External and Internal business environment have effects on business operations and various strategic decisions taken by organizations. If organizations are not aware about the change in business environment or if they fail to predict the change, it may create crisis for the organization. Decisions and decision-making process has important role in crisis management
According to Ducker “A decision is a judgment and choice between alternatives. It is rarely a choice between what is right or wrong, at best it is a choice between “almost right” and “probably wrong”- but more often choice between two courses of actions neither of which is probably more nearly right than the other”
Decision-making is a dynamic process, a complex search of information, alternatives and choices. There are two approaches to modeling human decision-making; The Outcome Oriented Approach and the Process Oriented Approach.
- The Outcome Oriented Approach, based on the view that if one can correctly predict the outcome of the decision process, then one obviously understand the decision process. The decision outcome and its correct prediction are at the centre of this approach. Normative decision analysis and multiattribute utility theories etc are examples of this orientation, which asks questions like what and when rather than how.
- The Process Oriented Approach, based on the view that if one understands the decision process, one can correctly predict the outcome. Essentially descriptive, this approach has prescriptive and normative features as well. Knowing how decisions are made, can teach how they should be made.
The decision making process consists of pre-decision, decision and post-decision stage. These stages are interdependent. The post-decision phase often coincides with the pre-decision preparation for the next decision. Each decision stage is itself composed of series of partial decisions, characterized by their own pre and post decision stages. In Crisis Management, Predecision Stage normally consists gathering information about the crisis and understanding the impact of crisis. First, there is a sense of conflict and underlying source of conflict is the nonavailability of suitable alternatives and particularly the infeasibility of the ideal alternative to manage crisis. Experiencing conflict, decision maker starts searching for new alternatives preferably, for those approximating the ideal. The evaluation of alternatives become more systematic as the decision maker realizes that a choice among alternatives already generated, rather than a discovery of new alternatives will dominate the process towards the conflict resolution. Decision stage is exploring the partial decisions and deriving the final concluding long-term strategic decision. Decision stage includes a series of short-term decisions channelized to long-term solutions. Post decision stage is a combination of pre and post decision, where evaluation of decisions implemented is done and a preparatory groundwork is done for future decisions. All phases are overlapping and interlinked. It is cyclic and continuous process to arrive at better decisions. There are different approached for decisions and methods to take a decision.
In a crisis management approach and decision making one needs to understand situation and should make efforts to find out answers for following questions.
- What is crisis and what is relevant to business?
- What will be a state of business?
- What should be a state of business?
The decision makers should try to unfold the answers by collecting information and processing it. These answers will generate a new approach and appropriate quality decisions.
Organization has a vital role in decision-making. Organization consists of various subsystems and one has to understand interlinking of organization subsystem. Interdependence of subsystems create a dilemma for a decision maker. As a decision maker one has to consider the impact of decision on effective utilization and performance of these systems. Organizational subsystems provide a structure and a link between various business environments and help decision process to select appropriate decision.
Experts in management and management gurus have developed a set of strategic decision models, which help the decision makers to understand the situation and it create a path of for better decisions. Application of these models helps the decision maker to take knowledged decisions. Selection and application of model depends upon the situation to be managed and the expected impact of the decision. It is well known fact that a crisis cannot be managed by using a single decision making model but it will help to gather the information for in-depth analysis before arriving at a decision. The outcome can change with use of different models. Some models are useful for crisis management related to external business environment. Other models are exclusively for crisis related with internal business environment.
Strategic Models for external environment crisis management are:
- GE-Mckinsey Matrix
- BCG Matrix
- Porters five force model
- Porters Generic Strategic Model
- PEST Analysis
- Ansoff Matrix
Strategic Models for internal environment crisis management are: