PB 301 – BUSINESS MANAGEMENT

CHAPTER 7 – DECISION-MAKING

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Definition of Decision MakingHuber (1980) - Problem solving process refers to a set of activities which involves exploring and implementing corrective action in a certain condition.

A selection made between two or more alternatives. A selection is made after analysing the available alternatives and this is followed with the implementation of the selection.

Involves the process of identifying problems and finding alternatives to solve the problem.

DECISION-MAKING MODELS

Rational Model

Bounded

Rational Rati

o

Emoti

onal

mode

l

Rational ModelPermits the minimum achievement of an objective within the limitation to which the decision is an objective. In the rational model, the manager addresses how best to achieve objectives. The rational model is divided into a series of steps in the form of logical sequences to find the best answer for a certain question.

Bounded Rational ModelHerbet Simon in the mind 1950s introduced his pioneering research into the decision-making process within business organizations. The model emphasized the limitations of the individual’s rationality, where is provides a better picture of the day-to-day decision-making process often used by individuals.

Emotional modelAn individual does not think

logically. The pattern for making

a decision is in a heuristic

format. This model can save time

but produce a biased decision.

Authority in Decision-Making

Managers must take various decision in order to ensure that the organization is running smoothly.

Two factors can be determine: - scope of the decision - management level

Advantages Disadvantages

More problems can be solved.

Time-consuming: waste resources if used for programmed decision or strategic planning.

More knowledge, facts and alternative can be evaluated.

Decision may not satisfy every employee/manager.

Discussion clarifies ambiguous problems and reduces uncertainty about decision-making.

Groupnorms may reduce dissent and better opinion.

Participation fosters employee satisfaction and support for choice of decision-making.

No clear focus for decision responsibility among group members.

Table 7.1 Advantages and Disadvantages of

Participative Decision Making

Types of DecisionProgrammed decisions - made based on the set of policies, rules, and procedures.

- every organization has written and unwritten rules that can be followed by manager and other employees to make decision.

- this approach is useful for lower-level managers in solving problems.

- also limits the manager’s freedom in making decision.

Non-programmed decisions

>>>non-programmed decisions are

used to solve unique or

extraordinary problems.

>>>used by top-line managers to solve

complicated and complex problems.

Conditions of Decision-MakingThere are three different making decision :

Certainty conditionsRisky conditionsUncertainty conditions

1. Certainty conditions

Will usually thinks of a problem based on the level of certainty and risk.Manager will be able to predict

what will happen in the future.They also have an adequate and

complete knowledge about the matter. This enables them to list the outcomes of implementing the available alternatives.Assuming that all the information

obtained is complete and reliable. Based list of outcomes, manager will select the alternative that produces the best and most beneficial outcome to the organization.

2. Risky conditions

Whereby managers would only be able to roughly predict the outcome of implementing the alternative due to limited knowledge and information.

Determined through objective probability whereby a mathematical model is used, or through subjective probability which is based on the managers experience and judgement.

Can refer to old data to help them make accurate predictions.

3. Uncertainty conditions

Refer to conditions whereby decision-makers are unsure or unable to predict the outcome of an action.

As manager, do not have any information on the outcome of implementing an alternative.

As manager do not have adequate information they must make their own judgement based on past experiences to make subjective evaluations.

Always assume that the best alternative that is selected is based on coincidence.

Goals and Decision Making

Goals called objectives, purposes, deadlines or targets.

Goals or objective are basically result that are achieved. They indicate the direction in which decisions and actions should be aimed.

Decision making under risk and certainty in an organization directly complies with objectives or goals in 2 ways(a)The decision-making process is triggered

by a search for a better way to achieve objective

(b)The decision-making process is triggered by an effort to discover new plans, revise current plans, or cancel current plans.

Goals are crucial in giving employees managers and the entire organization a sense of order, direction and meaning.

Goals serve to focus the effort of individuals and the organization in the decision making process.

Decision-Making Skills

1)Various problem in organization must be solved promptly by the management.

2)The ability to select the best alternative require manager who have decision making.

3)In a decision making process involving the opportunity to do something that has never been done before, comprehensive analysis must be made.

4)Manager need to depend on their past experience to make decision.

5)It depends on the willingness to accept risk and uncertainties.

Quantitative decision Refer to decision that made based on a set

data values that obtained and processed using several mathematical method to predict future value.

Widely used due:

I. Produce accurate decision and is accepted as a tool to facilitate the planning process

II. Increase the effectiveness and reduce the cost using quantitative decision-making techniques.

Statistics have been used because it is an area that is closely related to research. In general, it is a mathematical techniques to process, arrange, analyse and summarize data in quantitative form.

Qualitative decisionMade based on the opinion and knowledge of experts when comprehensive past data cannot be obtained by decision maker.

Steps that need to be taken by the manager:

a)Prioritize the problemb)Obtain the relevant

informationc)Act in a careful and

organized manner

The Decision-Making ProcessOutcomes is the selection made

from a list of available

alternatives.

The decision-making process that

managers follow will influence the

quality of decisions made.

7 Steps of Rational Decision-Making

Process

Take follow-up actionEvaluate the decisionImplement a decision

Select the best alternatives

Analyse the alternatives

Form alternativesIdentify the problem

Decision-Making

Techniques

Group Decision Making

Many decision have a importance effect on activities and human resources organization by group or team in that organization.

Advantages Able to collect more information

Able to form many effective alternatives

High acceptance level

Increase in the acceptance of rights

Disadvantages Takes a longer time

Minority domination

Pressure to follow a decision

Unclear responsibilities

Ways to improve group

decision-making

Brainstorming A process of generating information that encourages the collection of alternatives without criticism.

A process whereby every member provide his ideas and the best ideas will be selected to help the decision-making process.

Nominal Group Technique limits discussions held during the decision-making process.

all members are involved in the decision-making process.

Step :

2) present

1) meeting

3) record

4) discussion

Delphi Technique a group decision-making technique that is more complex and takes time.

does not allow team members to meet face to face.

Step : i. identify the problem.ii. members are instructed to provide

solutions through a series of specifically designed questionnaires.

iii. every members completes the questionnaires in private.

iv. the results of the first questionnaire are compiled in one location and duplicated.

v. the compiled results are given to all members.

vi. members are instructed to propose a solution once again.

Electronic Meeting the latest approach in group decision-making.

covers the nominal group technique and the usage of a sophisticated computerr technology.

Step:i. Computers are installed in the

meeting room.ii.50 members will have a meeting

through the computer network.iii.Issues will be given to participants iv. individual comments and aggregate

voting will be projected on the screen in the meeting room

Thank you… ^^,