Decision MakingThe essence of manager’s job

Topics to be Covered….. What is Decision? What are Decision Making Approaches? The Decision Making Process. The managers as Decision Makers. What is Problem? What are the types of Problems? Types of Decisions. Conditions of Decision Making. Decisions making styles. Decision making Biases and Errors.

What is Decision? Making a choice from two or more alternatives.

So, decision is a choice.

Suppose you have some money to invest , and you are considering different investment alternatives.

Problem● Alternative 1● Alternative 1● Alternative 2

What are Decision Making Approaches?

Rational Decision Making (Value Maximizing Approach) – Based on logics and normal thinking.

– Cost and benefits analysis.

– Select those alternatives where benefits are more than costs.

– Level of information is high.

– One clear goal, and all the alternatives available to achieve that Goal (Problem) are available.

Investment● Rafhan ● PTC ● MTM

Rational Decision Making (Value Maximizing Approach) – Managers make decisions rationally, but are limited /bounded by

their ability to process information.

– You are bound to make decisions those are not good.

Problem● A● B● CInformation may be available to managers but they are bound to make irrational decision because of;1. Order of boss,2. Lack of time,3. System,4. Limited resources.

Intuition** Predicting Stock Market Fluctuations

** Setting future perspective of business organization for next 5 years.

** Setting Pakistan's future direction for next 20 years.

Making decisions on the basis of experiences, feelings, judgments, skills, training, knowledge, senses, sub-conscious, mental processing, ethical values and culture.

** Usually for unseen problems.

● Experience

●Feelings

● Skills

● Ethical values

The Decision Making ProcessStep No.

Step Description Step Example

1 Identification of a Problem. ‘ I need a Automobile or Car’

2 Identification of decision criteria. 1. Price 2. Durability3. Mileage 4. Style

3 Allocation of weights to decision criteria. 1. Price ----------------102. Durability----------083. Mileage -------------074. Style ----------------05

4 Development of Alternatives. s I. GLI Toyota Corolla II. Honda Citi III. Suzuki Liana

These are given from 10.

5 Analysis of Alternatives

6 Selection of Alternative. I. GLI Toyota Corolla II. Honda Citi III. Suzuki Liana

7 Implementation of selected alternative. (decision)

‘ Purchased GLI Toyota Corolla’

8 Evaluation of decision ‘s effective. ‘ I am satisfied with decision, because this car has met all the criterion I was looking for’.

Price [10]

Durability[8]

Mileage [7]

Style[5]

Total

GLI Toyota Corolla

8 8 7 4 27

Honda Citi

8 5 5 5 23

Suzuki Liana

10 3 6 2 21

The Decision Making ProcessStep No.

Step Description Step Example

1 Identification of a Problem. ‘ I am feeling hungry and want to eat Pizza’

2 Identification of decision criteria. 1. Price 2. Taste 3. Environment 4. Customer Services

3 Allocation of weights to decision criteria. 1. Price ---------------- 502. Taste----------------1003. Environment ----- 804. Customer Services -70

4 Development of Alternatives. I. Pizza Hut II. AFC Pizza Shop III. Pizza Shop D- Ground

These are given from 100.

5 Analysis of Alternatives

6 Selection of Alternative. I. Pizza Hut II. AFC Pizza Shop III. Pizza Shop D- Ground

7 Implementation of selected alternative. (decision)

‘ Got there and eaten Pizza’

8 Evaluation of decision ‘s effective. ‘ I am satisfied with decision, because pizza hut’s pizza met criterion those I was intended for’ .

Price [50]

Taste [100]

Enviorn-ment[ 80]

Customer services

[70]

Total

Pizza Hut 30 100 80 70 280

AFC Pizza Shop

40 80 60 50 230

Pizza Shop D- Ground

50 60 40 30 180