Decision Making- An essence to problem solving
By: Sheeba Rehman
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 u nusual and for which information is ambiguous or incomplete. in complete. * 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 DecisionMaking Process
Define the Problem
Gather facts and develop alternatives.
Evaluate Alternatives
Select the best alternative.
Implement the chosen 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
“My sales Reps need new computers!” c omputers!” Memory and Storage, Display Quality, Bet Life,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, Gatewa Apple iBook, Lenovo, Dell Toshiba,
Implementation of alternatives
Evaluation of decision alternatives
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.
What is Intuition ? Their past experiences Ethical values and culture
Experience-based Decisions
Values or ethics based Decisions Subconscious mental processing
Data from subconscious mind
intuition
Feelings or emotions
Affect-Initiated Decisions Cognitive-Based Decisions
Skills,knowledge, and training
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.
Common decision-Making errors and Biases Overconfidence Hindsight Self-serving Sunk costs
Decision-Making Errors & Biases
Randomness
Immediate Gratification Anchoring Effect Selective Perception Confirmation
representation Availability
framing
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 GeneralDecision Making Model
A General Decision-Making model Improving
the Flow of Knowledge
– The flow of constructive tacit knowledge kno wledge
between coworkers is a priority. – Knowing what you know, what you don’t know, and how to find what you know yields better and more timely decisions.
(Cont’d)
Knowledge Management (KM): A Tool for Improving the Quality of Decisions – Developing a system to improve the creation
and sharing of knowledge critical for decision making. – Tacit knowledge: personal, intuitive, and
undocumented private information. – Explicit knowledge: readily sharable public
information in verbal, textual, visual, or numerical form.
Rational (Logical) Decision Model Steps Scanning
the situation —identifying a signal that a decision should be made.
Receipt
of authoritative communications from superiors.
Cases
referred for decision by subordinates. su bordinates.
Cases
originating from the manager.
Classify
the decision as routine, apply the appropriate decision rule; as nonprogrammed, begin comprehensive problem solving.
Monitor
and follow-up as necessary.
Individual Models of Decision-Making Cognitive style Underlying personality dispositions toward the treatment of information, selection of alternatives, and evaluation of consequences. Systematic decision makers people who approach a problem by structuring it in terms of some formal method. Intuitive decision makers people who approach a problem with multiple methods in an unstructured manner, using trail and error to find a solution. Organizational models of decision making Models of decision making that take into account the structural and political characteristics of an organization.
Organizational Models of Decision-Making Bureaucratic models of decision making where decisions are shaped by the organization’s standard operating procedures(SOPs). Political models of decision making where decisions result from competition and bargaining among the organization’s interest groups and key leaders. “Garbage can” model where states that organizations are not rational and that decisions are solutions that become attached to problems for accidental reasons.
Challenges for Decision Makers
Decision Making – The process of identifying and choosing alternative courses
of action to meet the demands of a situation.
Trends in Decision Making – The pace of decision making is accelerating: managers
report making more decisions and having less time to make them. • Complex streams of decisions • Sources of decision complexity • Perceptual and behavioral decision traps
(Cont’d)
Dealing with Complex Streams of Decisions – Multiple criteria to be satisfied by a decision. – Intangibles that often determine decision alternatives. – Risk and uncertainty about decision alternatives. – Long-term implications of the effects of the choice of a
particular alternative. – Interdisciplinary input increases the number of persons
to be consulted before a decision is made.
(Cont’d) – Pooled decision making
increases the number of persons playing a part in the decision process.
– Value judgments by differing participants
in the process create disagreement over whether a decision is right or wrong, good or bad, and ethical or unethical.
– Unintended consequences
occur because the results of purposeful actions cannot always be predicted.
Managers and Decision-Making Classical model of management management Traditional description of management that focused on its formal functions of planning, organizing, coordinating, deciding and controlling.
Behavioral models Descriptions of management based on behavioral scientists observations of what managers actually do in their jobs.
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.
,made at proper time to Timeliness- decision should be ,made 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 after
