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Unit I · Management, managerial economics and ethics
9 min readConcept sheetMCQ · process sequence, technique match and numerical

Communication and decision making

Managers communicate to coordinate and decide by choosing among alternatives. NET tests the communication process and barriers, and decision models, techniques and tools.

Bounded rationalityHerbert Simon (Administrative Behavior, 1947): managers 'satisfice'
Simon's phasesIntelligence, design, choice, then review
Delphi techniqueRAND Corporation, 1950s: anonymous expert rounds
GrapevineKeith Davis: four chains; the cluster chain is the most common

The communication process

Noise (Shannon and Weaver) can distort the message at any stage.

Types and networks of organisational communication

BasisTypesNET point
DirectionDownward, upward, horizontal (lateral), diagonalUpward carries feedback, grievances and suggestions
FormalityFormal (official channels) and informal (grapevine)Davis's grapevine chains: single strand, gossip, probability, cluster
MediumOral, written, non-verbal, electronicOral is fast with instant feedback; written leaves a lasting record
Small-group networkChain, Y, wheel, circle, all-channelWheel is the most centralised; all-channel suits complex tasks and high satisfaction

Barriers and remedies

BarrierExamples
SemanticJargon, ambiguous words, faulty translation
PhysicalNoise, distance, faulty equipment
Psychological or perceptualFiltering, selective perception, premature evaluation, emotions, distrust
OrganisationalToo many levels, rigid rules, status gaps, information overload
RemediesSimple language, two-way feedback, active listening, fewer levels, an open-door policy

The rational decision-making process

  1. 1★
    Identify and define the problem
    a wrong diagnosis spoils every later step
  2. 2
    Gather information and set decision criteria
  3. 3
    Develop alternatives
  4. 4
    Evaluate the alternatives
  5. 5★
    Choose the best alternative
  6. 6
    Implement the decision
  7. 7
    Follow up and evaluate the results

★ one-way, controls the pace

Decision types and conditions

BasisTypes
Structure (Simon)Programmed: routine and rule-based. Non-programmed: novel and unstructured, mostly at the top
LevelStrategic (top), tactical (middle), operational (lower)
ConditionsCertainty (outcome known), risk (probabilities known), uncertainty (probabilities unknown)
ModelsRational (economic man), bounded rationality (administrative man), intuitive, political

Decision techniques and tools

ToolHow it works
Brainstorming (Alex Osborn)Many ideas quickly; no criticism during the session
Nominal group technique (Delbecq and Van de Ven)Silent idea writing, round-robin sharing, discussion, independent ranking
Delphi (RAND Corporation)Anonymous experts answer questionnaires over several rounds until views converge
Decision treeBranches for choices and chance events; pick the highest expected value
Criteria under uncertaintyMaximax (optimist), maximin (Wald, pessimist), minimax regret (Savage), Hurwicz (realism), Laplace (equal chances)
Quantitative toolsLinear programming, simulation, queuing, game theory, break-even analysis
Group pitfallGroupthink (Irving Janis), countered by devil's advocacy and dialectical inquiry

Worked example: expected monetary value

Problem

A firm can launch Product X, with a 60% chance of ₹10 lakh profit and a 40% chance of a ₹4 lakh loss, or Product Y, with a certain profit of ₹3 lakh. Which should it choose by expected monetary value (EMV)?

Working
  1. EMV of X = (0.6 × 10) + (0.4 × −4) = 6.0 − 1.6 = ₹4.4 lakh.
  2. Check: 0.6 × 10 = 6.0 and 0.4 × 4 = 1.6; 6.0 − 1.6 = 4.4.
  3. EMV of Y = 1.0 × 3 = ₹3 lakh.
  4. ₹4.4 lakh is more than ₹3 lakh.
Answer

Choose Product X (EMV ₹4.4 lakh). A cautious manager using maximin would pick Y instead, because its worst case is a ₹3 lakh profit, not a ₹4 lakh loss.

How NET asks this

NET asks you to sequence the communication or decision process, name the barrier in a short case, match decision techniques (Delphi, NGT, brainstorming), and apply maximax, maximin or minimax regret to a small payoff table.

Exam angle

Typical MCQ: “Which criterion under uncertainty minimises the largest possible regret?” Savage's minimax regret criterion. Trap: Wald's maximin works on payoffs, not on regrets.

Typical MCQ: “A manager passes only good news up to the boss. Which barrier is this?” Filtering, a perceptual barrier. Trap: it is not semantic, because the words themselves are understood correctly.

Remember it

Simon decides in I-D-C: Intelligence, Design, Choice, then review. Maximin is the pessimist's 'best of the worst'; maximax is the optimist's 'best of the best'.