CHAPTER 10
Policies and Decisions

The rate equations, as described in Chapters 6 and 7, contain the statements of policy that govern system action. This action takes the form of streams of decisions that cause and control the system flow rates. The formulation of a model is based on an explicit statement of the policy (or rules) that govern the making of decisions in accordance with any condition to which the system may have evolved. The decision-making process consists of three parts -- the formation of a set of concepts indicating the conditions that are desired, the observation of what appears to be the actual conditions, and the generation of corrective action to bring apparent conditions toward desired conditions. Distorted and delayed information about actual conditions forms the basis for creating the values of desired and also of apparent conditions. Corrective action will in turn be delayed and distorted by the system before having its influence on actual and then on apparent conditions. All the literature of society is rich in information about the nature of decision-making policy; the literature of management is no exception. Adequate knowledge exists from which to build the central framework of the managerial policy structure.

MANAGEMENT is the process of converting information into action. The conversion process we call decision making. Decision making is in turn controlled by various explicit and implicit policies of behavior.

As used here, a "policy" is a rule that states how the day-by-day operating decisions are made. "Decisions" are the actions taken at any particular time and are a result of applying the policy rules to the particular conditions that prevail at the moment.

If management is the process of converting information into action, then it is clear that management success depends primarily on what information is chosen and how the conversion is executed. The difference between a good manager and a poor manager lies at this point. Every person has available a large number of information sources. But each of us selects and uses only a small fraction of the available information. Even then, we make only incomplete and erratic use of that information.

The manager sets the stage for his accomplishments by his choice of which information sources to take seriously and which to ignore. When he has chosen certain classes of information and certain information sources to carry the highest priority, the manager's success depends on what use is made of this information. How quickly or slowly is it converted to action? What is the relative weight given to different information sources in the light of the desired objectives? How are these desired objectives created from the information available?

In this book we shall look upon the manager as an information converter. He is a person to whom information flows and from whom come streams of decisions that control actions within the organization. Much human behavior might be properly viewed as the conversion of infor-

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