management decision making

Management Decisions-Making

What is management?

• Act of getting people together to accomplish desired goals.

• An art and science as well.

• Encompasses an array of different functions.

• ‘Getting things done.’

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Decision Making in Management

• A major concern in management.

• Sound and rational decision -making.

• Key part of manager’s activities.

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Characteristics of Decision-Making

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• Decision making implies choice.

• Continuous activity/process.

• Intellectual activity.

• Based on reliable information/

feedback.

• Goal oriented process.

• A ‘means’ and not the end.

Characteristics of Decision-Making (..ctd)

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• Related to specific problem.

• Time consuming activity.

• Needs effective communication.

• Pervasive process.

• Responsible job.

Decision-Making process

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• Defining / Identifying the managerial problem.

• Analyzing the problem

• Developing alternative solutions.

• Selecting the best solution out of the available alternatives.

• Converting the decision into action

• Ensuring feedback for follow-up.

Decision-Making process (..ctd)

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Approaches to Decision Making

• Approaches by psychologists:– Divide and Conquer strategy (problem

decomposition) – Benjamin Franklin.

– Normative Analyses.

– Descriptive Analyses.

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Normative Analyses

• Certain Outcomes–Multi-atribute utility.

– Linear models.

• Uncertain Outcomes– Decision Tree Analysis.

– Bayesian Networks.

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Normative Analyses (..ctd)

• Certain Outcomes–Multi-atribute utility.• Decisions made with more or less

certain outcomes.

– Linear models• Weights assigned to the cue.

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Normative Analyses (..ctd)

• Uncertain Outcomes– Decision Tree Analysis.• Sequence of decisions.

– Bayesian Networks.• Bayesian probability theory+ artificial

intelligence+graphical analysis

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DescriptiveAnalyses

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• Social Judgement Theory (SJT).

• Information Integration Theory (IIT).

• Image Theory.

• Heuristics and Biases.

• Fast and Frugal Heuristics.

• Naturalistic Decision Making.

• Expert Decision Making.

DescriptiveAnalyses (..ctd)

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• Social Judgement Theory (SJT)– Elements of normative + descriptive

analyses.

• Information Integration Theory (IIT)– Averaging rule.

• Image Theory– Views decision maker as processing

value image+tragectory image+strategic image.

DescriptiveAnalyses (..ctd)

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• Heuristic and Biases– Physiological shortcuts or “heuristics”.

• Fast and Frugal Heuristics– Bounded rationality.

• Naturalistic Decision Making– Online decision making.

• Expert Decision Making– Need for research for better decisions.

Three Decision Making Models

Classical ModelClassical Model

Administrative ModelAdministrative Model

Political ModelPolitical Model

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Political Model

Closely resembles the real environment in which most managers and decision makers operate.

Decisions are complex.Disagreement and conflict over problems

and solutions are normal.Coalition building is important.

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Administrative Model• How managers actually make decisions in situations

characterized by non-programmed decisions, uncertainty, and ambiguity.

• Focuses on organizational, rather than economic.

• Two concepts are instrumental in shaping the administrative model.

• bounded rationality: means that people have limits or boundaries on how rational they can be.

• satisficing: means that decision makers choose the first solution alternative that satisfies minimal decision criteria.

• Is considered to be descriptive.

• It is considered intuitive. 17

Classical Model

Accomplishes goals that are known and agreed upon.

Strives for certainty by gathering complete information.

Criteria for evaluating alternatives are known.Decision maker is rational and uses logic.

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Classical Models

Based on economic conditions

Is considered to be normative

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Diagnosis Questions(Kepner & Tregoe)

What is the state of disequilibrium affecting us?When did it occur?Where did it occur?How did it occur?To whom did it occur?What is the urgency of the problem?What is the interconnectedness of events?What result came from what activity?

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7 Popular Methods for Making Decisions

• Decision by running out of time.

• Decision by chos.

• Decision by fiat.

• Decision by coercion.

• Decision by competition.

• Decision by voting.

• Decision by inertia.

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Advantages of Decision Making

• Primary function of management.

• Facilitates the entire management process.

• Continuous managerial function.

• Essential to face new problems and challenges.

• Delicate and responsible job.

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Techniques for improving Decision Making

Brainstorming – idea generation for decision making.

Nominal group technique (NGT)- problem outlined, presentation of solution in written form, discussion over written solutions, and final decision.

Delphi technique- decision made on the basis of questionnaire filled by the respondents.

Consensus mapping- decision made on the basis of the report presented by the representative of each group after

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Guideline for making decision more effective

Categorical interpretation- the problem should be defined properly.

Application of limiting factor- limiting factor should be taken into account in order to analyze the external S & W.

Adequate information- more quantity of reliable information leads to effective decision making.

Considering other views- various views at the same point are taken into account for quality decision.

Timeliness- decision should be ,made at proper time to meet the competitive advantages.

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Simple Practical Test On Decision-Making

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Suppose that you are a manager & running your organization.

Few questions will be asked.

Think & answer the questions as though you are the manager!

The default choices (to all questions) will be:

a) Not at all b)Rarely c)Sometimes d)Often e)Very often

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Ready?

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1. I evaluate the risks associated with each alternative before making a decision.

2. After I make a decision, it's final – because I know my process is strong.

3. I try to determine the real issue before starting a decision-making process.

4. I rely on my own experience to find potential solutions to a problem.

5. I tend to have a strong "gut instinct" about problems, and I rely on it in decision-making.

6. I am sometimes surprised by the actual consequences of my decisions.

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Practice

7. I think that involving many stakeholders to generate solutions can make the process more complicated than it needs to be.

8. If I have doubts about my decision, I go back and recheck my assumptions and my process.

9. I take the time needed to choose the best decision-making tool for each specific decision.

10. I consider a variety of potential solutions before I make my decision.

11. Before I communicate my decision, I create an implementation plan.

12. In a group decision-making process, I tend to support my friends' proposals and try to find ways to make them work.

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Practice

13. I use a well-defined process to structure my decisions.

14. When communicating my decision, I include my rationale and justification.

15. Some of the options I've chosen have been much more difficult to implement than I had expected.

16. I prefer to make decisions on my own, and then let other people know what I've decided.

17. I determine the factors most important to the decision, and then use those factors to evaluate my choices.

18. I emphasize how confident I am in my decision as a way to gain support for my plans.

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Practice

How to calculate your score???

Evaluation :

Not at all - 1

Rarely - 2

Sometimes - 3

Often - 4

Very Often - 5

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Check out your score and comments friends

• Your decision-making hasn't fully matured. You aren't objective enough, and you rely too much on luck, instinct or timing to make reliable decisions.

• Start to improve your decision-making skills by focusing more on the process that leads to the decision, rather than on the decision itself. With a solid process, you can face any decision with confidence.

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If your score is between 18-42

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• Your decision-making process is OK. You have a good understanding of the basics, but now you need to improve your process and be more proactive.

• Concentrate on finding lots of options and discovering as many risks and consequences as you can. The better your analysis, the better your decision will be in the long term.

• Focus specifically on the areas where you lost points, and develop a system that will work for you across a wide variety of situations.

If your score is between 43-66

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If your score is between 67-90• You have an excellent approach to decision-

making! You know how to set up the process and generate lots of potential solutions.

• From there, you analyze the options carefully, and you make the best decisions possible based on what you know.

• As you gain more and more experience, use that information to evaluate your decisions, and continue to build on your decision-making success.

• Think about the areas where you lost points, and decide how you can include those areas in your process.

Six essential steps in the decision-making process

• Establishing a positive decision-making environment.

• Generating potential solutions.• Evaluating the solutions.• Deciding.• Checking the decision.• Communicating and implementing.

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