What is decision-making?
Decision-making is one of the central activities of
management and is a huge part of any process of
implementation
Good decision making is an essential skill to become an
effective leaders and for a successful career
“A decision is a judgment. It is a choice between alternatives.
It is rarely a choice between right and wrong. It is at best a
choice between “almost right” and “probably wrong”.-
Drucker.
wikipedia.org/wiki/Decision
www.merriam-webster.com/dictionary/decision
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The Significance of Decision Making
Decision making is the one truly distinctive
characteristic of managers.
Decisions made by top managers commit the total
organization toward particular courses of action.
Decisions made by lower levels of management
implement the strategic decisions of top managers
in the operating areas of the organization.
Decisions invariably involve organizational
change and the commitment of scarce resources.www.mindtools.com
March 6, 2015 3
Decision-making Process
Identifying a problem
Identifying decision criteria
Allocating weights to criteria
Developing alternatives
Analyzing alternatives
Selecting an alternative
Implementing the alternative
Evaluation (of decision effectiveness)
Introduction to management by L.M. Prasad
March 6, 2015 4
The Decision-Making ProcessAllocation of Development of
Problem Identification of Weights to AlternativesIdentification Decision Criteria Criteria Acer
Compaq“My salespeople Price Reliability 10GatewayWeight Screen size 8need new computers” HPWarranty Warranty 5
MicromediaScreen type Weight 5NECReliability Price 4SonyScreen size Screen type 3
ToshibaAnalysis of Selection of an ImplementationAlternatives Alternative of an Alternative
Acer AcerCompaq Compaq Evaluation
GatewayGateway Gateway of DecisionHP HP EffectivenessMicromedia MicromediaNEC NECSony Sony
Toshiba ToshibaMarch 6, 2015 5
Categories of Decisions
Programmed Decisions:
A decision that is repetitive and routine
A definite method for its solution can be established
Does not have to be treated a new each time it occurs
Procedures are often already laid out
Examples: pricing standard customer orders, determining billingdates, recording office supplies etc.
www.slideshare.net
March 6, 2015 6
Categories of Decisions
Nonprogrammed Decisions:
A decision that is novel (new or unique) or Ill structured
No established methods exist, because it has never occurred before or because
It is too complex
Are “tough” decisions that involve risk and uncertainty and
call for entrepreneurial abilities
Such decisions draw heavily on the analytical abilities of the manager
Examples: Moving into a new market, investing in a new unproven technology,
changing strategic direction
www.slideshare.net
March 6, 2015 7
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
Selecting a Decision Making Model
Depends on the manager’s personal
preference
Whether the decision is programmed or
non-programmed
Extent to which the decision is
characterized by risk, uncertainty, or
ambiguitywww.mindtools.com
March 6, 2015 9
Rational Model: Assumptions
Clear and unambiguous problem
Single, well-defined goal
All alternatives are known
Clear preferences (ranking criteria)
Constant/stable preferences
No time or cost constraints
Decision will maximize payoff
www.slideshare.net
March 6, 2015 10
Rational Model: Criticism
Not all decisions made on rational basis
Most problems, goals and preferences are not clear or
well defined
Not practical to know all possible alternatives
Time and cost constraints exist in all practical problems
Result not maximized in most cases
www.slideshare.net
March 6, 2015 11
Bounded Rational Model: Assumptions
Limited set of criteria
Self-interest influences ratings
Limited no. of alternatives
Alternatives are assessed one at a time till a satisficing
(or good enough) alternative is found
Politics influences acceptance and commitment of
decision
education-portal.com/.../bounded-rationality
March 6, 2015 12
1. NOMINAL GROUP THINK
The NGT is designed to help all team members participate and
express opinions while still building team consensus
The nominal group technique is a structured decision making
process in which group members are required to compose a
comprehensive list of their ideas or proposed alternatives in
writing
NGT is designed to help with group decision making by ensuring
that all members participate fully.http://www.slideshare.net/LouzelLinejan/decision-making-by-individual-and-group
NGT follows these steps:
7-10 individuals are brought together to participate in a
structured exercise that includes the following steps:
Team members are presented with a problem, challenge or
issue
Individual team members silently and independently write
down their ideas about how to tackle the problem.
Each team member (one at a time, in round-robin fashion)
presents an idea to the group.
Individuals silently and independently vote on each idea. http://www.slideshare.net/LouzelLinejan/decision-making-by-individual-and-group
2. DELPHI TECHNIQUE
Another technique which capitalises group's resources, while
avoiding several possible disadvantages of relying on group
decision-making processes
This approach, called the Delphi Technique, is similar to NGT in
several respects, but also differs significantly in that the
decision-makers never actually meet.
Its greatest advantage is that it avoids many of the biases and
obstacles associated with interacting groups (that is, groups
where the members meet face-to-face)http://www.slideshare.net/LouzelLinejan/decision-making-by-individual-and-group
DELPHI follows these steps:
Select a group of individuals who possess expertise in a
given problem area
Survey the experts for their opinions via a mailed
questionnaire.
Analyse and distil the experts' responses.
Mail the summarised results of the survey to the
experts and request that they respond once again to a
questionnaire.
If one expert's opinion sharply differs from the rest, he or
she may be asked to provide a rationale.
process is repeated several times, the experts usually
achieve a consensushttp://www.slideshare.net/LouzelLinejan/decision-making-by-individual-and-group
3. STEPLADDER TECHNIQUE
A problem-solving structure recently proposed as a solution to
the problem of unequal participation in groups.
The technique is intended to improve group decision-making
by structuring the entry of group members into a core group.
Encourages all members to contribute on an individual level
before being influenced by anyone else.
This results in a wider variety of ideas, it prevents people from
"hiding" within the group, and it helps people avoid being
"stepped on" or overpowered by stronger, louder group members.
http://www.slideshare.net/LouzelLinejan/decision-making-by-individual-and-group
3. STEPLADDER TECHNIQUE
Step 1: Before getting together as a group, present the task or
problem to all members. Give everyone sufficient time to
think about what needs to be done
Step 2: Form a core group of two members. Have them discuss
the problem.
Step 3: Add a third group member to the core group. The third
member presents ideas to the first two members BEFORE
hearing the ideas that have already been discussed.http://www.slideshare.net/LouzelLinejan/decision-making-by-individual-and-group
3. STEPLADDER TECHNIQUE
Step 4: Repeat the same process by adding a fourth member, and
so on, to the group. Allow time for discussion after each
additional member has presented his or her ideas.
Step 5: Reach a final decision only after all members have been
brought in and presented their ideas.
http://www.slideshare.net/LouzelLinejan/decision-making-by-individual-and-group
Group Decision-making
The factors requiring group decisions include:
Involving sensitive issues
High cost alternatives
Involving very high risk factor
Strategic impact
http://smallbusiness.chron.com/
March 6, 2015 20
Group Decision-making
Advantages
1. More information and
knowledge are available.
2. More alternatives are likely
to be generated.
3. More acceptance of the final
decision is likely.
4. Enhanced communication
of the decision may result.
5. Better decisions generally emerge.
Disadvantages1. The process takes longer than
individual decision making, so it is costlier.
2. Compromise decisions resulting from indecisiveness may emerge.
3. One person may dominate the group.
4. Groupthink may occur.
http://smallbusiness.chron.com/
March 6, 2015 21
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.
http://en.wikipedia.org/wiki/Decision-making
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 othershttp://en.wikipedia.org/wiki/Decision-making
REFERENCES
http://www.tutorialspoint.com/management_concepts/decision_making_process.htm
http://www.slideshare.net
http://www.authorstream.com/
http://en.wikipedia.org/wiki/Decision-making
http://smallbusiness.chron.com/
education-portal.com/.../bounded-rationality
Books:
1. Introduction to management by L.M. Prasad
2. Handbook on Decision making by Lakhmi C Jain Vol 4
March 6, 2015 24
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