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 managers called upon to make:
Programmed and non-programmed
Types of Problems and Decisions
• 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.
Problems and Decisions ( cont’d)• 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.
Types of Programmed Decisions
• Policy* a general guideline for making a decision about a
structured problem.• Procedure
* A series of interrelated steps that a manager can use to respond ( applying a policy) to a structured problem.
• Rule* an explicit statement that limits what a manager or employee can or cannot do.
Programmed vs. Non-programmed Decisions
Characteristics 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
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.
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 decision’s effectiveness.
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 manager becomes aware of it.* there is a pressure to solve the problem.* the manager must have the authority, information, or resources needed to solve the problem.
Step 2: Identify the Decision Criteria
• Decision criteria are factors that are important ( relevant) to resolving the problem.* Costs that will be incurred (investment required).* Risks likely to be encountered ( chance of failure).* Outcomes that are desired ( growth of the firm).
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.
Step 4: Developing Alternatives
• Identifying viable alternatives.* Alternatives are listed ( without evaluation) that can resolve the problem.
Step 5 :Analyzing alternatives• Appraising each alternative’s strengths and
weaknesses* An alternative’s appraisal is based on its ability to resolve the issues identified in step 2 and step 3.
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.
Step 8: Evaluating the decision’s 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?
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, Better Life,Warranty, Carrying weightMemory 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, Gateway, Apple iBook, Lenovo, Dell
Toshiba, HP, Soni Vaio, Qosmio, Gateway, Apple iBook, Lenovo, Dell
“ Toshiba!”
The role of intuition• Intuitive decision making
* Making decisions on the basis of experience, feelings, and accumulated judgment.
intuition
Experience-based Decisions
Affect-Initiated Decisions
Cognitive-Based Decisions
Subconscious mental processing
Values or ethics-based Decisions
Their past experiences
Feelings or emotions
Skills,knowledge, and training
Data from subconscious mind
Ethical values and culture
What is Intuition ?
Decision Making Conditions
• Certainty* A situation in which a manager can make an accurate decision because the outcome of every alternative choice is known.
• Risk* A situation in which the manager is able to estimate the likelihood (probability) of outcomes that result from the choice of particular alternatives.
Decision-making Conditions
• Uncertainty* limited information prevents estimation of outcome probabilities for alternatives associated with the problem and may force managers or rely on intuition, hunches, and “gut feelings”.# Maximax: The optimistic manager’s choice to maximize
the maximum payoff.
# Maximin: The pessimistic manager’s choice to maximize the minimum payoff.
# Minimax: The manager’s choice to minimize maximum regret.
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.
Decision-Making Styles (cont’d)• Types of Decision Makers
* Directive# Use minimal information and consider few
alternatives.* 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 others and
being receptive to suggestions.
Characteristics of an Effective Decision-Making
• It focuses on what is important• It is logical and consistent.• It acknowledges both subjective and objective
thinking and blends analytical with intuitive thinking.• 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.
A General-Decision Making Model
Individual Models of Decision-Making
Cognitive styleUnderlying personality dispositions toward the treatment of information, selection of alternatives, and evaluation of consequences.Systematic decision makerspeople who approach a problem by structuring it in terms of some formal method.Intuitive decision makerspeople who approach a problem with multiple methods in an unstructured manner, using trail and error to find a solution.Organizational models of decision makingModels of decision making that take into account the structural and political characteristics of an organization.
Bureaucratic models of decision makingwhere decisions are shaped by the organization’s standard operating procedures(SOPs).
Political models of decision makingwhere decisions result from competition and bargaining among the organization’s interest groups and key leaders.
“Garbage can” modelwhere states that organizations are not rational and that decisions are solutions that become attached to problems for accidental reasons.
Organizational Models of Decision-Making
Guideline for making decision more effective
Categorical interpretation- the problem should be defined properly.Application of limiting factor- limiting factor should be taken into account in order to analyze the external S & W.Adequate information- more quantity of reliable information leads to effective decision making.Considering other views- various views at the same point are taken into account for quality decision.Timeliness- decision should be ,made at proper time to meet the competitive advantages.
Techniques for improving decision making
Brainstorming – idea generation for decision making.
Nominal group technique (NGT)- problem outlined, presentation of solution in written form, discussion over written solutions, and final decision.Delphi technique- decision made on the basis of questionnaire filled by the respondents.Consensus mapping- decision made on the basis of the report presented by the representative of each group.