Decision Making

DECISION MAKING
It is the act of choosing one alternative

from among a set of alternatives
The person making the decision must
recognize that a decision is necessary
and identify a set of feasible alternatives
before selecting one
Effective Decision Making requires that
the decision maker understands the
situation driving the decision. An
effective decision may be one that
minimizes loss, expenses, or employee
turnover
TYPES OF DECISIONS
Programmed Decisions:- They are fairly
structured or recur with some frequency or both.
Many decisions regarding basic operating systems
and procedures and standard organizational
transactions are of this variety
Non Programmed Decisions:- They are relatively
unstructured decisions and occur much less often
(non- routine). Managers faced with such decisions
must treat each as unique, investing enormous
amounts of time, energy and resources exploring
the situation from all perspectives
Note: Most of the decisions made by top managers
involving strategy and organization design are non
programmed
DECISION MAKING
CONDITIONS
Decision Making under Certainty
If the decision maker knows with reasonable certainty what
alternatives are and what conditions are associated with each
alternative, a state of certainty exists
Few organizational decisions are made under these conditions. The
complexity and turbulence of the contemporary business world make
such situations rare
Decision Making Under Risk
It’s a more common decision making condition. Here, the availability
of each alternative and its potential payoffs and costs are all
associated with probability estimates
Decision Making Under Uncertainty
Most of the decision making in modern day organizations is done
under a state of uncertainty. The decision maker does not know all
the alternatives, the risks associated with each. This uncertainty is
due to the complexity and dynamism of modern organizations and
their environments
DECISION MAKING MODELS
These models help reveal factors that managers and other
decision makers must beware of in order to improve the
quality of their decision making
The Classical Model of Decision Making
This is an approach that tells managers how they should
make decisions. It rests on the assumptions that managers
are logical and rational and that they make decisions that are
in the best interests of the organization
 The model assumes:-
 Decision makers have complete information about the decision
situation and possible alternatives
 They can effectively eliminate to achieve a decision situation of
certainty
 They evaluate all aspects of the decision situation logically and
rationally
Note:- These conditions rarely, if ever exist
Steps in Rational Decision Making
Recognizing and Defining the Decision Situation i.e.
recognizing that a decision is necessary (There must be some
stimulus to initiate a process). The stimulus may either be positive or
negative. A manager must develop a complete understanding of the
problem, its causes, and its relationship to other factors
Identifying Alternatives:- A manager should then generate a set of
feasible alternative courses of action to take a response to the
opportunity or threat. Generally, the more important the decision, the
more attention is directed to develop alternatives. Though managers
should seek creative alternatives and solutions, they must recognize
the various constraints such as legal restrictions, moral and ethical
norms, authority or constraints imposed by the power and authority
of the manager etc.
Evaluating Alternatives:- The first question to ask is whether an
alternative is feasible i.e. is it practical? If yes, it must be examined
to see how well it satisfies the conditions of the decision situation.
Finally, when it has proven both feasible and satisfactory, its
probable consequences must be assessed.
Steps Cont…
Selecting an Alternative:- After the alternatives
have passed the tests of feasibility,
satisfactoriness and affordable consequences,
one has to be chosen. Choosing the best is the
real crux of decision making.
 One approach is to choose the one with the
highest combined level of feasibility,
satisfactoriness and affordable consequences
 Although most situations do not lend
themselves to objective, mathematical analysis,
the manager can often develop subjective
estimates and weights for choosing the
alternative.
Steps Cont..
Implementing the Chosen Alternative:- The manager needs to
put into effect the alternative. In some situations, it’s fairly easy while
in others its more complex
 For example, in the case of an acquisition, managers must decide
how to integrate all activities of the new business like purchasing,
human resource practices into an ongoing organization framework
 Managers must also consider people’s resistance to change when
implementing decisions
Following up and Evaluating the Results:- It requires managers
to evaluate the effectiveness of their decisions i.e. the chosen
alternative has served its original purpose
 If an implemented alternative appears not to be working, a manager
can adopt the second best alternative or recognize that the situation
was not correctly defined at the start and begin the decision making
process again
DECISION MAKING MODELS
CONT..
The Administrative Model:- Rather than prescribing how
decisions should be made, this model describes how
decisions are often made. It assumes managers:-
Have incomplete and imperfect information
Are constrained by bounded rationality
Tend to satisfice when making decisions
Bounded rationality suggests that decision makers
are limited by their values and unconscious reflexes,
skills and habits. They are also limited by less than
complete information and knowledge
Satisficing suggests that rather than conducting an
exhaustive search for the best possible alternative,
decision makers tend to search only until they identify
an alternative that meets some minimum standard of
sufficiency
Cont..
 Because of the inherent imperfection of
information, bounded rationality and satisficing, the
decisions made by a manager may or may not
actually be in the best interests of the organization
 Therefore, the Classical and Administrative models
paint quite different pictures of decision making,
however, each can be used to better understand
how managers make decisions
 The Classical model is prescriptive as it explains
how managers can attempt to be logical and
rational in their approach to decisions
 The Administrative model can be used by
managers to develop a better understanding of
their inherent biases and limitations
GROUP DECISION MAKING
In today’s organizations important decisions are made by groups rather than
individuals
The most common methods include:-
Interacting Groups:- It’s the most common and it involves an existing or a
newly designated group being asked to make a decision. Existing groups
may be functional departments, regular groups or standing committees.
Newly designated groups includes ad hoc committees, task forces or work
teams. The group members talk amongst themselves, argue, agree, argue
some more, form internal coalitions e.t.c. Finally after some period of
deliberation, the group makes a decision\
Delphi Groups:- It’s used for developing a consensus of expert opinion.
This procedure solicits input from a panel of experts who contribute
individually. Their opinions are combined and averaged. The experts are
asked to anonymously predict a time frame for the expected solution. The
persons coordinating the Delphi group collects the responses, averages
them and as the experts. When the predictions stabilize, the average
prediction is taken.
Nominal Groups:- Unlike the Delphi method where group members do not
see one another, the nominal group members are brought together but do
not talk freely to one another like members of interacting groups. They are
used mostly to generate creative and innovative alternatives or ideas
Nominal Groups Cont….
 A manager assembles a group of
knowledgeable people and outlines the problem
to them
 The group members are then asked individually
write down as many alternatives as they can
think of. The members then take turns stating
their ideas which are recorded on a flip
chart/blackboard at the front of the room
 Discussion is limited to simple clarification and
after all alternatives have been listed, more
discussions take place.
 Group members then vote by rank ordering the
alternatives or ideas and the highest ranking
alternative represents the decision of the group
Advantages of Group Decision
Making
More information and knowledge
More alternatives generated
More acceptance of the final decision
Enhanced communication
Generally better decisions
Disadvantages
Process takes longer thus costly
Compromise decisions
One person may dominate
Group think may occur (The withholding by group
members of different views in order to appear to be
in agreement)
Managing Group Decision Process
By being aware of the pro and cons of group
decision making
By setting deadlines thus reducing time and costs
To avoid domination, remove the dominant person
or put several strong willed people together
To avoid group think, each group member to
critically evaluate all alternatives (The Devil’s
advocate)
After reaching a preliminary decision, the group
should hold follow up sessions where divergent
views can be raised again if any group member
wishes to do so

Decision Making - Timothy Mahea

Uploaded by

Copyright:

Available Formats

Decision Making - Timothy Mahea

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Decision Making - Timothy Mahea

Uploaded by

Copyright:

Available Formats

It is the act of choosing one alternative

You might also like