02-Decision Making

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DECISION MAKING

Principles of Management

M. Salman Anjum

Module # 2


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Salman Anjum - Module # 2 2

1. Define decision making

2. Outline the steps in the decision-making process3. Identify few decisions at managers make while performing

managerial functions

4. Contrast programmed and nonprogrammed decisions andtheir application at different management levels

5. Contrast the three decision-making conditions

6. Advantages and disadvantages of group decision making

7. Identify few effective group decision making tools

Learning Objectives of Module

Learning Objectives of Module

After studying this chapter, you should be able to:


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Manager & Decision Making - Quote

Manager & Decision Making - Quote

~ The one wordhat makes a good manager -- decisiven

Lee Iacocca


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The process of identifying andchoosing alternative courses of

action to meet the demands ofa situation.

The pace of decision making isaccelerating: managers makingmore decisions and havingless time to make them.

Decision Making

Decision Making

2.1


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Decision Making Process

Decision Making Process

1Define andDiagnose

Problem

1Define andDiagnoseProblem

7Implementing the

Alternative

7Implementing the

Alternative

6Selecting anAlternative

6Selecting anAlternative

5Analyzing

Alternatives

5Analyzing

Alternatives

4DevelopingAlternatives

4DevelopingAlternatives

3Allocating Weights

to Criteria

3Allocating Weights

to Criteria

2Identifying

Decision Criteria

2Identifying

Decision Criteria

8Evaluating Decision

Effectiveness

8Evaluating Decision

Effectiveness

2.2


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Decision Making Process - Example

Decision Making Process - Example

2.2

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 Laptops!

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, Dell

Toshiba, HP, Soni Vaio, Qosmio, Gateway,Apple iBook, Dell

Toshiba, HP, Soni Vaio, Qosmio,

Gateway, Apple iBook, Dell

Toshiba!


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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 pressure to solve the problem.

The manager must have the authority, information,or resources needed to solve the problem.

Step 1: Identifying the ProblemStep 1: Identifying the Problem

2.2.1 Decision Making Process


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Decision criteria are factors thatare important (relevant) to

resolving the problem. Costs that will be incurred

(investments required)

Risks likely to be encountered

(chance of failure)

Outcomes that are desired (growthof the firm)

Step 2: Identifying Decision CriteriaStep 2: Identifying Decision Criteria



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Decision criteria are not

of equal importance: Assigning a weight to

each item places theitems in the correct

priority order of theirimportance in thedecision making process.

Step 3: Allocating Weights to CriteriaStep 3: Allocating Weights to Criteria



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Identifying viablealternatives Alternatives are listed

(without evaluation) thatcan resolve the

problem.

Step 4: Developing AlternativesStep 4: Developing Alternatives



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Appraising each alternatives strengths andweaknesses

An alternatives appraisal is based on its ability toresolve the issues identified in steps 2 and 3.

Step 5: Analyzing AlternativesStep 5: Analyzing Alternatives



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Choosing the best

alternative The alternative with the

highest total weight ischosen.

Step 6: Selecting an AlternativesStep 6: Selecting an Alternatives



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Putting the chosenalternative into action. Conveying the decision to and

gaining commitment from thosewho will carry out the decision.

Step 7: Implementing the DecisionStep 7: Implementing the Decision



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The soundness of thedecision is judged by its

outcomes. How effectively was the

problem resolved byoutcomes resulting from the

chosen alternatives? If the problem was not

resolved, what went wrong?

Step 8: Evaluating the Decisions EffectivenessStep 8: Evaluating the Decisions Effectiveness



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Programmed Decisions for Structured ProblemsProgrammed Decisions for Structured Problems

Structured Problems

Straightforward

Are familiar (have occurred before), Are easily and completely defined

information about the problem isavailable and complete

Customer returning purchase to store

Programmed Decision

A repetitive decision that can behandled by a routine approach.

2.4.1 Types of Problems & Decisions


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Types of Programmed DecisionsTypes of Programmed Decisions

Policy

A general guideline for making a decision about a structuredproblem.

Accept all customer-returned merchandise.

Procedure A series of interrelated steps that a manager can use to respond

(applying a policy) to a structured problem.

Follow all steps for completing merchandise returndocumentation.

Rule

An explicit statement that limits what a manager or employee can orcannot do in carrying out the steps involved in a procedure.

Only managers can approve all refunds over $50.00.

No credit purchases are refunded for cash.



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Nonprogramed Decisions for Unstructured ProblemsNonprogramed Decisions for Unstructured Problems

Unstructured Problems

Problems that are new or unusual and for which

information is ambiguous or incomplete. Problems that will require custom-made solutions.

Whether to build a new manufacturing facility in China

Non-programmed Decisions Decision that are unique and nonrecurring.

Decision that generate unique responses.



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Programmed Vs. Non-programmed DecisionsProgrammed Vs. Non-programmed Decisions


Characteristics ProgrammedDecisions

Non-programmedDecisions

Type of Problem Structured Unstructured

Managerial Level Lower level Upper level

Frequency Repetitive New,unusual

Information Readily available Ambiguous or incomplete

Time Frame forSolution

Short Relatively long

Solution Relies on Procedures,rules, andpolicies

Judgment and creativity


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Types of Decisions & Manager FocusTypes of Decisions & Manager Focus

2.4.4

Few managerial decisions in thereal world are either fullyprogrammed or non-programmed

These are extremes and mostdecisions fall somewhere inbetween

Its best to think of decisions asmainly programmedormainlynon-programmed


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Types of Decisions & Level in OrganizationTypes of Decisions & Level in Organization

Programmed

Decisions

NonprogrammedDecisions Level in

Organization

Top

LowerWell-structured

Ill-structured

Type ofProblem

2.4.5


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Decision Making ConditionsDecision Making Conditions

Objective

Probabilities

Subjective

ProbabilitiesRisk

Certainty Uncertainty

Clear Intuition and judgment

2.5


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Decision Making Conditions - CertaintyDecision Making Conditions - Certainty

The condition under which individuals are:

1. fully informed about a problem,

2. alternative solutions are known, and

3. the results of each solution are known

Both the problem and alternative solutions

are totally known and well defined

Exception for most managers

2.5.1


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Decision Making Conditions - UncertaintyDecision Making Conditions - Uncertainty

Condition under which individualsdo not have the necessary

information to assign probabilitiesto the outcomes of alternativesolutions

May not even be able to define the

problem, much less identifyalternative solutions and possibleoutcomes

2.5.3


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OtherCrises

Economic Crises

RecessionsStock market crashes

Hostile takeovers

Physical Crises

Industrial accidentsSupply breakdowns

Product failures

Information Crises

Theft of proprietary informationTampering with company records

Cyberattacks

Natural Disasters

FiresFloods

Earthquakes

Examples of Possible Crises as

Sources of Uncertainty and High Risk

Examples of Possible Crises asSources of Uncertainty and High Risk

2.5.3


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Integrating Decision Making ConditionsIntegrating Decision Making Conditions

Unusual and

Ambiguous

Known and

Well Defined

Problem

Types

Untried and

Ambiguous

Innovative

DecisionsInnovative

Decisions

Adaptive

DecisionsAdaptive

Decisions

Routine

DecisionsRoutine

Decisions

Cond

itionsun

derw

hich

decis

ions

are

mad

eUncertaintyUncertainty

CertaintyCertainty

RiskRisk

Solution Types

(Alternative Solutions)

2.5.4


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Group Decision MakingGroup Decision Making

Potential Advantages1. Better-quality decisions

2. More information,

alternatives, creativity, andinnovation

3. Better understanding ofthe decision

4. Greater commitment to the

decision5. Improved morale and

motivation

6. Good training

Potential Disadvantages1. Wasted time and slower

2. Satisficing

3. Domination and goaldisplacement

4. Conformity and groupthink

2.6


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Group Decision Making TechniquesGroup Decision Making TechniquesBrainstormingBrainstorming

The process of suggesting many possiblealternatives without evaluation.

Used to generate ideas in a group decision making

2.7.1


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Group Decision Making TechniquesGroup Decision Making TechniquesBrainstorming Ground RulesBrainstorming Ground Rules

Relax, Have fun, Support

Select a moderator, no dominating& interrupting

Create solutions/ideas in silence

No boundaries, no limits on thenumber of ideas

Just Keywords Short session (Max 20 minutes)

No criticizing (during or after)

2.7.2


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Multiple rounds, if required

After session explain quickly Select promising solutions/ideas

Promising solutions/ideas aredeveloped in more detail listing pros

and cons Team select one solution/idea

2.7.2


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Pakistan textile industry isgoing through difficult period.Lets do some brainstormingto find out some ideas for itsrecovery!

Class ExerciseClass Exercise

02-Decision Making

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