Decision Making in Complex and Simple Situations.

A situation is complex when there are too many unknowns regarding the case. They are unlike simple or noncomplex situations where the variables are clearly defined and all “to dos” to achieve the given objective are understood from the onset.

 A simple situation may be layered or multifaceted, but they usually lead to a logical conclusion, unlike complex situations where the multi phases usually unveil several new situations, and the focus keeps changing as the situations are being analyzed/tackled. An example of a complex situation is the Central Bank of Nigeria (CBN)’s foreign currency, FX situation in Nigeria; apparently, we keep getting into more profound situations as the CBN tries to resolve the FX volatility issue. The original plan was to make the FX available by introducing the platform where qualified businesses go to bid and are availed of the FX at the “retail bid window”. The platforms now have several “windows” where the FX can be purchased at various exchange rates within the official window, for example, retail bid window for raw materials and machinery importation, Form A platform for travel allowances, payment for services and Invisibles, Form Q platform, e.t.c. This has made the CBN’s intervention interpreted and used as a transactional tool by some stakeholders, causing the increasing devaluation of the Naira.

Other factors that affect the decision-making process are risk and uncertainty. 

 Risk and Uncertainty in my opinion both have impacts on the decision-making process, however at varying degrees; the identified risk will take a higher percentage of the effect. Because the risks are already identified, they can be evaluated, and mitigated ahead of decision-making while the unknown should be envisaged and there should be allowance for the same in all decision-making processes.

 Albeit risk should be considered a greater variety in the decision-making process.

The situations that give rise to decision-making can broadly be summarized as four, they are:

1. Simple Situations: here the facts are known, mostly repeating patterns and there are clear causes and effects here. Decision-making in these situations is easy, and well thought through and communications are clear and direct. Here decisions follow the trend of Sensing, Categorizing, and Responding.

2.   

Complicated Situations are characterized by “known unknowns” and expert diagnosis is usually required. The cause and effects are not immediately known, they are fact-based and usually have more than one resolution. Decision-making here follows the trend of Sensing, Analyzing, and Responding.

3.   

Complex Situations as explained above, are full of “unknown unknowns”, flux and unpredictability; there is usually a need for creative innovations in dealing with complex situations. The decision trend here follows the Probing, Sensing, and Response.

4.   

Chaotic Situations are a lot tougher as they are full of “Unknowable”, high turbulence requires many decisions in no time and is characterized by high tension. Here the decision is irrational, as it follows the trend Act, Sense, and Respond. An example of this is a fire outbreak where the action of running for safety comes first.

These are reflections from the course Analysis of Business Problems; I will give more insight into the decision-making process in my next post.

#MEMBA 11