Decision Making, CBMC, Consumer Behaviour in Decision Making
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Transcript of Decision making
DECISION MAKING
Decision Making
Perceptions of the
decision maker
Perceptions of the
decision maker
Outcomes
Decision Making Decision making is the process of choosing a
course of action for dealing with a problem or opportunity.
Steps in systematic decision making.Recognize and define the problem or opportunity.Identify and analyze alternative courses of action, and estimate their effects on the problem or opportunity.Choose a preferred course of action.Implement the preferred course of action.Evaluate the results and follow up as necessary.
Phases of Decision making Process
Intelligence activity Design activity Choice activity
Stages of decision making Process
The identification phase The development phase The selection phase
Decision making Process Certain decision environments.
Exist when information is sufficient to predict the results of each alternative in advance of implementation.
Risk decision environments.Exist when decision makers lack complete certainty regarding the outcomes of various courses of action, but they are aware of the probabilities associated with their occurrence.
Decision making Process Uncertain decision environments.
Exist when managers have so little information on hand that they cannot even assign probabilities to various alternatives and their possible outcomes.
Described as a rapidly changing setting in terms of:
External conditions.
The information technology requirements needed for analyzing and making decisions.
The people who influence problem and choice
definitions.
Types of decisions.Programmed decisions.
Involve routine problems that arise regularly and can be addressed through standard responses.
Nonprogrammed decisions.Involve nonroutine problems that require solutions specifically tailored to the situation at hand.
Decision-making model
Classical decision theoryClassical decision theory assumes the
manager faces a clearly defined problem, knows all possible action alternatives and their consequences, and then chooses the optimum solution.
Behavioral decision theoryBehavioral decision theory accepts the
notion of bounded rationality. It assumes the manager acts only in terms of what is perceived about a given situation, and then chooses a satisficing solution.
Assumptions of the Rational Decision-Making Model
Assumptions of the Rational Decision-Making Model
1. Problem clarity
2. Known options
3. Clear preferences
4. Constant preferences
5. No time or cost constraints
6. Maximum payoff
1. Problem clarity
2. Known options
3. Clear preferences
4. Constant preferences
5. No time or cost constraints
6. Maximum payoff
Steps in the Rational Decision-Making ModelSteps in the Rational
Decision-Making Model
E X H I B I T 5-3
Social Model Social model is drawn from psychology, which explain as human behavior being guided largely by their unconscious desires. Social pressures and influence may cause the manager to make irrational decision.
Making ChoicesMaking Choices
Four reason for escalation of commitment
Project characteristics Psychological determinants Social forces Organizational determinants
Intuition.The ability to know or recognize quickly
and readily the possibilities of a given
situation.
A key element of decision making under
risk and uncertainty.
Escalation of Commitment11-9
Figure 11-4
Psychological and Social Determinants* Ego defense* Individual motivators* Peer pressure* Saving face
Organizational Determinants* Breakdown in communication* Politics* Organizational inertia
Project Characteristics* A delayed return on the investment* Setbacks attributed to temporary causes
Contextual Determinants* External political pressure
Escalationof
commitment
Poor resultsor
outcomes
Simon’s Normative Model of Decision Making
Based on premise that decision making is Based on premise that decision making is not rationalnot rational
Decision making is characterized byDecision making is characterized by * limited information processing * limited information processing * use of judgmental heuristics * use of judgmental heuristics * sacrificing * sacrificing
Making ChoicesMaking Choices
Judgmental HeuristicsAvailability HeuristicAvailability Heuristic: A decision maker’s tendency : A decision maker’s tendency to base decisions on information that is readily to base decisions on information that is readily available in memory.available in memory.Representativeness HeuristicRepresentativeness Heuristic: The tendency to : The tendency to assess the likelihood of an event occurring based on assess the likelihood of an event occurring based on one’s impressions about similar occurrences.one’s impressions about similar occurrences.
The Adjustment Heuristic: The Adjustment Heuristic: In this heuristic, the In this heuristic, the decision maker makes a judgment by starting from an decision maker makes a judgment by starting from an initial value and the adjust to make the final decision.initial value and the adjust to make the final decision.
Decision-Style ModelDecision-Style Model
E X H I B I T 5-5
Participative Decision Making Techniques
The Three Components of Creativity
The Three Components of Creativity
E X H I B I T 5-4
A Model of Organizational Creativity and Innovation
11-15
Figure 11-7
Individual CharacteristicsIntellectual abilitiesTacit (implied) and explicit knowledge Styles of thinkingPersonality traitsIntrinsic task motivation
Group Characteristics- Norms - Diversity- Cohesiveness - Roles- Size - Problem-solving approaches
Organizational Characteristics- Culture - Strategy- Resources - Structure- Rewards - Technology
Individual creativebehavior/performance
Group creativebehavior/performance
Organizational creativity andinnovation
A Model of Participative Management11-11
Participation inGoal Setting
Participation inDecision Making
Participation inProblem SolvingParticipation in
Change
Contingency Factors* Design of work* Trust* Readiness to Participate
AutonomyIncreased
control over workbehavior
Completion ofMeaningful
Tasks
Acceptanceand Commitment
Security
Challenge
Satisfaction
Performanceand Innovation
Management Decision Styles You solve the problem or make the decision yourself, usingYou solve the problem or make the decision yourself, using
information available to you at that time. information available to you at that time. You obtain the necessary information from your subordinate(s),You obtain the necessary information from your subordinate(s),
then decide on the solution to the problem yourself. then decide on the solution to the problem yourself. You share the problem with relevant subordinates individually,You share the problem with relevant subordinates individually,
getting their ideas and suggestions without bringing them together getting their ideas and suggestions without bringing them together as a group. Then you make the decision that may or may not reflect as a group. Then you make the decision that may or may not reflect your subordinates’ influence. your subordinates’ influence.
You share the problem with your subordinates as a group,You share the problem with your subordinates as a group, collectively obtaining their ideas and suggestions. Then you make collectively obtaining their ideas and suggestions. Then you make the decision that may or may not reflect your subordinates’ influence. the decision that may or may not reflect your subordinates’ influence.
You share a problem with your subordinates as a group. Together youYou share a problem with your subordinates as a group. Together you generate and evaluate alternatives and attempt to reach agreement generate and evaluate alternatives and attempt to reach agreement (consensus) on a solution. (consensus) on a solution.
11-12
Advantages and Disadvantages of Group-Aided Decision Making
Advantages Disadvantages1. Greater pool of knowledge
1. Social pressure2. Different perspectives 2. Minority domination3. Greater comprehension 3. Logrolling4. Increased acceptance 4. Goal displacement5. Training ground 5. “Groupthink”
11-10a
Table 11-3a
Group Problem-Solving Techniques (continued)
Nominal Group Technique: Process to generate ideas and evaluate solutions
This technique reduces roadblocks to group decision making by* separating brainstorming from evaluation* promoting balanced participation* incorporating mathematical voting techniques
11-14b
Group Problem-Solving Techniques (continued)
The Delphi Technique: Process to generate ideas from physically dispersed experts
Computer-Aided Decision Making: Computers are used to reduce consensus roadblocks while collecting more information faster
11-14c
Organizational Constraints on Decision Makers
Organizational Constraints on Decision Makers
Performance EvaluationEvaluation criteria influence the choice of actions.
Reward SystemsDecision makers make action choices that are favored by the organization.
Formal RegulationsOrganizational rules and policies limit the alternative choices of decision makers.
System-imposed Time ConstraintsOrganizations require decisions by specific deadlines.
Historical PrecedentsPast decisions influence current decisions.
Choosing problems In choosing problems to address, ask and
answer the following questions:Is the problem easy to deal with?
Might the problem resolve itself?
Is this my decision to make?
Is this a solvable problem within the context of the organization?
Reasons for decision making failure.
Managers too often copy others’ choices and try to sell them to subordinates.Subordinates may believe the manager is imposing his or her will rather than working for everyone’s interests.Managers may focus on the problems they see rather than the outcomes they want.Managers use participation too infrequently.
Decision making frameworkManager or team leader uses information that he or she possesses and decides what to do without involving others.Variant 1 manager solves the problem or makes the decision alone.Variant 2 manager obtains the necessary information from others and then decidesManager or team leader consults with others and allows them to help make the final choice
Ethics into decision making Ways to infuse ethics into decision making.
Develop a code of ethics and follow it.Establish procedures for reporting violations.Involve employees in identifying ethical issues.Monitor ethical performance.Reward ethical behavior.Publicize ethical efforts.
Ethics into decision making Morality is involved in:
Choosing problems.Deciding who should be involved in making decisions.Estimating the impacts of decision alternatives.Selecting an alternative for implementation.
An effective decision needs to solve a problem as well as match moral values and help others