In as much as it might seem like something that is of no concern, decision making is one of the processes and activities that human beings have to make on a day to day basis. Bouyssou, Dubois, Prade & Pirlot (2010: 1) do observe that every day, man must at least make a decision regarding a situation. Decision-making can be used to define humanity. On many occasions, the decisions that we have made have been fundamental in shaping the course of our lives. William, Samuelsson & Stephen, do confirm the fact that decision making is the heartbeat of all companies and organizations. (2009, p. 1) Decisions can either ruin of develop a firm.
Gupta in this article myessayservices.com/research_paper_for_sale defines economics as being a social science which covers the actions of individuals and groups of individuals in the process of producing exchanging and even consuming of goods and services. Here, the definition is clear about the role that decision making will play. There are actions to be undertaken, and before they can be implemented, decisions must be made. Therefore, the scope of this paper will be to interpret the decision making processes with classroom knowledge especially when dealing with economics (cash).
Problem identification
The first step that one needs to take when trying to come up with a solution is to realize the problem. It is only after one has been able to identify correctly where/what the problem is that they can be able to think rationally. William, Samuelsson &Stephen are categorical that the problem has to be correctly identified, who will make decisions, and what decisions will be made (2006: 6). In this case, I had a huge financial problem occasioned by the retirement of my father from the military. His retirement meant that we had no other source of income, and as such we had to sit down and ponder the next move.
Determining the objective
Gupta observes that for any organization/firm that wants to succeed, then objectives have to be set early enough(2006: 11) he seems to say that it is these objectives that will give the company/organization the direction which to follow, and especially with regards to finances. He goes ahead to allude the importance of objectives to a medical practitioner who is unable to treat a patient. He says that such a doctor then has no business prescribing medication to the patient. For us objectives were important. The main objective was to ensure that no matter the cost, we should spend less and save more. This we did because none was sure about what the future had in store for us. Since we did not have someone to provide for us, we had to look for appropriate means of surviving (William, Samuelsson &Stephen (2006, p. 7)
Exploring the available alternatives
A quick glance at the Harvard Business Essential journal highlights that when in a crisis, one hesitates to make decisions. Equally, coming up with alternatives to the said problem is hard. The journal observes that this is hard especially when each of the alternatives that one is presented with as its own consequences and uncertainties. (2005, p. 4). From a practical point of view, this situation presented itself before us. Previously w had been used to living lavishly. We spent money on anything without giving it a second thought. With the current situation, we had to look for an alternative lifestyle. The first decision to make was that we had to move from the house to another house which was cheaper.
We also had to cut down on the entertainment costs as much as possible (William, Samuelsson &Stephen 2006, p. 9). Before a decision is made, the available alternatives are put into perspective. This will enable the person charged with making the decision come up with one that is sober. We also had to think about the settlement plans. Since dad was still powerful and could work, we agreed that we stay in Seattle. This was to help him find another job quickly. We also decided to stay since my siblings, and I were going to schools there, and it would inconvenience us if we had to move at that point in time.
Predicting the consequences
William, Samuelsson &Stephen (2006, p. 10) imply that it is quite important that before you set to carry out any given decision and implement it, always try and consider the repercussions: “If I do not do this, what will not happen?” Financial decisions are usually delicate matters, and as such one needs to analyze critically given situation from the two sides of a coin. In the words of one high-ranking U.S official, choices do have consequences. It is just a matter of making the right choices. For all those charged with the responsibility of making decisions, they have to be very keen especially when it comes to the consequences. Negative decisions will affect the organization/company negatively. Have the decisions taken solved the problem, or have they just added more miseries? For us, we had to weigh the options in terms of finance: if we decided to stay, what would this mean to the finances? Would we the cash be able to provide for all of the basic needs as well as pay the huge amount in the form of rent?
If we decided to move away from Seattle, would dad be able to find another job in time to cater for the needs? All in all, we had to think of all the possible consequences, whether good or bad. We had to critically explore every angle of the situation so as to come up with well informed decisions. The Harvard business journal observes that foe good decisions to be made, and then the environment has to be ideal. Here, the environment can be coiled to mean one analyzing all the angles including consequences before making a decision. (2005, p. 6).
The actual decision
Gupta argue that this should not take long to make. Prolonged period will turn out to be catastrophic to the concerned party (1988, p. 11). At times some problems have to be tackled at the shortest time possible and solutions given quickly. Delaying to make decisions might plunge the organization/company/situation into even deeper complications. In the case of companies, the principal of marginal or incremental principle as illustrated by Gupta will be adhered to. (1988, p. 13). Any decision has to make sense. Since our decisions were solely based on cash, then we also tried applying this Principle: a decision will only be acceptable if it leads to an increase in profit. Here, for us all the decisions that we made had to ensure that there was much less spending and more saving. This would enable us save more cash.
Our principle also had to borrow directly from what Gupta refers to as the perspective principle (1988, p. 15) despite the fact that we had to make decisions based on our finances, we also had to be wary of the fact that some of the decisions might have seemed convenient at the time, but would pose serious problems in the long run. This is what led us to move to the outskirts of Seattle city. We would actually have stayed in the city because dad had money by then.
The problem would be that the cash would have run out quickly; we would spend too much on rent and yet there were other areas of necessity as well, among other factors. Making the choice is the most important part of the decision making process William, Samuelsson &Stephen (2006, p. 11). This is what will determine the future. When we made our decision, it defined the course of life that we took henceforth.
Sensitivity analysis
What does this term refer to? Well, a group of scholars defined it as being how uncertainty in the output of a model can be apportioned to different portions of uncertainty in the model input (Saltelli, Marco, terry et al 2008, p. 1). This is a mathematical concept. In a simplified manner, this concept tries to shed light on a situation where a factor, idea or abstract entities are introduced into an existing situation. It is concerned with what will happen in the event that factor A has been affected by factor B. in this situation, we had a scenario where we had no money.
The idea of us staying without a proper source of income is the abstract entity that is in the situation. This entity forces the lives to change drastically. What follows is the consequence of us taking certain actions based on the situation. In as much as we were okay, we were not as happy as we were back then. Most of the happy days had been taken away from us. The situation brought some miseries. We could not enjoy some facilities like electricity, showers and event entertainment.
Conclusion
The scope of this paper was to try and find the relationship between finances and decision making. To be able to do this well, the paper tried to analyze each of the decision making steps as and try to see how economics would work best under each. In its quest to highlight the existing correlation, the paper has dug deep and analyzed this using a practical experience of a young man who had to make some tough decisions himself.
At the end of it all, it is clear that economics as an independent entity needs this decision making steps for it to succeed. Managers have to be rational at each of the steps as they try to solve their problems.