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Decision making –

The process of making a choice between alternatives

Problem solving - the process of producing alternative solutions to a recognized problem

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Types of decisions

Programmed decisionsDecisions are programmed to the extent that they are

repetitive and routine and a definite procedure has been developed for handling them

Nonprogrammer decisionsDecisions are nonprogrammed when they are novel and

unstructured. There is no established procedure for handling the problem

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Types of decisionsProgrammed Decisions

Nonprogrammed Decisions

Type Of problem

Frequent,routine, much certainty regarding cause-and-effect relationships

Novel,unstructured,much

uncertainty regarding cause-and-effect relationships

procedure Dependence on policies,rules,&definite procedures

Necessity for creativity intuition,tolerance for ambiguity

examples Periodic reorder of inventoryMerit system for promotion of state employeesNecessary grade-point average for good academic standing

Diversification into new products & marketsReorganization of state government agenciesConstruction on new classroom facilities

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Best vs. Satisfactory decision

Best decision - a chosen solution produced with full information and in adequate time to resolve a well-defined problem

Satisfactory decision - a partially or temporary chosen solution with partial information taken in limited time to resolve an ill-defined problem

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Rational Decision Making

Rational Model of Decision Making

also called the classical model explains how managers should make decisions; it assumes managers will make logical decisions that will be optimum in furthering the organization’s best interests

The Rational Model is based on unrealistic assumptions:

Complete information, no uncertainty

Logical, unemotional analysis,

Best Decision for the organization

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Nonrational Decision Making

Nonrational models of decision making

explain how managers do make decisions; they assume the decision making is nearly always uncertain and risky, making it difficult for managers to make the optimum decisions

Five Nonrational Models are:

Satisficing Incremental Coalitional Garbage can Intuitional

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Nonrational Models

1. Satisficing Model managers seek alternatives until they find one that is satisfactory, not optimal

2. Incremental Model managers take small, short-term steps to alleviate a problem

3. Coalitional Model managers band together in groups favoring different alternatives, and the groups bargain, negotiate, and compromise on a particular problem

4. Garbage Can Model managers virtually make random decisions

5. Intuitive Model consists of a manager’s quickly sizing up a situation and making a decision based on his or her experience or practice

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Some Hindrances to Perfectly Rational Decision Making

Complexity Time and money constraints Different cognitive capacity, values, skills,

habits, and unconscious reflexes Imperfect information Information overload Different priorities Conflicting goals

Panel 7.2

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The Decision Making Process

Establishing specific goals and objectives and measuring results

Problem identification and definition

Consideration of causes

Development of alternative solutions

Evaluation of alternative solutions

Solution selection

Implementation

Follow-up

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Evaluation

What should you do if the solution is not working?

Give it more time Change it slightly Try another alternative Start over

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Factors influencing problem identification

Perceptual problems Defining the problem in terms of solutions Identifying symptoms as

problems

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Establishing Priorities

Prioritizing depends on : UrgencyRelate to time. How critical is time pressure? ImpactDescribes the seriousness of the

problem’s effects. Growth tendencyAddresses future considerations.

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Evaluation of Alternative Solutions

The alternative-outcome relationship is based on 3 possible conditions:

Certainty the decision maker has complete knowledge of the probability of the outcome of each alternative

Uncertainty the decision maker has no knowledge of the probability of the outcome of each alternative

Risk the decision maker has some probabilistic estimate of of the outcome of each alternative

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Behavioural Influenced on Decision Making

Values Propensity for risk Potential for dissonance Escalation of commitment

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Values are guidelines in making a choice

• In establishing objectives

• In developing alternatives

• In choosing and alternative

• In implementing a decision

• In evaluating and control phase (when corrective action is taken)

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Potential for Dissonance

There is often lack of consistency among individual’s various attitudes, beliefs after a decision has been made

The decision is an important one psychologically or financially

There are a number of foregone alternatives The forgone alternative have many favorable

features

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Methods,used to reduce dissonance:

Seek information that supports the wisdom of the decision

Selectively perceive information in a way that supports the decision

Adopt a less favorable view of the foregone alternatives

Minimize the importance of the negative aspects of the decision and exaggerate the importance of the positive aspects

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Escalation of Commitment

is the tendency to persist in an ineffective course of action when evidence reveals that the project

cannot succeed

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Individual/Group Decisions

In establishing goals grouper are probably superior to individuals

In identifying causes and developing alternatives efforts of group members are necessary

In evaluating alternative solutions judgment if the group seems superior to that of an individual

In solution selection group tends to take more risky decisions

Implementation and follow-up is usually accomplished by individual managers

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Group Decisions

Advantages More information and

knowledge are available More alternatives are

likely to be generates More acceptance of the

final decision is likely Better decisions generally

emerge

Disadvantages The process takes longer

that individual decision making, so it is costlier

Social pressures to those who disagree

One person may dominate the group

Groupthink may occur

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When to use groups in decision making

When it can increase quality

When it can increase acceptance

When it can increase development Panel

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Techniques for Stimulating Creativity

Brainstorming The Delphi Technique The Nominal Group Technique

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Summary Decisions can be classified as programmed or

nonprogrammed depending on the type of the problem

there are several types of decision making process The decision-making process entails a number of

steps Problems are of different importance and it’s

necessary to prioritize them ( urgency, impact and growth tendency)

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Summary The relationship between alternatives and

outcomes is based on three possible conditions: certainty, uncertainty & risk

The decision-making process is influenced by behavioral factors: values, propensity for risk, potential for dissonance, and escalation of commitment

Research suggests that decisions made by group are superior to those made individual. However there are aspects of group decision making that have negative effects.