decision making
TRANSCRIPT
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Decision Making:The Essence of Managers’
Job
by Muhammad Iqbal Malik
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Key Topics
Introduction
The Decision-making process
Decision-making models
Decision Styles
A discussion on Group Decisions
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Part I
Introduction
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Organizations
Organizations are systems
Involve people, structure and a common purpose
Have limited resources
Need to perform a series of functions to meet its objectives
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Managers
Managers are responsible for effective and efficient execution of these organizational functions.
A typical manager performs a number of functions that are categorized as:
• Interpersonal
• Informational
• Decisional
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Managers
One of the key traits that distinguish managers from operatives is the ability to make independent decisions.
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Part II
Decision-making
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What is decision-making?
The word decision is defined as:
“A choice between two or more alternatives”.
Thus decision-making can be defined as:
“the selection of a course of action from among alternatives ”.
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Decision-making Process
Identifying a problem
Identifying decision criteria
Allocating weights to criteria
Developing alternatives
Analyzing alternatives
Selecting an alternative
Implementing the alternative
Evaluation (of decision effectiveness)
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Problem Definition
Problem is a discrepancy (difference) between an existing and a desired state.
Example:
“The manager has resigned, and we need another manager”
Here the phrase “manager has resigned” reflects the current state while “need another manager” represents a desired state.
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Identifying Decision Criteria
The word criteria, is defined as “a standard by which something can be judged”.
A decision criteria therefore, is the basis of a decision, which outlines the relevant and important factors for a decision. And implicitly, it also defines what is not important.
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Decision Criteria: Example
In the above-cited scenario, the decision criteria may include the following factors:
Relevant qualifications
Leadership skills
Communication skills
Planning and analytical skills
Professional experience
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Allocating Weights to Criteria
The next step in the decision making process is prioritization.
Prioritization is achieved by assigning quantitative weights to each criteria element.
The weightage defines the relative significance of each element.
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Allocating Weights: Example
Criterion Weight
Relevant qualifications 3
Leadership skills 5
Communication skills 3
Analytical skills 4
Professional experience 1
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Developing Alternatives
Involves defining the possible alternatives (or choices) that would resolve the problem.
In our case, the alternatives would be a list of candidates or job applicants.
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Analyzing Alternatives
Alternatives are rated and analyzed on the basis of the criteria
The rating can be based on a specified scale, say 1 – 5 etc.
Rating may be subjective in nature and thus,may depend on the judgment of the individual(s)
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Criteria Rating: Example
C A N D I D A T E S R A T I N G A N D A S S E S S M E N T
Candidate Qualif- ication
Leader- ship
Commun- ication
Analysis Exper- ience
Kamran Ashraf 3 3 3 1 1
Rahila Mushtaq 2 1 4 2 2
Tasaduq Hussain 4 2 3 2 3
Zubair Ahmed 2 5 2 4 1
Maliha J aved 4 5 4 3 2
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Analyzing & Assessment: Example
E V A L U A T I O N O F C A N D I D A T E S
Candidate Qualif-ication
Leader- ship
Commun- ication
Analysis Exper- ience
Total
Kamran Ashraf 9 15 9 4 1 38
Rahila Mushtaq 6 5 12 8 2 33
Tasaduq Hussain 12 10 9 8 3 42
Zubair Ahmed 6 25 6 16 1 54
Maliha J aved 12 25 12 12 2 63
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Selecting an alternative
Involves choosing the best alternative, based on the above rating and analysis
Generally implies selecting the alternative with the highest score.
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Implementing the Alternative
Putting the decision into action
Involves clear communication of the decision to all concerned and obtaining their commitment
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Evaluation
Evaluation forms an integral part of any process
Involves evaluation of the outcome based on the desired goal and criteria
Involves assessing the effectiveness and efficiency of the outcome (or the entire process)
In case of any undesired results, each step of the process is carefully reviewed to trace the root causes
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Decision-making Models
Model
“A simplified representation or description of a system or complex entity”
Examples
A model of a building
A globe (Earth model)
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Rational/Bounded Rational
So Rational and Bounded Rational Models are cognitive models that describe how managers make rational decisions
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The Rational Model
External and internal Environ. forces
1. Define and diagnose the
problem2. Set goals
3. Search for alternative solutions
4. Compare and evaluate
solution
5. Choose among
alternative solutions
6. Implement the solution
selected
7. Follow up and control
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Rational Model: Assumptions
Clear and unambiguous problem
Single, well-defined goal
All alternatives are known
Clear preferences (ranking criteria)
Constant/stable preferences
No time or cost constraints
Decision will maximize payoff
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Rational Model: Criticism
Not all decisions made on rational basis
Most problems, goals and preferences are not clear or well defined
Not practical to know all possible alternatives
Time and cost constraints exist in all practical problems
Result not maximized in most cases
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Bounded Rational: Assumptions
Limited set of criteria
Self-interest influences ratings
Limited no. of alternatives
Alternatives are assessed one at a time till a satisficing (or good enough) alternative is found
Politics influences acceptance and commitment of decision
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Intuition
An unconscious process of making decisions on the basis of experience and judgment
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Intuition
Involves gut feeling
May also have rational basis
The “feeling” arises from past experience and knowledge
Involves quicker response
Does not involve systematic analysis
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Decision Types
Effective managers make various kinds of decisions. In general, these decisions are either
Programmed decisions
Non-programmed decisions
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Programmed Decisions
A decision that is repetitive and routine
A definite method for its solution can be established
Does not have to be treated a new each time it occurs
Procedures are often already laid out
Examples: pricing standard customer orders, determining billing dates, recording office supplies etc.
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Non-programmed Decisions
A decision that is novel (new or unique) or Ill structured
No established methods exist, because it has never occurred before or because
It is too complex
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Non-programmed Decisions
Organizational Levels
Nature ofProblems
Nature ofDecision-making
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Non-programmed Decisions
Are “tough” decisions that involve risk and uncertainty and
call for entrepreneurial abilities
Such decisions draw heavily on the analytical abilities of the manager
Examples: Moving into a new market, investing in a new unproven technology, changing strategic direction
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Decision Styles
Decision-making, though a rational process does include some subjective elements
Thus in real organizational settings, the quality of decision does depend on the ability, style and approach of the manager
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Decision Styles: Directive
Directive
Represents low tolerance for ambiguity and uncertainty
Reflects rational thinking of the manager
Such decision styles are more suitable for routine procedural tasks
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Decision Styles: Analytic
Analytic
Analytical style is also a rational style of thinking
Involves a very high tolerance for ambiguity and uncertainty
Such managers generally seek detailed information before making a decision
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Decision Styles: Behavioural
Behavioural
Represents a creative way of thinking
Involves a low tolerance for ambiguity or uncertainty
Managers with a behavioural style introduce “new” ways of doing things
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Decision Styles: Conceptual
Conceptual
Conceptual style also reflects a creative and intuitive way of thinking
Conceptual style managers have a very broad vision and generally look at numerous alternatives for decision-making
Focused on the long run and often result in creative outcomes or alternatives
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Vroom and Yetton Model
Vroom and Yetton have identified five decision styles for managers, and are classified as follows:
Autocratic
AI
The decision is made individually, using the information available to the individual only
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Vroom and Yetton Model
AII
The manager obtains information from subordinates and himself makes the decision
May or may not share with subordinates, the purpose of questions or the nature of problem
Subordinates do not play any role in problem definition or selection of alternatives
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Vroom and Yetton Model
Consultative
CI
The manager shares the problem with relevant subordinates individually
Getting their input individually and not as a group. The manager then makes the decision independently, and may or may not be influenced by the subordinates’ suggestions
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Vroom and Yetton Model
CII
The problem is shared to subordinates in a group
Their ideas and suggestions are sought in a group meeting
The decision is then made by the manager which
May or may not reflect the subordinates’ influence
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Vroom and Yetton Model
Group Consensus
GI
The problem is shared to subordinates as a group
Alternatives are generated and evaluated collectively
Effort is made to reach a consensus
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Vroom and Yetton Model
GI (Contd.)
The decision is made collectively and the manager functions as a coordinator
Does not “press” the group in adopting the manager’s “solution”
The manager is willing to accept and implement the decision of the group
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Group Decision-making
The factors requiring group decisions include:
Involving sensitive issues
High cost alternatives
Involving very high risk factor
Strategic impact
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Group Decisions: Advantages
Acceptance of group members
Coordination is easier
Communication is easier
Existence of large alternatives
More information can be processed
Diversity of experience and perspectives
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Group Decisions: Disadvantages
Take longer time
Group can be indecisive
Groups can compromise
Groups can be dominated
Groups can “play games”
Victim to Groupthink
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Situational Factors for Individual Decision-making
Short time
Unimportant to group
Manager can take decision
Dominate the decision
Destructive conflict
Members hesitant
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Situational Factors for Individual Decision-making
Confidential data
Incapability of members
Manager’s dominance
Indirect effect on group members
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Situational Factors for Group Decision-making
Need for innovation and creativity
Data collection
Importance of acceptance
Importance of solution
Complex problem
Democratic process
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Situational Factors for Group Decision-making
Risk taking solution needed
Better understanding
Whole responsibility
Feedback required
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Improving Group Decision-making
Brainstorming
Nominal group techniques
Electronic meeting