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CONTENTS
1. 2. 3. 4. 5.
6.
Concept And Roles Of Decision Making Types Of Decisions Decision Making Process Techniques Of Decision Making Decision Making Models Difficulties In Decision Making
DIRECTING
CONTROLLING
PLANNING
Planning is the process of defining a goal, establishing strategy and developing plan to coordinate activities.
ORGANISING
Organizing is the process of determining what needs to be done, how it will be done and who is to do it.
STAFFING
Staffing is the process of placing right person at right place in the organization.
DIRECTING
Directing is the process of explaining the people what they have to do and helps them to do it to the best of their ability.
CONTROLLING
Controlling ensures conformity with the plans adopted, instruction issued and the principles established.
TYPES OF DECISION
PROGRAMMED DECISIONS
Deal with recurring problems. Made in accordance with policies, rules and procedures. Repetitive decisions and easier for managers to make. For the same problem two managers will reach at the same solution.
For dealing with unusual or exceptional problems. No definite procedures exist. Novel and non repetitive. For the same problem two managers may arrive at different solution.
STRATEGIC DECISIONS
Central to companys operation. Require lengthy deliberation and large funds. Taken by managers at higher levels.
ROUTINE DECISIONS
Supportive for companys operation. Require little deliberation and money. Taken by managers at lower levels.
INDIVIDUAL DECISION
These decisions are made by individual where Problem is of routine nature . Analysis of variable is simple. Definite procedures to deal with problem already exist.
GROUP DECISION
These decisions are made by group where Decisions are important and strategic which may result into some change in the organization.
CERTAINTY
Under conditions of certainty. Objectives are clearly defined. Accurate, reliable information about the outcome of each alternative is known.
RISK
occurs whenOutcome of alternative cannot be predicted with certainty. Enough information to predict the probability is available.
UNCERTAINTY
Under conditions of uncertainty Little is known about alternatives and their outcomes. Probability cannot be assigned.
RECOGNISING THE PROBLEM. DECIDING PRIORITIES AMONG PROBLEMS. DIAGNOSING THE PROBLEM. DEVELOPING ALTERNATIVE SOLUTIONS. MEASURING AND COMPARING THE CONSEQUENCES OF ALTERNATIVE SOLUTIONS. CONVERTING THE DECISION INTO EFFECTIVE ACTION AND FOLLOW-UP OF ACTION.
All strategic problems should be handled by the manager and all routine problems should be passed on to the subordinates.
MARGINAL ANALYSIS
Technique involves comparison of additional revenues from additional costs to find the point where the cost resulting from the addition of one more unit (marginal cost) is equal to the benefit (marginal revenue).
It is a comparison tool to help evaluate choices. It will not always indicate a clear choice, but it will evaluate options quantitatively based on a defined model.
RISK ANALYSIS
A risk analysis involves identifying the most probable threats to an organization and analyzing the related vulnerabilities of the organization to these threats.
LINEAR PROGRAMMING
Technique for determining the optimum combination of limited resources to minimize costs or maximize profits.
OPERATIONS RESEARCH
It provides scientific and objective basis so as to reduce intuition and subjectivity in solving organizational problem. TECHNIQUES Probability Theory Games Theory Network Analysis Queuing Theory LIMITATION Can be applied only when all the elements of a problem are quantified.
SIMULATION
It is a technique of reproducing the phenomena likely to occur in actual practice. Based on Probability Factor Enables to determine cost and benefit of each course of action
LIMITATION The calculations involved are very complex making the use of computer essential.
BRAINSTORMING
Under this technique a small group of persons are stimulated to creative thinking. Such free association and unrestricted thinking generates novel ideas from which unique solution can be found.
DELPHI TECHNIQUE
A panel of experts is appointed who are separated and unknown to each other. Suggestions are invited till convergence of opinions begins to emerge. This helps in quality of decisions.
Developed by Delbecq and VandeVen It is a structured method for group brainstorming that encourages contributions from everyone. Its main objective is to gain consensus.
STEPS :
Divide the people present into small groups of 5 or 6 members. State an open-ended question. Have each Person spend several minutes in silence individually brainstorming all the possible ideas and jot these ideas down. Give a chance to each person to put forward their ideas
Contd.
Have each person evaluate the ideas and individually and anonymously vote for the best ones. A group report is prepared, showing the ideas receiving the most points. Allow time for brief group presentations on their solutions.
Advantages Equal participation of group members. Influence and distractions are minimized. Disadvantages Opinions may not converge in the voting process. Cross-fertilization, of ideas may be constrained. The process may appear to be too mechanical.
Assumptions
Perfect Rationality. Best Alternative Searched In a Planned , Orderly And Logical Manner Perfect Knowledge. Normative. Optimal Decision.
Limitations
It requires a great deal of time. It requires great deal of information It assumes accurate, stable and complete knowledge of all the alternatives, preferences, goals and consequences. It assumes a rational, reasonable, non political world
by Herbert Simon Also called as Bounded Rationality Model. A more realistic description of decision-making behaviour.
Assumptions
Bounded rationality Descriptive Incomplete knowledge Limited search for feasible alternatives Satisfying decisions
Steps involved:
Defining the problem. Establishing appropriate criteria to judge the acceptability of a solution. Using heuristics to narrow down the field of search and identify the feasible solution. If no feasible solution is identified then lower the criteria of acceptability of a solution. Evaluating the feasible solution.
If a solution is found acceptable then implement it and if not then search for a new one. Evaluating the degree of difficulty with which goal was or was not attained and raise or lower the criteria to judge the acceptability of a solution
ASSUMPTIONS
Decisions are: Guided by unconscious desires Subject to social pressures and influences
OBSERVATIONS:
Strong social pressures can at times force managers to choose wrong alternatives. Their decisions cannot be termed as organisationally rational though it may be personally rational.
Incomplete information. Unsupportive environment. Non-acceptance by subordinates. Ineffective communication. Incorrect timing.
References
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