Quantitative Perspective and Decision Theory

Meaning of Quantitative Perspective

Scientists from several fields came together during World War II to work on a variety of brand-new, challenging military concerns. Operation research teams were the interdisciplinary groups hired for this purpose. These teams' effort was beneficial in handling and managing the problems associated with the war. Later, decisions related to trade, business, industry, and organizations are made using these quantitative techniques.

The quantitative approach to management emphasizes the use of quantitative tools to improve decision-making, including statistics, information models, and computer simulations. These two branches of this school, which broadly include management science, operation management, and management information system, are covered below:

Management Science Theory

The application of mathematics, statistics, and other quantitative methods for making decisions and resolving management issues is emphasized in management science theory. The main focus of management science theory is decision-making. Managers employ statistical techniques like linear programming, game theory, sampling theory, queuing theory, model building, probability theory, simulation, etc. to solve resource allocation issues. The application of management science focuses on addressing technological issues rather than issues with human behavior. The problems are analyzed using computer programs.

The following is a list of the key components of management science theory:

• Using mathematical methods and tools to make informed decisions quickly.
• All management issues can be described mathematically using processes, concepts, symbols, and models.
• Put a focus on making decisions using a computer.

Operations Management Theory

A subset of the quantitative management approach is operations management. It places a strong emphasis on controlling the processes that transform raw resources, labor, and capital into functional goods and services. Both service organizations and businesses focused on making a profit are concerned with effective operations management. The vast array of resources, such as raw materials, technology, capital details, and human resources, required to produce finished goods are included in the resource. The conversion process is where the actual work is done in order to create finished products or services that have value for customers or clients.

The needs of the consumer, the quality of the services provided, and market rivalry are all carefully considered by operations management. The first step in the procedure is becoming aware of the wants of the clientele. What do they want it when and where? Managers organize resources and make whatever decisions or actions necessary to achieve customer expectations based on the responses to these questions. The most effective method for resolving complicated management issues is operation research.

Management Information Information System (MIS)

The quantitative school's most modern subfield is management information systems. A constant stream of information about prices, advertisements, competitions, distribution, and other topics is provided through management information systems. It is the main tool for scanning and keeping an eye on the forces of the outside world. MIS gathers important data from a variety of sources, synthesizes it, and distributes it to marketing decision-makers. Because of this, managers are better able to uncover alternatives rapidly, assess them using spreadsheet tools, ask a series of "what-if" questions, and then choose the best options based on the answers.

Contributions of Quantitative Perspective

The following are the main contributions of the quantitative perspective:

• While defining the issues and establishing relationships between the variables in management problems, it promotes disciplined thinking.
• It is possible to represent complex relationships between variables more clearly.
• It provides management with a factual foundation on which to decide.
• It emphasizes how factual information and logical analysis should take the place of intuition and gut feeling in the decision-making process.

Limitations of Quantitative Perspective

The following are the main drawbacks of the quantitative perspective:

• It doesn't address the human element of an organization.
• All of the necessary and significant data are inaccurate and unable to be updated.
• It necessitates making irrational or erroneous assumptions.
• For non-routine or unpredictable management decisions, the quantitative models are inappropriate.

Decision Theory

Management is viewed by decision theory as a decision-making process. The manager is viewed as the decision-maker, and making logical decisions is one of his biggest challenges. The manager's capacity to make decisions has a big impact on whether a company succeeds or fails. To increase productivity, the management must be logical in their decision-making and strive to make the best choice possible based on the circumstances. The manager's choices affect everything from hiring new personnel to presenting new products, building organizational structures, and defining goals.

Major proponents of this approach include Lyndall Urwik, Herbert Simon, and Luther Gulick. Goals can be accomplished by managers who make sensible decisions. To make the best choice, one needs to have a comprehensive awareness of all possible options. The management must be motivated to choose the greatest option in order to arrive at the best solution.

Characteristics of Decision Theory

• In essence, management participates in the decision-making process.
• Decision-makers and problem-solvers make up an organization.
• The caliber of managerial decisions serves as the standard by which organizational performance is measured.
• A collaborative approach to decision-making is ideal.
• A good information management system is necessary for making decisions.

Rational Decision Making Process

In actual fact, managers rarely attain total rationalism. Manager makes a wise choice given the information, resource, and time constraints. In this situation, the management chooses a satisfactory course of action. The steps involved in making sensible decisions are as follows:

• An explanation of the issue.
• Locating appropriate alternatives.
• Analyzing the available options.
• Choosing the most effective strategy.
• Action being put into practice.
• Assessing the outcome.

Contribution of Decision Theory

The following are some of decision theory's significant contributions:

• Using this theory can help you improve your problem-solving abilities.
• Different mathematical and quantitative decision-making tools are developed as a result.
• It places a focus on the use of economics knowledge in decision-making.
• It greatly aids in the handling of information.

Limitations of Decision Theory

The fundamental drawbacks of choice theory are as follows:

• This idea does not consider management from every angle.
• Its scope is constrained and restricted.
• The context-specific factors are disregarded.
• The behavioral and human relations aspects are not emphasized.

Reference

(Podyal, S.R., Pradhan G.M. and Bhandari, K.P. (2011). Principles of Management. Kathmandu: Asmita Publishers and Distributors (P) Ltd.)