The Decision making process
Sisanda mpikwa 213087936
BTech Clinical Technology
Lecturer: Mari van Wyk
Table of Contents
Introduction Pg. 3
What is “Decision making”? Pg.3
Decision Making Principles and Rules Pg.3-4
Decision Making Styles Pg.4-5
The characteristics of Decision Making Pg.5-7
What is the Decision Making Process Pg.7-9
Types of Decisions Pg.9-11
Decision Making Conditions Pg.11-12
Summary Pg. 12
Management is the process of coordinating work activities so that they are completed efficiently and effectively with or through other people. A manager is the person who directs the activities of others in an organization. He or she is responsible for implementing the four management activities in order to accomplish a goal. These activities are to plan, i.e. define goals, establish strategies and develop plans to coordinate activities. It also includes organizing, which is to determine which tasks are to be done, who is to do them, how tasks are grouped, who reports to whom and where decisions are to be made. The manager also leads, this is to motivate employees, direct the activities of others, select the most effective communication channel and resolve conflicts. The last management activity is to control; this is the process of monitoring the performance, comparing it with goals and correcting any significant deviations.
The role of a manager is to perform ten different but highly interrelated roles according to Henri Mintzberg. These roles are grouped under three primary headings, namely: interpersonal relationships, transfer of information and decision making. For the purpose of this article the decision making process that a manager should follow will be discussed, as well as the principles and rules of decision making, conditions and the decision making styles. (Robbins SP, Decenzo DA: Fundamental of Management, 4th Ed., Prentice-Hall Inc., 1995)
WHAT IS “DECISION MAKING”?
Firstly in order to understand what decision-making is one has to understand the meaning of the word decision. Decision is defined as a choice made between two or more alternatives or options. (Robbins SP, Coulter M: Management, 7th Ed., Prentice-Hall Inc., 2003).
Decision making is therefore the act of seeking information, interpreting that information and based on this analysis to come to a conclusion. It is an incremental process that does not happen at one point in time, but involves the progression from one stage of planning to the next. Decision making is a process used by managers to organize, prioritize and sort information. (Werner A, Bagraim J, Cunningham P, Potgieter T, Viedge C: Organizational Behaviour, 2nd Ed., Van Schaik Publishers, 2007).
DECISION MAKING PRINCIPLES AND RULES
The principles and rules of decision making are influenced by the need to provide an ethical justification for a person’s decisions and behaviours. These range from self-serving decisions to those that require careful consideration of other people’s human, civil and constitutional rights. In order to for a manager to make good ethical decisions, he or she must have a trained sensitivity to ethical issues and a practiced method for exploring the ethical aspects of a decision and weighing the considerations that should impact the choice of a course of action. It is extremely important for a manager to have a method by which to approach ethical decision making. (Werner A, Bagraim J, Cunningham P, Potgieter T, Viedge C: Organizational Behaviour, 2nd Ed., Van Schaik Publishers, 2007).
DECISION MAKING STYLES
How a decision is made is influenced by many factors, one of these factors is the decision making style. The decision making style reflects the combination of how an individual sees and understands stimuli and the general way in which he or she chooses to respond to it. There are two different dimensions which controls decision making, these are value orientation and tolerance for ambiguity. Value orientation is the extent to which an individual focuses on a task and technical concerns or people and social concerns. Tolerance ambiguity is the extent to which a person needs structure or control in his or her life. Together these two dimensions form four styles of decision making, these are, directive, analytical, conceptual and behavioural decision making. (Werner A, Bagraim J, Cunningham P, Potgieter T, Viedge C: Organizational Behaviour, 2nd Ed., Van Schaik Publishers, 2007).
The directive style is typically used by most people who have a low tolerance for ambiguity and are orientated towards tasks and technical concerns when making decisions. These people are efficient, practical and systematic; they are action-orientated, decisive and like to focus on facts. When making a decision, they do so rapidly using little information and considering few alternatives. (Werner A, Bagraim J, Cunningham P, Potgieter T, Viedge C: Organizational Behaviour, 2nd Ed., Van Schaik Publishers, 2007).
The analytical style
The analytical style of decision making is used by people who are willing to consider complex situations based on ambiguous information. These individuals have a higher tolerance for ambiguity and are characterized by the tendency to analyze a situation closely. They careful and take longer than others to make decisions. (Werner A, Bagraim J, Cunningham P, Potgieter T, Viedge C: Organizational Behaviour, 2nd Ed., Van Schaik Publishers, 2007).
The conceptual style of decision making is used by people who are more socially orientated in their approach to problems. They consider broad alternatives, and envisage the future. They enjoy coming up with new ideas. These people have a high tolerance for ambiguity and are willing to take risks. They focus on the people and social aspects of a work situation. However this style can lead to an idealistic and indecisive approach to decision making. (Werner A, Bagraim J, Cunningham P, Potgieter T, Viedge C: Organizational Behaviour, 2nd Ed., Van Schaik Publishers, 2007).
The behavioural style of decision making focuses more on the people aspect of decisions. People who use this style are more concerned for the organization they work for and the well being of their fellow workers. They are supportive of others and enjoy social interaction in which opinions are shared. These individuals are always open to suggestions and tend to rely on meetings on order to solve a problem. (Werner A, Bagraim J, Cunningham P, Potgieter T, Viedge C: Organizational Behaviour, 2nd Ed., Van Schaik Publishers, 2007).
THE CHARACTERISTICS OF DECISION MAKING
How does a manager know that a decision made is a good decision? The characteristics of a good decision are based on the quality, timeliness, acceptance and ethical appropriateness of the decision. To better understand this I will explain each characteristic in detail. (Werner A, Bagraim J, Cunningham P, Potgieter T, Viedge C: Organizational Behaviour, 2nd Ed., Van Schaik Publishers, 2007).
The quality is determined by the content of the decision being made. A high quality decision will allow the manager to meet the desired outcome and specific criteria. It will also help the organization meet the strategic goals through implementation of high quality decisions. A manager can accomplish a high quality decision by obtaining reliable and relevant information and allowing sufficient time to use the information after it is collected. High quality decision is not necessarily associated with optimal decisions. Sometimes choosing a satisfactory or acceptable decision may be adequate given the time, financial and satisfying constraints. (Werner A, Bagraim J, Cunningham P, Potgieter T, Viedge C: Organizational Behaviour, 2nd Ed., Van Schaik Publishers, 2007).
Timeliness refers the need to make the necessary decision within a given time frame. Failure to make decisions within the required time can result in inefficient use of resources, unhappy workers and the inability to compete effectively with other competitors. The manager should be able to design a time table for making major and minor decisions in the workplace. This will allow him or her to understand the interrelationships of the various decisions and the responsibility for making and implementing them. (Werner A, Bagraim J, Cunningham P, Potgieter T, Viedge C: Organizational Behaviour, 2nd Ed., Van Schaik Publishers, 2007).
It is important for the people affected by the decision to understand and implement the decision as intended. If the employees accept the decision it can result in the proper implementation and thereby lead to a successful decision made. A manager should know that they must have the workers support at all levels in order to implement a significant decision. Acceptance is imperative of quality decision making. (Werner A, Bagraim J, Cunningham P, Potgieter T, Viedge C: Organizational Behaviour, 2nd Ed., Van Schaik Publishers, 2007).
Ethical appropriateness indicates that a decision has been made according to its ethical justness. Ethics refers to the norms or what is accepted in society. A manager must be able to evaluate the ethical justness of a decision by recognizing that that the decision involves a moral issue. He or she must be able to assess the ethics of all decisions by applying personal moral or societal codes of value. (Werner A, Bagraim J, Cunningham P, Potgieter T, Viedge C: Organizational Behaviour, 2nd Ed., Van Schaik Publishers, 2007).
By applying these four characteristics a good decision can be made. However in the advanced paced world we live today managers are faced with great challenges in making effective decisions because of the complexity and uncertainty of international situations. It is therefore important that the manager has decision making skills. These skills include technical or task skills which refer to the managers’ knowledge of the content area of the decision. Interpersonal or leadership skills indicate the managers’ ability to lead people, communicate with, motivate and influence others. Decision making skills indicates the managers’ ability to perform the components of the rational decision making process, including identifying a problem, establishing a criteria and generating, evaluating and selecting alternatives. This will be explained in detail later. (Werner A, Bagraim J, Cunningham P, Potgieter T, Viedge C: Organizational Behaviour, 2nd Ed., Van Schaik Publishers, 2007).
WHAT IS THE DECISION MAKING PROCESS?
The decision making process is a set of eight steps that begins with identifying a problem, it then moves on to a decision criteria, allocating weights to the criteria, developing alternatives, analyzing the alternatives, selecting the appropriate alternative and implanting the chosen one. The last step in the decision making process is the evaluation of the decision effectiveness, that is to determine whether the choice implemented was successful or not. In order to understand the decision making process better we will have a look at each step in the process. (Robbins SP, Coulter M: Management, 7th Ed., Prentice-Hall Inc., 2003).
Step 1: Identifying the problem
This is where the decision making process begins; it starts with an existing problem or more specifically with a discrepancy between an existing and a desired affair. How does the manager identify a problem? Every manager may not see the same situation as a problem that needs urgent solving. The key in identifying the problem is to compare the current state of the organization to the desired state. (Robbins SP, Coulter M: Management, 7th Ed., Prentice-Hall Inc., 2003). Other ways of identifying a problem is to have a set standard at which the manager wants the organization to perform. This standard could be past performances, previously set goals or the performance of another unit within the organization or in other organizations. (Robbins SP, Decenzo DA: Fundamental of Management, 4th Ed., Prentice-Hall Inc., 1995) If a manager finds that they are not currently where they want to be a problem exists. The problem should be of such a nature that it exerts a type of pressure on the manager to act. This pressure may come from organizational policies, deadlines, financial crises, competitor actions, and complaints from customers or subordinates, expectations from the boss or an upcoming performance evaluation. The manager may in any of these situations initiate the decision making process in order to solve the problem. Before addressing the problem the manager may also look at his or her resources, budget and information to assess whether the problem can be solved. The manager also assesses the problem and decides whether he or she has the authority to make the appropriate decision to solve the problem. (Robbins SP, Coulter M: Management, 7th Ed., Prentice-Hall Inc., 2003).
Step 2: Identifying Decision Criteria
What are the decision criteria? This is the criteria which defines what is relevant in a decision. Once the manager has identified the problem, the decision criteria to solve the problem must be identified. This guides the manager into deciding the best way to solve the problem and outlines what he or she wants the desired outcome to be. (Robbins SP, Coulter M: Management, 7th Ed., Prentice-Hall Inc., 2003). Every decision maker has criteria - whether it is explicitly stated or not – that guides his or her decision. The decision criteria state what is important to the manager in solving the problem. If the manager does not identify a particular factor in this step, then it is treated as if it were irrelevant the manager. (Robbins SP, Decenzo DA: Fundamental of Management, 4th Ed., Prentice-Hall Inc., 1995)
Step 3: Allocating weights to the Criteria
It is important to realize that not all the criteria identified in step 2 are of equal importance. Therefore the decision maker must weigh the items in order to give them the correct priority in the decision. This can be done by giving each criterion a score in order of importance. That is the most important criterion gets the highest score because it affects the problem positively. (Robbins SP, Coulter M: Management, 7th Ed., Prentice-Hall Inc., 2003). The idea behind allocating weights to each item is to use your own personal preference to assign priorities to the relevant criteria in your decision and to indicate their degree of importance in solving the problem. (Robbins SP, Decenzo DA: Fundamental of Management, 4th Ed., Prentice-Hall Inc., 1995)
Step 4: Developing alternatives
In the fourth step of the decision making process the manager must list the possible alternatives or solutions that could solve the problem. During this step no attempts are made to evaluate the alternatives, only to list them. (Robbins SP, Decenzo DA: Fundamental of Management, 4th Ed., Prentice-Hall Inc., 1995)
Step 5: Analyzing Alternatives
After the alternatives have been identified the manager must critically analyze each one. Each alternative is evaluated by comparing it to the criteria established in steps 2 and 3. By doing so the strengths and weaknesses of each alternative become evident. The assessment made can be objective such as comparing the price of the same item at two different places. But most assessments are made based on the judgment of the manager. (Robbins SP, Coulter M: Management, 7th Ed., Prentice-Hall Inc., 2003). Once an item has been assessed according to the previously established criteria and weight it can be given a new score. That is the item can increase its weight. Certain items that had lower rankings can now increase in priority. The importance of analyzing the alternatives is to eliminate the ones that would temporarily solve the problem and to determine which alternative would best solve the problem. (Robbins SP, Decenzo DA: Fundamental of Management, 4th Ed., Prentice-Hall Inc., 1995)
Step 6: Selecting the alternative
In this step a decision is made as to which alternative best solves the problem from those considered. By now the manager should have determined the decision criteria, weighted each one and identified and analyzed each alternative. The manager then chooses the alternative that generated the highest score in step 5. (Robbins SP, Coulter M: Management, 7th Ed., Prentice-Hall Inc., 2003)
Step 7: Implementing the Alternative
Step seven involves implementing the choice made in step 6, which is, putting it into action. This is done because the decision can still fail if it is not implemented properly. The manager is therefore responsible to convey the decision to the employees affected by it and getting their commitment to it. (Robbins SP, Coulter M: Management, 7th Ed., Prentice-Hall Inc., 2003). The manager may also decide to allow the group or committee who is affected by the problem to make the decision. This allows for better commitment to the decision made and employees would be more enthusiastic to implement the decision. (Robbins SP, Decenzo DA: Fundamental of Management, 4th Ed., Prentice-Hall Inc., 1995)
Step 8: Evaluating the decision effectiveness
This is the last step in the decision making process, it involves monitoring the outcome of the decision to see if the problem has been resolved. If not the manager would have to evaluate what went wrong, if the problem was defined properly, was the alternatives evaluated properly and was the correct alternative chosen and implemented. The answers to these questions may send the manager back to a previous step or may start the decision make process over. (Robbins SP, Coulter M: Management, 7th Ed., Prentice-Hall Inc., 2003)
Some Decision Making Strategies
Making decision can be more responsibility than we expect. There are many strategies used in choosing the best choice or alternative. The most commonly used strategies include:
Optimizing: This is the strategy of choosing the best option among the identified alternatives. The effectiveness of this strategy depends on importance of the problem, time limit, availability of resources, and cost of other alternatives and the state of the decision maker. In many cases there is always a better decision than the decision taken. It is better to place limitations to alternatives as it might not be possible to sample all alternatives for a case with large sample space. (Maryam TA, Habeeb O; 2012)
Satisficing: This strategy considers the first satisfactory alternative rather than the best. The word satisficing was derived from two words Satisfy and sufficient. Once, these two conditions are in place, and then it is considered as the best option. This is mostly used in many small and quick decisions like where to park, what to where and what to eat. (Maryam TA, Habeeb O; 2012)
Maximax: This is maximizing the maximums. In this strategy, evaluation is done and the alternative with the maximum profit is chosen as the best option. This is usually referred to as decision of the optimist, as favorable outcome is expected and high potentials are the area of concern. This is usually used when risk is most acceptable and failure can be tolerated.
Maximin: Also known as the maximize the minimum. This strategy is considered to be that of a pessimist as it considers the worst possible outcome of all alternatives and the one with the highest minimum is chosen. This type of strategy is used when failure is expensive and can’t be tolerated. (Maryam TA, Habeeb O; 2012)
TYPES OF DECSIONS
Managers are required to make decisions daily. These decisions range from high priority to simple everyday decisions. Because of the variety of decisions the, manager must be able to classify them in order to diagnose the specific challenges or opportunities an individual decision provides. Decisions can be categorized as: programmed or non-programmed, strategic or operational and top-down or worker-empowered. (Werner A, Bagraim J, Cunningham P, Potgieter T, Viedge C: Organizational Behaviour, 2nd Ed., Van Schaik Publishers, 2007).
Programmed versus Non-programmed Decisions
Programmed decision is defined as a repetitive decision that can be handled by a routine approach. (Robbins SP, Coulter M: Management, 7th Ed., Prentice-Hall Inc., 2003). They are well thought out solutions to specific problems. Programmed decisions are formed by performing tasks that follow a set of guidelines tested through experience. (Werner A, Bagraim J, Cunningham P, Potgieter T, Viedge C: Organizational Behaviour, 2nd Ed., Van Schaik Publishers, 2007). The goal of the manager is clear, the problem is familiar and information about the problem is easily defined and complete. With programmed decisions the problem is well structured and the manager does not have to go through the trouble and expense of the decision making process. It is relatively simple and relies on previous solutions. Programmed solutions does not require the “develop an alternative” stage in the decision making process. This is owing to the fact that the solution is self-evident or it is reduced to very few alternatives that are familiar and that have proved success in the past. (Robbins SP, Coulter M: Management, 7th Ed., Prentice-Hall Inc., 2003).
Non-programmed decisions are defined as a unique decision that requires a custom-made solution. They are characterized by a poorly structured problem that is unique and has no existing alternatives. These decisions require the manager to follow the decision making process in order to come up with an alternative solution. (Robbins SP, Coulter M: Management, 7th Ed., Prentice-Hall Inc., 2003).
Strategic versus Operational Decisions
Strategic decisions are those decisions which relate to the long-term future of an organization. These decisions include plans for accomplishing long term goals and therefore provide the manager with a longer period of time to undertake the decision making process. (Werner A, Bagraim J, Cunningham P, Potgieter T, Viedge C: Organizational Behaviour, 2nd Ed., Van Schaik Publishers, 2007).
Operational decisions are those decisions that are concerned with the day to day activities of the organization. These include the work schedules, employee assignments, equipment use and expected crises such as absenteeism, machinery break down and delays in the receipt of supplies. All these require the manager to act quickly by setting objectives, determining and evaluating alternatives and making a decision. (Werner A, Bagraim J, Cunningham P, Potgieter T, Viedge C: Organizational Behaviour, 2nd Ed., Van Schaik Publishers, 2007).
Top-down versus Worker-empowered decisions
Traditionally, all decisions made in an organization are made by the manager and is then passed down to employees for implementation. The top-down approach is believed to save time and results in high quality decisions. However workers may question the legitimacy of the decision because they did not take part in making the decision. Due to many companies introducing the self-manages team approach, the responsibility to for aspects of production and service is passed on to the team members who also make the decisions. (Werner A, Bagraim J, Cunningham P, Potgieter T, Viedge C: Organizational Behaviour, 2nd Ed., Van Schaik Publishers, 2007).
Approaches to Decision Making
In an organization or a team, there are basically two approaches to decision making:
Authoritarian: the manager or the leader make experience based on what they experienced or based on their exposure and await for the approval from the group members .
Group: The group tends to make the decision together by analyzing the different alternatives that fits their objective. Some studies came up with the research that in an Authoritarian approach, the leader spends five minutes to make a decision, thirty minutes to communicate his decision and another 30minutes for the group to accept while a group approach spends 30 minutes to analyze and decide on the best option. Therefore, the group approach is more encouraged as group members tend to appreciate ideas they think of and have more zeal in achieving goals set by their own initiative than when decision are being taken on their behalf. (Maryam TA, Habeeb O; 2012)
Automating System: This is a computer system that automates significant parts (or all) of an administrative decision-making process. The primary feature of this system is its ability to build and automate administrative decision using some logic in a computer system. Automated systems may range from conventional information technology systems (which may calculate a rate of payment in accordance with a formula set out) through to more complex systems such as ‘expert’, ‘business rules engines’, ‘rules-based’ and ‘decision-support’ tools. The automated system is a developing approach to decision making as managers find it easier to make unbiased decision once the right criteria has been entered
Bad Decision Making
Why Bad Decision? It should be noted here that a decision is not evaluated based on its outcome but rather based on analysis of the decision making. Hence, a bad decision is not a decision with an unexpected outcome or a negative outcome. A bad decision is one in which you override your senses and choose an option that, at some level, you know you should not. There are various mechanisms or reasons that can lead to bad decision making. These include:
Not having sufficient number of alternatives: The more limited alternatives are, the more likely a bad decision is made. Alternatives should be make open and be sure to include all alternatives.
Lack of information: Lack of information has led to many bad decisions has decision were only based on some known facts.
No enough time to decide: Decision making under pressure could be very disastrous, as it only solve an immediate problem but could lead to a bigger problem.
Ignorance of evaluation techniques: Most people assume they are good decision makers and this over confidence has led to negligence in some steps in decision making.
Inaccurate forecasting of the effects of specific actions: A good example of this could be seen in construction of a new road to solve the congestion in an old road, not taking nto consideration that everyone tend to take the new road and leading to initial problem.
Inaccurate forecasting of external influences: Some external factors tend to have great influence on the decision. Factors like government policy have a great influence and could lead to change of decision.
Uncritical acceptance of others' judgments: This usually happen in a group decision where you tend to accept majority’s opinion without looking critically at the opinion of the minority.
Uncritical acceptance of subjective needs and feelings: While making a decision, being objective and focus is as important as the decision itself. Many people has compromised a good decision for selfish interest, people’s feeling and this has led to negative eventualities. However, the result of bad decision could be heart breaking and could have an adverse effect on the decision maker and the society at large. Some of the effects of bad decision include: Lessons are being learnt in a hard way. Time is said to be life. Some bad decision has led to time wasting. More and unbudgeted money is spent. The most insidious and damaging effect is a wasted life (Maryam TA, Habeeb O; 2012)
DECISION MAKING CONDITIONS
There are three conditions that managers face when making a decision, these are certainty, risk and uncertainty. What are the characteristics of each of this decision making conditions? (Robbins SP, Coulter M: Management, 7th Ed., Prentice-Hall Inc., 2003)
Certainty refers to a situation in which the manager can make an accurate decision because all the outcomes of the alternatives are known. This situation is however not characteristic of most managerial decision situations, it is more idealist than realistic. (Robbins SP, Coulter M: Management, 7th Ed., Prentice-Hall Inc., 2003)
Risks are those conditions in which the manager is able to estimate the likelihood of certain outcomes or alternatives. The manager should have the ability to assign probabilities to outcomes. This ability is acquired through past experiences or secondary information. (Robbins SP, Coulter M: Management, 7th Ed., Prentice-Hall Inc., 2003)
Uncertainty refers to a situation in which the manager has neither certainty nor reasonable probability estimates available. Under these conditions of uncertainty the choice of alternative is influenced by the limited information available to the manager. Another factor that could affect the outcome of the decision under these conditions is the psychological orientation of the manager. An optimistic manager would follow a maximaxi choice; this means that the manager chooses to maximize the maximum payoff. A pessimistic manager would choose the maximin choice, this means he or she chooses to maximize the minimum payoff. Lastly a manager could also choose the minimax choice, which means he or she chooses to minimize their maximum. (Robbins SP, Coulter M: Management, 7th Ed., Prentice-Hall Inc., 2003)
Depending on the problems a manager is facing, he or she may try to quantify a decision by using payoff or regret matrices, uncertainty may force them to rely more on intuition, creativity, hunches and “gut feeling”. Regardless of the decision situation each manager has his or her style of making decisions. (Robbins SP, Coulter M: Management, 7th Ed., Prentice-Hall Inc., 2003)
As a manager one has an integral task of leading, controlling, organizing and planning in order to accomplish the goals of the organization. Apart from satisfying the organization and making a profit, the manager also needs to satisfy the employees allocated to him or her. The manager must provide the necessary environment for all employees to work comfortably and ensure that the necessary resources are available. One of the key functions of the manager is the ability to make decisions. This encompasses the ability to make a high quality ethical decision. The manager must firstly understand meaning of the decision making, that is to seek information, interpret it and based on this analysis come to a conclusion. He or she must have knowledge on the principles and rules that govern decision making. This involves an ethical method of decision making. The manager should be aware of the different styles of decision making and should establish his or her style according to preference and previous experience. The manager should understand the characteristics of making a good, high quality decision. He or she should integrate it into their work force in order to successfully solve any problem. A major part of the decision making for the manager is the decision making process. The manager should be able to follow the eight steps in the decision making process. He or she should be able to identify which situations it is appropriate to use in and which is not. Interlinking with this the manager should know the different types of decisions, which will help him or her decide the appropriate course of action to take.
It has become evident to me how important the decision making ability of a manager is. The productivity of the organization greatly depends on how, when and where the manager makes his or her decisions. It also affects the productivity of the employees allocated to the manager. It is imperative for the manager to have a vast knowledge on what is happening in his or her organization, the prospective outcomes of the strategies in place, what improvements can be made and any problems that currently or may in future exist. The manager can therefore plan ahead and make the necessary changes in order to improve the current status of the organization.
Robbins SP, Coulter M: Management, 7th Ed., Prentice-Hall Inc., 2003.
Werner A, Bagraim J, Cunningham P, Potgieter T, Viedge C: Organizational Behaviour, 2nd Ed., Van Schaik Publishers, 2007.
Robbins SP, Decenzo DA: Fundamental of Management, 4th Ed., Prentice-Hall Inc., 1995.
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