Organizational Decision

Making
Module 4

Sreenath B.
Roll No.45
 Organizational decision
making
• “The process of responding to a problem by
searching for and selecting a solution or
course of action that will create value for
organizational stakeholders.”
• Organizational decision-making occurs when
problem solving includes seeking & selecting
a solution to create value for stakeholders.

• Managers make programmed & non

programmed decisions.
 Organizational decision making:
Types
• Programmed decisions are routine decisions,
developed in advance through rules, standard
operating procedures (SOPs), and norms.
– Programmed decisions increase efficiency and
reduce costs.
• Non programmed decisions are new and
unstructured decisions, without programmed
rules to manage them.
– Managers rely on intuition and judgment, and
solutions are found as problems occur.
– It require more search activity.
– It assist in adapting and managing a changing
environment.
 Organizational decision making:
MODELS
1. RATIONAL MODEL
• Traditional models depict decision-making as a
rational process.
• The rational model proposes that decision-
making is a three-staged process.
1. Identify the problem: Managers analyze the
environment and recognize opportunities &
threats.
2. Generate alternatives: Managers analyze skills
and resources to respond to opportunities and
threats.
3. Select the best solution.
 The Rational Model of Decision
Making

Stage 2:
Stage 1: Stage 3:
Generate
Select solution
alternative
Identify & define &
solutions to the
the problem implement it
problem
 Rational model
• Under ideal conditions, managers know a
decision is right because no uncertainty exists.
• All alternatives and their effects are known,
and the same objective criteria are used to
evaluate each alternative.
• Managers have the ability to make the right
decision to maximize stakeholder value.
• The rational model assumes this ideal state.
• Yet, these conditions do not exist, so the
assumptions of the rational model seem
unrealistic:
 Assumptions of the Rational Model
• Information and uncertainty:
– The model assumes that managers know all
alternative courses of action.
– It is not feasible to know every alternative in an
uncertain environment, and the cost of collecting
information would far outweigh the benefits.
• Managerial abilities:
– The rational model assumes the ability to evaluate
all alternatives and select the best solution.
– Managers cannot process all the information to
make perfect decisions and lack the time to follow
the rational model.
– Many managers would be needed, and managers
are costly.
 Assumptions of the Rational
Model
• Preferences and values:
– The model assumes that managers agree about
preferences, values, and goals.
– This assumption is false due to subunit
orientations.
– A production manager is concerned about costs
whereas an engineering manager is concerned
about design.
 The Carnegie Model of Decision
Making
Carnegie Model: a model that addresses
the realities of decision making:

Satisficing

Bounded rationality

Organizational coalitions
 Carnegie Model

• Satisficing:
– Managers satisfice or determine the criteria to evaluate
solutions, limiting the range of alternatives.
– Satisficing is less costly & less work than searching for
every alternative.
• Bounded rationality:
– Managers are restricted by bounded rationality, a limited
ability to process information.
– Managers improve decision-making by strengthening
analytical skills and using computers. However, they
don’t know all possible alternatives.
 Carnegie Model

• Organizational coalitions:
– The organization is a coalition of different interests
with decisions made by compromise, bargaining,
and negotiation. Selected solutions are approved
by the dominant coalition, those with the power to
implement the chosen alternative.
– Over time, interests change and the dominant
coalition changes. Thus decision-making changes.
 Differences:
Rational Model Carnegie Model

• Information is available. • Limited information is available.

• Decision making is costless • Decision making is costly.
• Decision making is “value free.” • Decision making is affected by
the preferences and values of
• All possible alternatives are decision makers
generated. • A limited range of alternatives is
• Solution is chosen by generated.
unanimous agreement.
• Solutions are chosen by
compromise, bargaining, and
• Solution chosen is best for the accommodation between
organization. organizational coalitions.
• Solution chosen is satisfactory
for the organization.
 The Unstructured Model of Decision
Making
• It describes how decision making takes place in
environments of high uncertainty.
• This model was developed by Henry Mintzberg.
• Decisions are made in a series of little steps that result in
a major decision over time.
• Consists of 3 stages similar to the but understands that
problems may require rethinking alternatives & going
back to the drawing board.
1. Identification stage: Managers develop routines to
recognize problems.
2. Development stage: Managers generate problem-solving
alternatives.
3. Selection stage: Managers make decisions using
judgment, intuition, and formal analysis.
 Unstructured Model
• The unstructured model requires rethinking
alternatives when facing obstacles and even
starting from scratch.
• Decision-making evolves in an unpredictable
manner.
• Managers use intuition that requires continuous
adaptation to respond to changing situations.
• The unstructured model concentrates on
making non programmed decisions.
 The Garbage Can Model of Decision
Making
• Views decision-making as a highly unstructured process.
• Instead of identifying a problem, the model proposes that
decisions begin with the solution. When solutions emerge,
problems arise.
• An organization that makes a high quality product may expand
globally. The solution is the quality competence; the problem is
transferring it globally.
• The organization seeks solutions to identify problems whereas
coalitions promote their own alternatives.
• The organization faces anarchy as problems, answers, and
coalitions blend in a “garbage can” and compete.
• The selection of an alternative depends on the dominant
coalition.
• Chance and timing play a role in decision-making.
VARIOUS TECHNIQUES OF
DECISION-MAKING
QUALITATIVE TECHNIQUE

»DELPHI TECHNIQUE
»BRAINSTORMING TECHNIQUE
»SWOT ANALYSIS
»CONSENSUS DECISION-MAKING
»NOMINAL GROUP TECHNIQUE
QUANTITATIVE TECHNIQUE

PROBABILITY

LINEAR PROGRAMMING
 DELPHI TECHNIQUE

• This technique developed by OLAF HELMER

and his colleagues at RAND Corporation, has a
degree of scientific respectability and
acceptance.

• A panel of expert on a particular problem area

is selected, usually from both inside and
outside the organization.
 DELPHI TECHNIQUE

• The expert are asked to make

(Secretly, so that they will not
influenced by others) a forecast as to
what they think will happen, and
when, in various areas of new
discoveries or development.
 DELPHI TECHNIQUE
PROBLEM PRESENTED

QUESTIONNAIRE COMPLETED

RESULT COMPILED, DISTRIBUTED

SECOND & SUBSEQUENT QUESTIONNAIRE COMPLETED

CONSENSUS
 BRAINSTORMING TECHNIQUE
• Alex F Osborn is called farther of
Brainstorming.
• In the brainstorming session, a
multiplication of ideas is sought.
• The purpose of this approach is to
improve problem solving by finding
new and unusual solution.
 BRAINSTORMING TECHNIQUE

The rules of brainstorming are follows:

No ideas are ever criticized.

The more radical (far-reaching); the ideas
are, the better.
The quantity of idea production is stressed.
The improvement of ideas by others is
encouraged
 SWOT ANALYSIS
• This is a technique which help
decision making by analyzing
organization’s internal strength
and weaknesses and external
opportunities and threats.
CONSENSUS DECISION MAKING
• Consensus decision-making is a 
group decision making process that not
only seeks the agreement of most
participants, but also the resolution or
mitigation of minority objections.
• Consensus is usually defined as meaning
both general agreement, and the process
of getting to such agreement. Consensus
decision-making is thus concerned
primarily with that process.
FLOWCHART OF BASIC CONSENSUS DECISION-MAKING
PROCESS

By A3 26
 Nominal group technique
• The nominal group technique is a 
decision making method for use among groups of
many sizes, who want to make their decision quickly,
as by a vote, but want everyone's opinions taken
into account (as opposed to traditional voting, where
only the largest group is considered)
• The method of tallying is the difference. First, every
member of the group gives their view of the solution,
with a short explanation.
• Then, duplicate solutions are eliminated from the list
of all solutions, and the members proceed to rank
the solutions, 1st, 2nd, 3rd, 4th, and so on.
 Nominal group technique
• The numbers each solution
receives are totaled, and the
solution with the lowest (i.e. most
favored) total ranking is selected
as the final decision.
 PROBABILITY
• A probability is a numerical statement about the
likehood that an event will occur.

• The probability, P, of any event or state of

occurring is greater than or equal to 0 and less
than or equal to 1.

• The probability of 0 indicates that an event is

never expected to occur.

• A probability of 1 means that an event is always

expected to occur.
 LINEAR PROGRAMMING
• It was conceptually developed before World War II by Soviet
Mathematician A.N.Kolmogorov.

• A mathematical model for optimal solution of resource

allocation problems.

• A branch of mathematics that uses linear inequalities to solve

decision-making problems involving maximums and
minimums.
 LINEAR PROGRAMMING
Assumptions Of Linear Programming

 Certainty
 Proportionality
 Divisibility
 Nonnegative Variable
Thank You