Decision Making

Overview

The traditional process of decision making. The factors that go in to decision making. The difficulties in selecting the course of organizational activities. Overview of two emerging approaches to decision making.

Game Theory Chaos Theory

Decision Making

Management is the practice of consciously and continually shaping formal organization, and the art of decision making is central to it. Decision making is the selection of a course of action from among alternatives. Decision making is the process of identifying and selecting a course of action to solve a specific problem.

Time and Human Relationship in Decision Making These are crucial elements in the decision making.
It connects the organizations present circumstances to actions that will take organization into future. It also depends on the past ; past experience positive or negative. Objectives for the future are thus based on past experience. Manager does not make decision in isolation while they make decision, other decisions are made by people both with in the same organization and out side, other businesses, government offices and social organizations. Decision making, in short, is the process that manager conduct in relationship with other decision makers.

The Problems and Opportunity Finding

Decision making deals with the Problems :- it is the situation that occurs when an actual state of affairs differs with the desired state of affairs. In many cases the problem may be an opportunity in disguise. The problem finding process is often informal and intuitive. The four situation usually alert manager to possible problems.

The four situations

A deviation from past experience means that a previous pattern of performance in the organization has been broken. A deviation from set plans means expectations or projections are not being met. Other people may includes customers and employees. The performance of competitors can also create the problem solving situation.

Opportunity Finding

It is not always clear whether a situation faced by a manager is a problem or opportunity. Missed opportunity may create the problem or opportunity may emerges while exploring the problem. Decision making is linked to the opportunity finding, it clearly involves choosing action that can help to make the future of the organization.

Deciding to Decide

Deciding what to do about every problem. Threshold for problem recognition depends on the gap between the actual and desired state of affairs, man must use their judgment based on the their knowledge of the environment ( gathering information ).

Setting Priorities. Is the Problem is Easy to Deal With. The Problem Might Resolve itself. Is this my Decision to Make.

Nature Of Managerial Decision Making

Different problems require different types of decision making. Programmed decisions are used for structured or routine work.

According to written or non-written policies, procedures, or rules. Its components elements are defined, predicted, and analyzed. It limits the freedom of decision making.

Non-Programmed decisions are used for unstructured, novel, and ill-defined situations of a nonrecurring nature.

As one move up in the organizational hierarchy, the ability to make these decisions is important.

Nature of Problems and Decision Making in the Organization

Certainty, Risk, and Uncertainty

Decision making situations can be categorizes from certainty ( highly predictable ), through risk, to uncertainty ( highly unpredictable ). Certainty : Decision making conditions under which managers have accurate, measurable, and reliable information about the outcome of various alternatives under construction. Risk : Decision making condition under which manager know the probability a given alternative will lead to a desired goal or outcomes.

Probability : A statistical measure of the chance a certain event or outcome will occur.

Decision - Making Process Rational

Rational model of decision making : A process that helps managers weigh alternatives and choose the alternative with the best chance of success.

Limited, or Bounded, Rationality

Limitations of information, time, and certainty limit rationality, even though a manager tries earnestly to be completely rational. Satisfying is picking a course of action that is satisfactory or good enough under the circumstances.

Decision - Making Process

1. Premising or Investigate the Situation. 2. Identifying alternatives or Developing Alternatives. 3. Evaluating alternatives in terms of the goal sought or Select the best one available. 4. Choosing an alternative, that is, making a decision or Implement and monitor the decision.

1. Premising or Investigate the Situation.

A through investigation has three aspects: 1. Define the problem.

Define the problem in terms of the organizational objectives that are being blocked helps to avoid confusing symptom with the problem. Managers sometimes have to rely on intuition to identify them. Different individuals shaped by the experience and expertise, may perceive very different causes for problem.

2. Diagnose the cause.

3. Identify the decision objectives.

Once the problem has been define and cause(s) diagnosed, the next step is to decide what would constitute an effective solution.

2. Identifying alternatives or Developing Alternatives.

This stage may be simple for programmed but not for non-programmed decision, if there are time constraint. Too often the first temptation to accept first alternative prevents manager from finding the best solutions. Some managers turn to individual or group Brainstorming. Brainstorming is the creativity by spontaneously proposing alternatives without concern for reality or tradition. The rules are
1. 2. 3. 4. No ideas are criticized. The more radical the ideas are, the better. The quantity of idea production is stressed. The improvement of ideas by others is encouraged.

Creativity and Innovation Creativity refers to the ability and power to develop new ideas. Innovation means the use of new ideas.
Creativity Process
The creative process is seldom simple and linear. It generally consists of four overlapping and interacting phases: 1. Unconscious scanning 2. Intuition 3. Insight 4. Logical formulation or verification

Development of Alternatives and the Limiting Factor

A limiting factor is something that stands in the way of accomplishing a desired objective. The principle of the limiting factor: By recognizing and overcoming those factors that stand critically in the way of a goal, the best alternative course of action can be selected.

Quantitative and Qualitative Factors Quantitative factors are factors that can be measured in numerical terms. Qualitative, or intangible, factors are those that are difficult to measure numerically. Marginal Analysis and Cost-effective analysis Marginal analysis is to compare the additional revenue and the additional cost arising from increasing output.
Cost-effectiveness analysis seeks the best ratio of benefit and cost.

3. Evaluating alternatives in terms of the goal sought or Select the best one available.
Drop the Alternative

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2

Drop the Alternative

Drop the Alternative

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1. Is the alternative feasible? 4 2. Is the alternative a satisfactory solution? 3. What are the possible consequences for the rest of the organization? 4. Conduct further evaluation.

Selecting an Alternative: Three Approaches When selecting from among alternatives, managers can use:
1. Experience. 2. Experimentation. 3. Research and analysis.
Bases for Selecting From Among Alternative Courses of Action

4. Choosing an alternative, that is, making a decision or Implement and monitor the decision.

Once the best alternative has been selected, managers are ready to make plans to cope up with the requirements and problems that may be encountered. Resources must be acquired and allocated as necessary. Action taken to implement a decision must be monitored Decision making is a continual process for managers.

Thanks