Decision Making Syllabi

7/31/2019 Decision Making Syllabi

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Decision Making- An essence toproblem solving

By: Udhaya Kumar.C

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Decision making

the process of choosing a course of action from among

alternatives to achieve a desired goal.

One of functions of management & a core process of

planning Management executives take a number of decisions every

day

A direction to other to do or not to do-----means rational

or irrational 2


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Types of Problems and Decisions

There are basically two kinds of decisionthat managers called upon to make:

Programmed and non-programmed

Structured problems* Involved goals that clear.

*Are familiar(have occurred before)

*Are easily and completely defined- information

about the problem is available and complete.

Programmed decision

*A repetitive decision the can be handled by a

routine approach. 3


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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 structuredproblem.

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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One more type of decision

making Organizational & personal :

Organizational : taken by individual in official capacity to

further the interest of organization

Based on rationality, judgement and experience

Example : introducing a new incentive system, transferring an

employee, reallocation or redeployment of employee, etc -----

affect functioning of organization directly

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Features of Decision Making

Selection process

Goal oriented process

End process

Human & rational process---involve

intellectual ability

Dynamic process

Situational ---no.of decisions every day

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Features of Decision Making

Continuous or ongoing process

Freedom to decision ---regarding final

choice

Positive or negative

Happiness to endeavourwho takes

various steps to collect all information,

likely to affect a decision.

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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. 10


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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 resolvethe problem.

Step 5 :Analyzing alternatives

Appraising each alternatives strengths and weaknesses

* An alternatives appraisal is based on its ability to resolve theissues identified in step 2 and step 3.

Following techniques useful:

i. Quantitative & Qualitative analysis:

ii. Marginal analysis---compare additional revenue withadditional cost

revenueincome received by an organization, or a state bytaxes

iii. Cost effectiveness analysis---alternatives evaluate based oncosts & benefits

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Step 6: selecting the alternative

Choosing the best alternative

* The alternative with the highest total weight is chosen.

Based on

1. Experiencesolved or faced similar problems

2. Experimentationtrial & error methodtrying or testing

alternatives---most expensive of all techniques---does not yield

optimum result & time consumingdevelop a test model

limitationsinterrelationship b/w variables---theoretical

approach---intangible factors not considereddifficult to

collect data

Step 7: Implementing the Alternative

Putting the decision to and gaining comment from those whose

will carry out the decision.

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St 8 E l ti th d i i


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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? 17


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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

My sales Reps need new computers!

Memory and Storage, Display Quality,

BetterLife,Warranty, Carrying weight

Memory and Storage-10, Display

Quality -8, Better Life -6,Warranty -4,Carrying weight-3

Toshiba, HP, Soni Vaio, Qosmio,

Gateway, Apple iBook, Lenovo, Dell

Toshiba, HP, Soni Vaio, Qosmio, Gatew

Apple iBook, Lenovo, Dell

Toshiba, HP, Soni Vaio, Qosmio,

Gateway, Apple iBook, Lenovo, Dell

Toshiba!18


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Rationality in Decision Making

Defined in terms of objective and

intelligent action

2 contrasting views of models of decisionmaking with each model using degree of

rationality

Economic model

Bounded Rationality

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Rationality in Decision

Making(Contd..) Economic model

Decision making tries to maximize values

in a given situation by choosing mostsuitable course of action

Effectively & Efficiently assures

attainment of aims for which the means areselected

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Making(Contd..) Bounded Rationality

Normative approach based on following

assumptions:

Decision maker has clear & well defined

goal that he tries to maximize

He is objective & rational

He can identify problem clearly &

precisely21


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Making(Contd..) Clear understanding of alternative course

of action

Ability to analyse & evaluate alternatives

Desire to come to best solution by

alternative selection

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Making(Contd..) Major implications of bounded rational

decision making process:

Decision maker forced to strike a balanceb/w ideal & real situation

No exhaustive search--- stop search in

alternative when standard reached

Human factors---value systems, prejudices,

perceptions, social factors,etc.23


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Making(Contd..) Not search for best solutionbut for good

solution-----aim at satisfying rather than

maximizing Does not have complete knowledge of

alternative & their consequences.

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Decision Making Syllabi

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