The overburdened manager and decision making

This article discusses three methods managers can use to make decisions: intuition, management analysis, and Type 1 and Type 2 error analysis. Olson identifies studies that have shown that top managers work at an unrelenting pace and jump from one activity to another. He claims that managers do not have time to plan in a reflective, systematic manner. In fact, in his view, decision makers usually react intuitively to situations that can no longer be ignored. The author presents evidence that top managers prefer verbal media such as telephone calls and meeting for decision making because of their timeliness. He points out that the strategic data bank of the organization is largely in the mind of the manager. As a consequence, he states, an effective analysis requires that the manager communicate to the analyst the relevant data stored in his head. This process often makes it easier for the manager to solve the problem himself rather than delegate it to others. Olson identifies five organizational conditions that enable a top manager to effectively delegate problem solving tasks to management analysts: (1) the analyst must have the confidence of the same people who influence the manager; (2) the analyst must be able to adapt the techniques to the specific needs of the manager; (3) there must be sufficient time for the analyst to structure the problem and evaluate the alternatives; (4) the analyst must share in information gathered by the manager from verbal contacts; and (5) the manager must be part of an organization large enough to make it profitable for him to seek assistance from an analyst. When the above organizational conditions are not met, the author suggests Type 1 and Type 2 error analysis. He promotes this form of analysis as a method for using logic and intuition to consider various forms of information. This management tool is named for Type 1 error (accepting a proposal that should have been rejected) and Type 2 error (rejecting a proposal that should have been accepted). The author advocates the use of this methodology because, in his view, it focuses the attention of the manager on the facts when a decision needs to be made. In this process, the manager must identify and evaluate the likelihood and consequences of each alternative strategy. Olson sees Type 1 and Type 2 error analysis as providing explicit logic to strengthen the intuitive decision making process.