The decision making process depends and gets affected by
multiple factors, those factors could be time pressure, risk taking,
complexity, expertise, external context, technology, motivation and so forth. Usually
if we are under pressure, our ability to make decisions is examined, we might
not make the same decision if we are relaxed or have enough time to analyze the
options. As well the surrounding environment affects the decision-making
process, interaction with people and technology have a big effect on it, level
of experience and age both influence the level of knowledge and confidence
which affects decision making as well. People personality, our propensity to
assume of avoid risk has a big impact of the decision making process.
The key difference between being a risk taker (seeker) or
risk averse relies on the personality of the person, who is willing to tradeoff
return for risk or vise versa. Some people love risk (risk seekers), others are
risk averse (prefer situation with less risk), studies showed that most people
are risk averse, in the meaning of, if we have to choose between two options
were both have the same outcome but varies in risk level, we tend to go for the
option with less risk (March & Shapira, 1987). Risk averse decision makers
favor low risks and are likely to to sacrifice certain predictable return in
order to reduce the variation in possible outcomes (March & Shapira, 1987).
So, from the definition, we see that when considering risk factor only, what
really affects the decision making process is the expected return. Attitude
toward risk is an unchanging feature of the personality of an individual, but
factors like mood, feeling and the way the problems are fit, affects the risk
preference.
Because information and communication technology allows
faster information collection, decision-making process for managers will be
faster, but it won’t affect the personality of the manager being risk averse or
risk taker. In other words, instead of consuming a lot f time fetching for
information to comfort decision making process, the information technology will
make the required information available in shorter period of time, based on
that the decision making process will be faster, still this speed in which the
information became available will not change his decision nor his risk
preference.
For example, if an investment manager in an organization,
wants to invest in a listed company in the stock market, he will be able to
gather all required information about the company from the company’s website, stock
market website and financial news online, in addition to that he doesn’t need
to do the financial analysis manually, The technology will make the information
gathering process faster and much easier, and the tools will give him and
accurate analysis faster, and therefore the decision making process will be
faster. However, the technology, didn’t change his personality nor his
decision.
Reference:
Heath A. Demaree, Michael A. DeDonno, Kevin J. Burns, D.
Erik Everhart, You bet: How personality differences affect risk-taking
preferences, Personality and Individual Differences, Volume 44, Issue 7, May
2008, Pages 1484-1494, ISSN 0191-8869, DOI: 10.1016/j.paid.2008.01.005. [Online],
Available from:
(Accessed 13 May 2011)
March, J. & Shapira, Z., (1987), ‘Managerial
Perspectives on Risk and Risk Taking’, Management
Science, Vol. 33, No. 11 (Nov., 1987), pp. 1404-1418, Stable URL:
http://www.jstor.org/stable/2631920, [Online], Available from: https://hec.unil.ch/docs/files/83/655/march_shapira_1987_managerial_perspectives_on_risk_and_risk_taking.pdf
(Accessed 13 May 2011)
Nicholson, N. el al., (n.d), ‘Risk Propensity and
Personality’, [Online], Available from:
(Accessed 13 May 2011)
Steve Williams, Mohamed Zainuba, Robert Jackson, (2003)
"Affective influences on risk perceptions and risk intention",
Journal of Managerial Psychology, Vol. 18 Iss: 2, pp.126 – 137, [Online],
Available from:
(Accessed 13 May 2011)
No comments:
Post a Comment