Such variation the authors assert could not exist if

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Unformatted text preview: 1984). Such variation, the authors assert, could not exist if constraints alone were driving decisions. Hence, Dean and Sharfman (1996) conclude that it appears likely that viable outcomes are a product of the decision process used. Leading on from this, the second assumption is that choices relate to outcomes, and that all outcomes are not equally good. Once again there can be very little doubt that external forces also influence decision effectiveness (Hitt and Tyler, 1991; Pfeffer and Salancik, 1978). Changes in competitor strategies or customer tastes can turn strategic coups into disasters or vice versa. However, Dean and Sharfman (1996) note that it is unlikely that the influence of such forces eliminates the impact of choice on decision effectiveness as it is hard to imagine a decision in which all potential choices will be equally successful or unsuccessful. 31 The two assumptions then appear plausible (Dean and Sharfman, 1996) which suggests that it is reasonable to expect the investment appraisal decision-making process to influence decision effectiveness. However, as Aldrich rightly observed (1979), the importance of managerial decisions in determining organisational outcomes is ultimately an empirical question (Dean and Sharfman, 1996). Many empirical studies have investigated the existence of a relationship between the investment decision-making process and effectiveness. None have concentrated on the use of decision analysis in the investment decision-making processes of organisations. However, several have explored the effects of comprehensiveness, rationality, formality and consensus in the decision-making process on organisational performance. In much of the decision theory literature, it is argued that decision analysis provides: “…convincing rationale for choice, improves communication and permits direct and separate comparisons of different people’s conceptions of the structure of the problem, and of the assessment of decomposed elements within their structures, thereby raising consciousness about the root of any conflict.” (Humphreys, 1980 in Goodwin and Wright, 1991 p177) Goodwin and Wright (1991) also argue that adopting a decision analysis approach implies comprehensiveness/rationality and formalisation of the decision-making process, improved communication amongst the stakeholders and provides the organisation with access to a common language for discussing the elements of a decision problem. This, they argue, helps to build consensus in the company, which in turn expedites implementation of the decision. Keeney and Raiffa (1972 pp10-11) say of decision analysis: “As a process, it is intended to force hard thinking about the problem area: generation of alternatives, anticipation of future contingencies, examination of dynamic secondary effects, and so forth. Furthermore, a good analysis should illuminate controversy – to find out where basic differences exist, in values and uncertainties, to facilitate compromise, to increase the level of debate and undercut rhetoric – in short, “to...
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This document was uploaded on 03/30/2014.

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