Notes #4 - Managerial Decision Making
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Transcript of Notes #4 - Managerial Decision Making
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Decision Making Process
The intelligence phase
Finding / Identifying / Formulating problems
The design phase
Develop alternative decisions The choice phase
Chose the best decision from the pool
Types of Decisions
Based on convenience
Structured
Well defined decision making procedure where every decision
is broken down in distinct stages of evaluation, alternative
search, elimination and acceptance criteria. Semi Structured
It is a mixed kind of situation where very limited amount of
structuring is maintained at some areas of operation but
otherwise no segmenting and structuring is done.
Unstructured
All three phases of decision making are unstructured and
clustered. Any one of the functions (Input, Output or Internal
Process) is not readily available because the decision must be
very rare or new so that it was not extensively studied to
incorporate procedures to deal with it within the system Based on criticality
Strategic
Affect the entire organization or a major part of it. These are
quite long-term decisions and generally made at upper level
of management
Tactical
This is also called management control decisions and affects
only a part of the organization. This is taken by middle level
management with the objective to meet the strategic plan.
Operational Affect only one or two functional areas at a time. These are
very short term and made at lower management levels.
Based on availability
Certainty / Uncertainty / Risk
Based on programmability
Programmed
All resources for decision making are already available and
the system can respond on the go.
Non Programmed
All resources are not available for instant decision making.
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3Q1 (A) 2009
Q4 (A)
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Decision Making Models
Rational Decision Making Mode
o Consists of a structured four-step sequence
identifying the problem
generating alternative solutions
selecting a solution
implementing and evaluating the solution
Political Decision Making Model
o Assumes that people bring preconceived notions and biases into the
decision-making situation
o Self-interest may block people from making the most rational choice
o Sometimes it is difficult to determine if a decision maker is
operating rationally or politically
Normative Model of Decision Making Simons Model
o Based on premise that decision making is not rational
o Decision making is characterized by
limited information processing
use of judgmental heuristics
sacrificing
Problem Solving Techniques
Problem solving is a mental process and is part of the
larger problem process that includes problem finding and problemshaping. Considered the most complex of all intellectual functions,
problem solving has been defined as higher order cognitive process that
requires the modulation and control of more routine or fundamental skills.
Problem solving occurs when an organism or an artificial
intelligence system needs to move from a given state to a desired goal
state.
More Problem-solving techniques
Q1 (B) 2009Q3 (B)
Q4 (B)
Q8 (B)
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Abstraction: solving the problem in a model of the system before applying
it to the real system.
Analogy: using a solution that solved an analogous problem.
Brainstorming: (especially among groups of people) suggesting a large
number of solutions or ideas and combining and developing them until an
optimum is found.
Divide and conquer: breaking down a large, complex problem into
smaller, solvable problems.
Hypothesis testing: assuming a possible explanation to the problem and
trying to prove (or, in some contexts, disprove) the assumption.
Lateral thinking: approaching solutions indirectly and creatively.
Means-ends analysis: choosing an action at each step to move closer to
the goal.
Method of focal objects: synthesizing seemingly non-matching
characteristics of different objects into something new.
Morphological analysis: assessing the output and interactions of an
entire system.
Reduction: transforming the problem into another problem for which
solutions exist.
Research: employing existing ideas or adapting existing solutions to similar
problems.
Root cause analysis: eliminating the cause of the problem.
Trial-and-error: testing possible solutions until the right one is found.
How Decisions are being supported
Man-Machine System DSS is man-machine system for decision making
purposes. Man part is more open and probabilistic while the machine partis more closed and deterministic. E.g. DSS for deciding PRICE and
ADVERTISING levels
Closed-loop system with feedback external to system DSS uses feedback
to adjust output. Feedback is not internal like an elevator. The user
provides judgmental inputs to DSS.
DSS components: Database, model base, knowledge base, interfaces
which interact with each other and the user.
(Judgmental) Heuristics
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Availability Heuristic: A decision makers tendency to base
decisions on information that is readily available in memory.
Representativeness Heuristic: The tendency to assess the
likelihood of an event occurring based on ones impressions about
similar occurrences.
Decision Styles
Tuckmans Five-Stage Theory of group development
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Group Decision MakingIt is decision making in groups consisting of multiple members/entities. The
challenge of group decision is taking into consideration the various opinions of
the different individuals and deciding what action a group should take. There arevarious systems designed to solve this problem.
Formal systems
o Consensus decision-making tries to avoid "winners" and "losers".
Consensus requires that a majority approve a given course of
action, but that the minority agrees to go along with the course of
action. In other words, if the minority opposes the course of action,
consensus requires that the course of action be modified to remove
objectionable features.
o Voting-based methods
Range voting lets each member score one or more of theavailable options. The option with the highest average is
chosen. This method has experimentally been shown to
produce the lowest Bayesian regret among common voting
methods, even when voters are strategic.
Majority requires support from more than 50% of the
members of the group. Thus, the bar for action is lower than
with unanimity and a group of losers is implicit to this rule.
Plurality, where the largest block in a group decides, even if it
falls short of a majority.
o Dictatorship, where one individual determines the course of action.Group Decision Making balance:
Advantages Disadvantages
Greater pool of knowledge
Different perspectives
Greater comprehension
Increased acceptance
Training ground
Social pressure
Minority domination
Logrolling
Goal displacement
Groupthink
Group Decision Support System (GDSS)
This mainly has three reasons to come into being and become widely acceptedwithin a very short span of time. The various reasons associated with GDSS are:
Task related reasons: It may be the case where one single person is not
viable for a decision making and needs a consensus from various
participants of the same level. Again, one single person may not have the
expertise to deal with situations.
Organizational reasons: Organizations were going into a grouped work
environment, problem solving and decision making mode which pushed
the IT market to comply with industrial requirements.
Technical reasons: Connecting through GDSS became much more
economical than distributed group policy system where different
databases are individually connected together in a central location
Q5 (A)
2009Q8 (B) 2006
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Disadvantages of GDSS
Cost infrastructure costs to provide the hardware and
software/room/network connectivity can be very expensive
Security especially true when companies rent the facilities for GDSS;
also, the facilitator may be a lower-level employee who may leakinformation to peers
Technical Failure power loss, loss of connectivity, relies heavily on
bandwidth and LAN/WAN infrastructure properly setup system should
minimize this risk
Keyboarding Skills reduced participation may result due to frustration
Training learning curve is present for users, varies by situation
Perception of messages lack of verbal communication could lead to
misinterpretation
Application of CBIS PPT Retail
Railway
Aviation
Education
Hotel
Q5 (B)
http://www.authorstream.com/Presentation/varun.goel-83162-cbis-application-science-technology-ppt-powerpoint/http://www.authorstream.com/Presentation/varun.goel-83162-cbis-application-science-technology-ppt-powerpoint/