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Decision Making- An essence toproblem solving

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Organisational Decision making

the process of responding to a problem by searching for

and selecting a solution or course of action that will

create value for organisational stakeholders.

There are basically two kinds of decision that managerscalled upon to make:

Programmed and non-programmed

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Types of Problems and Decisions

Structured problems

* Involved goals that clear.

*Are familiar(have occurred before)

*Are easily and completely defined- informationabout the problem is available and complete.

Programmed decision

*A repetitive decision the can be handled by a

routine approach.

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Problems and Decisions ( contd) Unstructured problems

* Problems that are new or unusual and for which

information is ambiguous or incomplete.

* Problems that will require custom-made

solutions.

Non-programmed decisions* Decision that are unique and nonrecurring.

* Decision that generate unique responses.

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Types of Programmed Decisions Policy

* a general guideline for making a decision about astructured problem.

Procedure

* A series of interrelated steps that a manager canuse to respond ( applying a policy) to a structured

problem. Rule

* an explicit statement that limits what a manageror employee can or cannot do.

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Programmed vs. Non-programmed

DecisionsCharacteristics Programmed

decisions

Non-programmed

decisions

Type of problem Structured Unstructured

Managerial level Lower level Upper level

Frequency Repetitive New,unusual

Information Readily available Ambiguous or

incomplete

Time frame for

solution

Short Relatively long

Solution relies on Procedures,rules, and

policies

Judgment and creativity

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The Decision-

Making Process

Define the

Problem

Evaluate

Alternatives

Implement

the chosen

Alternative

Gather facts and

develop

alternatives.

Select the best

alternative.

Follow up and

evaluate the chosen

alternative.

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Decision Making Process Identify a problem and decision criteria

and allocating weights to the criteria.

Developing, analyzing, and selecting an

alternative that can resolve the problem.

Implemented and selected alternatives.

Evaluating the decisions effectiveness.

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Step 1: Identifying the Problem Problem

* A discrepancy between an existing and desired

state of affairs. Characteristics of Problems

* A problem becomes a problem when a managerbecomes aware of it.

* there is a pressure to solve the problem.

* the manager must have the authority,information, or resources needed to solve theproblem.

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Step 2: Identify the Decision

Criteria Decision criteria are factors that are

important ( relevant) to resolving the

problem.* Costs that will be incurred (investmentrequired).

* Risks likely to be encountered ( chanceof failure).

* Outcomes that are desired ( growth of thefirm).

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Step 3: Allocating Weights to

the Criteria Decision criteria are not of equal

importance:

* Assigning a weight to each item.

* Places the items in the correct priority

order of their importance in the decision

making process.

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Step 4: Developing Alternatives Identifying viable alternatives.

* Alternatives are listed ( without evaluation) that

can resolve the problem.

Step 5 :Analyzing alternatives Appraising each alternatives strengths and

weaknesses* An alternatives appraisal is based on its abilityto resolve the issues identified in step 2 and step3.

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Step 6: selecting the alternative

Choosing the best alternative

* The alternative with the highest total

weight is chosen.

Step 7: Implementing the Alternative Putting the decision to and gaining

comment from those whose will carry out

the decision.

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Step 8: Evaluating the decisions

effectiveness

The soundness of the decision is judged by

its outcomes.

* How effectively was the problem

resolved by outcomes resulting from the

chosen alternatives?

* if the problem was not resolve, what

went wrong?

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The decision making process-Example

Identification of a problem

Identification of Decision Criteria

Allocation of weights to criteria

Development of alternatives

Analyzing of alternatives

Selection of alternatives

Implementation of alternatives

Evaluation of decision alternatives

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Memory and Storage, Display Quality,

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Gateway, Apple iBook, Lenovo, Dell

Toshiba, HP, Soni Vaio, Qosmio, Gatew

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Toshiba, HP, Soni Vaio, Qosmio,

Gateway, Apple iBook, Lenovo, Dell

Toshiba!

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The role of intuition

Intuitive decision making

* Making decisions on the basis of

experience, feelings, and accumulated

judgment.

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intuition

Experience-based

Decisions

Affect-InitiatedDecisions

Cognitive-Based

DecisionsSubconscious

mental processing

Values or ethics-based Decisions

Their past experiences

Feelings or emotions

Skills,knowledge, and

trainingData from

subconscious mind

Ethical values

and culture

What is Intuition ?

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Decision Making Conditions

Certainty

* A situation in which a manager can make an

accurate decision because the outcome of everyalternative choice is known.

Risk

* A situation in which the manager is able to

estimate the likelihood (probability) of outcomesthat result from the choice of particularalternatives.

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Decision-making Conditions

Uncertainty

* limited information prevents estimation of

outcome probabilities for alternatives associatedwith the problem and may force managers or relyon intuition, hunches, and gut feelings.

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Decision-making styles

Dimensions of decision-making styles

* Ways of thinking

* Rational,orderly, and consistent.

* Intuitive, creative, and unique.

Tolerance of ambiguity

*Low tolerance:require consistency and order.*High tolerance: multiple thoughts simultaneously.

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Decision-Making Styles (contd)

Types of Decision Makers* Directive

# Use minimal information and consider fewalternatives.

* Analytic# Make careful decisions in unique situations.

* Conceptual

# Maintain a broad outlook and consider many

alternatives in making decisions.* Behavioral

# Avoid conflict by working well with othersand being receptive to suggestions.

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Characteristics of an Effective

Decision-Making It focuses on what is important

It is logical and consistent.

It acknowledges both subjective and objectivethinking and blends analytical with intuitivethinking.

It requires only as much information and analysis

as is necessary to resolve a particular dilemma. It encourages and guides the gathering of relevant

information and informed opinion.

It is straightforward,reliable, easy to use, and

flexible.

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A General-

Decision

MakingModel

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Challenges for Decision Makers

Decision Making

The process of identifying and choosing alternative coursesof action to meet the demands of a situation.

Trends in Decision Making

The pace of decision making is accelerating: managers

report making more decisions and having less time to makethem.

Complex streams of decisions

Sources of decision complexity

Perceptual and behavioral decision traps

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Dealing with Complex Streams of Decisions

Multiple criteria to be satisfied by a decision.

Intangibles that often determine decision alternatives.

Risk and uncertainty about decision alternatives.

Long-term implications of the effects of the choice of a

particular alternative.

Interdisciplinary input increases the number ofpersons to be consulted before a decision is made.

(Contd)

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Pooled decision making increases the number ofpersons playing a part in the decision process.

Value judgments by differing participants in theprocess create disagreement over whether a decision is

right or wrong, good or bad, and ethical or unethical.

Unintended consequences occur because theresults of purposeful actions cannot always be predicted.

(Contd)

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Guideline for making decision more effective

Categorical interpretation- the problem should bedefined properly.

Application of limiting factor- limiting factor shouldbe taken into account in order to analyze the external S &

W.

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

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

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