A Psychological perspective is used to analyze the decision-making framework at RBS Skals. RBS Skals is one of the ten biggest players in the very competitive and corruption riddled construction market of Latvia. Investments in the construction market have been very small ever since the collapse of the centrally planned economy in the 80s, however RBS Skals has managed to separate itself as a socially responsible, large capacity and financially stable company. It is popular with employees and subscribes to international quality standards. This makes it a viable choice for any big projects in and out of Latvia Maris Saukans is one of the three owners of RBS. He takes a very active role in the day-to-day company operations. He uses an authoritarian leadership style and his word is law. Maris has attached his personal success to that of the company and makes company decisions based on his personal goals. Maris’s attitude of wanting total control and not delegating have proved chaotic at times, and the decision by the board to put all other projects on hold and pursue the big tender, seem more out of fear for Maris as opposed to research. It is therefore recommended that the company utilize the rational eight-stage decision making model effectively; so as to combat elements of bounded rationality. It is further recommended that Maris delegate some decisions to the skilled personnel and spend time on decisions that he is actually needed. Lastly an application of the Johari window theory, can assist the company improve its self-awareness and help it achieve its goals efficiently in a very competitive market.
The purpose of this report is to analyze the decision-making framework of the Latvian based Construction Company RBS Skals, under the leadership of its enthusiastic part owner Maris Saukans. The case study is a Marketing example, however a Management view is applied for the purpose of analysis. Maris has been the driving force behind the achievements of RBS over the last 8 years. This has mainly been because he has attached the success of the company with his own personal success. He rules with authority, whilst also maintaining team spirit in the work environment, as evidenced by his presence at construction sites and the reverence that his employees have of him. His authoritarian style of leadership, high drive for success, coupled with the lack of formal training and education may however be limiting the company from reaching efficient, sustainable and profitable goals. A psychological perspective is used to identify significant issues affecting the company, and make recommendations to ensure effective decision-making in the future.
2) THE DECISION MAKING FRAMEWORK AT RBS SKALS
Decision-making as a science is subject to debates over rationality. The confusion lies in whether the term rational decision-making refers to the rationality of the choice or the behavior of the individual/manager making the decision (Harrison, F E.1999), at RBS this would be in regards to Maris Saukans, who acts as both the Chairman of the Board and the Managing Director. Traditionally rational decision-making is focused round maximizing behavior (Harrison, F E.1999). In the absence of the ability to maximize due to uncontrollable constraints like information and time, we have the concept of satisficing, where the aim moves from seeking optimization to accepting good enough. Rationality however does exist in a continuum meaning we can have rational behavior involving some non-rational elements. A psychological perspective is a qualitative approach to decision making. Qualitative approaches in psychology are essentially ideographic meaning the theories are mostly concerned with the uniqueness of the individual (Teale, Dispenza, Flynn and Currie, 2003).
The psychological perspective is associated with the bounded rational model and acknowledges an individuals’ inability to process all the information relevant to making a decision. One of its main shortcomings is that it is limited by the aspirations of the decision maker; in our case study, this would be Maris. At RBS all major decisions are subject to the approval of the board of directors, however Maris’s authoritarian style of leadership lends the final decision in his capacity. Studies have shown that a CEO’s need to achieve, denoted as nAch, is a major influence on their ability to decentralize power (Robbins, S. Barnwell, N 2002), a high need to achieve therefore results in less power being decentralized. This is evident at RBS, given that Maris has made the company his life’s work and therefore he feels the need to take major credit for, and carefully control the performance of the company. The practice by RBS of outlining decision criteria and allocating weights to these criteria, in response to the preparation of a bid, highlights the first three steps of the eight-stage decision-making process model. This is a great start to decision making, however its success depends on the influence of the final key player, in this case Maris.
3a) A PSYCHODYNAMIC APPROACH
Maris Saukans is one of the three owners of RBS Skals. He is directly involved in the day-to-day operations of the business and holds the posts of Chairman of the Board as well as Managing Director. Despite his limited formal training and education, his passion and enthusiasm has ensured that RBS has grown into a recognizable competitor in the Latvian construction market. The first issue lies in Maris’s desire to control all decisions at RBS. Maris’s hands on approach is at times unnecessary and has been known to cause chaos and disturb efficient decision making. Using the Transactional Analysis theory, Maris’s attitude towards power and control can be evaluated. Transactional Analysis is a form of psychodynamic approach to decision making. This theory was presented by Berne in 1968 (Teale et al 2003), and it suggests that the human psyche consists of three ego states, namely Parent, Adult, and child. The parent nurtures and punishes, whilst the adult is objective and evaluates and lastly the child is creative and naughty.
Sigmund Freud’s earlier work, on the concept of the sub conscious mind, initially dealt with this concept, where the ego states restated are, parent becomes superego, adult becomes ego and child becomes id. Different situations influence the state of mind that an individual is in at any given time. Maris’s membership with the Land Rover drivers club coupled with his enthusiasm to demonstrate his success, highlights aspects of his child like/id state, which seeks pleasure as a driving force. This child like state is what influences his bouts of creativity and makes him see opportunities everywhere. At the same time, we have his parent like/super ego state showing through his desire to motivate and nurture employees via a Christmas skiing trip. His adult/ego state is expressed in his domineering presence at the construction sites as well as at the office. His word is law.
3b) PSYCHOLOGY OF DECISION MAKER
‘Hot cognitions’ is Abelson’s term that is used by Janis and Mann (Teale et al 2003) to describe the fact that emotions have a bearing on how we think and act. As thinking decision makers we are bounded by our own subjective rationality, whereby we find ourselves ignoring information that we do have, or using information that is irrelevant in decision making. As individual decision-makers, we therefore see the world and its problems differently (Teale et al 2003). The second issue lies in the decision by RBS to focus all resources on the upcoming project bid. The unanimous and immediate decision to prepare a bid for the tender by the directors seems to be more out of fear of Maris’s intolerance for indecisiveness or hesitation, even when there may be a possibility of well grounded objectives like the feasibility of being able to finish project, rather than on well researched and supported information. Morgan (1986) (Teale et al 2003) suggests that many organizational actions may be dependent on the psychodynamics of the company’s founders or senior managers.
The project thus ends up being about helping Maris reach the goals that he has been striving for as opposed to helping the organization reach its goals efficiently and at its own pace. It is worth noting that the seemingly rational and objective organizational phenomena may actually be the result of highly subjective, individual, psychological processes (Teale et al 2003). The fact that the company considered as the largest only has a 2% market share clearly highlights that the market is very tight and margins are very low. Harrison cautions that when personal values and organizational objectives/goals conflict; undesirable consequences are likely to result from suppressed feelings of the other interested/ affected parties in the organization. This means it would have wiser to carry out research on the feasibility of carrying out the project before emotionally committing to carrying out the project. In the context of Maslow’s holistic theory of the hierarchy of needs, the managerial decision maker is aligned toward self-actualization, through the attainment of goals and objectives (Harrison, F E.1999).
This is highlighted in the fact that Maris’s personal and professional lives are tightly linked as evidenced by how his hobbies still allow him to establish useful contacts with powerful people in the business and political community. Maris therefore measures the achievement of his needs in direct relation to the success of the company. Managerial decision-making represents a learned psychological process that is complicated with the decision maker’s personality (Harrison, F E.1999). An individual’s personality is the entirety of the distinctive physical and mental tendencies that influence characteristic adjustments to material and social surroundings (Harrison, F E.1999). Maris’s strong personality is highlighted in the arrangement and furnishing of his office. This strong presence can prove over powering to his competitors as well as his employees at time. A decision maker’s intellect therefore plays a very important role during the evaluation and selection of alternatives. Maris’s lack of formal education and training can explain his disregard for figures and profitability potential when pressing for company growth. His focus is publicity and fame.
3c) PERCEPTUAL PROCESS AND THE DECISION MAKING PROCESS
Perception is the process by which individuals form and infer their sensory impressions in order to give meaning to their environment (Teale et al 2003). This process reinforces the fact that as individuals we all view the world differently. Selective attention is an example of a perceptual process that can lead individuals to distort objective phenomena to suit one’s needs. The fact that we can not give our undivided attention to all the sensory stimuli around us at a given time, means we end up filtering the data as per factors like motivation or learning experience and making decisions based on these perceived views. The challenges likely to be faced by RBS due to their completion of the first three steps of the eight stage decision making process in deciding to place a bid are firstly the chance of personal framing, by Maris and the directors.
The group is quick to speculate on their competition based on their personal views, before actually enquiring on the current state of those companies. Secondly, we have stakeholder framing, whereby objective reality is overlooked, in favor of what the management/ decision makers choose to believe and pay attention to concerning their competitors and the opportunity at hand. The fact that Janis Milzarajs, the marketing director, has no authority over aspects that he is skilled in like the corporate responsibility and he still has to direct final decision to Maris, could lead to some important aspects being understated. Lastly we can have Perceptual filtering, here decision makers can unconsciously screen out negative information as a method of protecting self-esteem. The disadvantage arises when serious problems are dismissed as random errors.
In conclusion, RBS Skals has thrived under the leadership of Maris. Whether his method of leadership has actually aided the company in achieving its full potential is not certain. What is clear is that Maris’s drive for control, his enthusiasm and strong personality, have overcome his shortfalls of a lack of education and formal training. The perceptions, emotions, personalities and goals of those in management seem to over shadow the common organizational goals, and as discussed problems will surely arise when the two sets of goals are mismatched.
Simon (Teale et al 2003) has argued that individuals could achieve a greater degree of rationality/ optimization in organizational decision-making, as compared to individual decision-making. The management at RBS can start by applying a frame work where decisions are influenced and made by members of the organization who have relevant skills, leading to routine decisions being made at operational levels and in groups as opposed to senior management level (Teale) by an individual. Fully and effectively utilizing the rational eight-stage decision-making process can also ensure that decisions are made efficiently and subjectively. Lastly RBS can employ the Johari window theory as a tool to illustrate and improve self-awareness in the whole organization, from management to employees.
Harrison, F E. (1999). The managerial decision-making process. 5Ed. Boston, New York
Robbins, S P. Barnwell, N (2002). Organisation Theory: Concepts and Cases 4th Ed, Pearson Education,Australia
Teale, M., Dispenza, V., Flynn, J. and Currie, D. (2003). A psychological dimension. In Management decision-making: towards an integrative Approach, 1st Edn, United Kingdom: Pearson Education.