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Decision Making:

The Essence of Managers Job

Key Topics
Introduction
The Decision-making process
Decision-making models
Decision Styles
A discussion on Group Decisions

Part I
Introduction

Organizations
Organizations are systems
Involve people, structure and a
common purpose
Have limited resources
Need to perform a series of functions
to meet its objectives

Managers
Managers are responsible for
effective and efficient execution of
these organizational functions.
A typical manager performs a number
of functions that are categorized as:
Interpersonal
Informational
Decisional

Managers
One of the key traits that distinguish
managers from operatives is the ability
to make independent decisions.- self
determining. Decide traits.

Part II
Decision-making

What is decision-making?
The word decision is defined as:
A choice between two or more
alternatives. Maraming pagpipilian
Thus decision-making can be defined as:
the selection of a course of action from
among alternatives . Select action from
alternatives

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)

Problem Definition
Problem is a discrepancy (difference)
between an existing and a desired state.
Example:
The manager has resigned, and we
need another manager
Here the phrase manager has resigned
reflects the current state while need
another manager represents a desired
state.

Identifying Decision Criteria


The word criteria, is defined as a
standard by which something can be
judged.
A decision criteria therefore, is the basis
of a decision, which outlines the
relevant and important factors for a
decision. And implicitly, it also defines
what is not important.

Decision Criteria: Example


In the above-cited scenario, the decision
criteria may include the following factors:
Relevant qualifications
Leadership skills
Communication skills
Planning and analytical skills
Professional experience

Allocating Weights to Criteria


The next step in the decision making
process is prioritization.
Prioritization is achieved by assigning
quantitative weights to each criteria
element.
The weightage defines the relative
significance of each element.

Allocating Weights: Example

Developing Alternatives
Involves defining the possible
alternatives (or choices) that would
resolve the problem.
In our case, the alternatives would be
a list of candidates or job applicants.

Analyzing Alternatives
Alternatives are rated and analyzed
on the basis of the criteria
The rating can be based on a specified
scale, say 1 5 etc.
Rating may be subjective in nature
and thus,may depend on the judgment
of the individual(s)

Criteria Rating: Example

Analyzing & Assessment: Example

Selecting an alternative
Involves choosing the best alternative,
based on the above rating and
analysis
Generally implies selecting the
alternative with the highest score.

Implementing the Alternative


Putting the decision into action
Involves clear communication of the
decision to all concerned and obtaining
their commitment

Evaluation
Evaluation forms an integral part of any
process
Involves evaluation of the outcome based
on the desired goal and criteria
Involves assessing the effectiveness and
efficiency of the outcome (or the entire
process)
In case of any undesired results, each
step of the process is carefully reviewed
to trace the root causes

Decision-making Models
Model
A simplified representation or
description of a system or complex
entity
Examples
A model of a building
A globe (Earth model)

Rational/Bounded Rational
So Rational and Bounded Rational Models
are cognitive models that describe how
managers make rational decisions

The Rational Model


1. Define and
diagnose the 2. Analyze the
2. Set goals
problem
problem
7. Follow up
and control
3. Search for
External and
alternative
internal
solutions
6. Implement
Environ. forces
the solution
selected
5. Choose 4. Compare
among
and evaluate
alternative
solution
solutions

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

Bounded Rational: 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

Intuition
An unconscious process of making
decisions on the basis of experience
and judgment

Intuition
Involves gut feeling
May also have rational basis
The feeling arises from past
experience and knowledge
Involves quicker response
Does not involve systematic analysis

Decision Types
Effective managers make various kinds
of decisions. In general, these decisions
are either
Programmed decisions
Non-programmed 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 billing dates,
recording office supplies etc.

Non-programmed 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

Non-programmed Decisions
Organizational

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Levels

Nature of
Problems

Nature of
Decision-making

Non-programmed Decisions
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

Decision Styles
Decision-making, though a rational
process does include some subjective
elements
Thus in real organizational settings,
the quality of decision does depend on
the ability, style and approach of the
manager

Decision Styles: Directive


Directive
Represents low tolerance for
ambiguity and uncertainty
Reflects rational thinking of the
manager
Such decision styles are more suitable
for routine procedural tasks

Decision Styles: Analytic


Analytic
Analytical style is also a rational style
of thinking
Involves a very high tolerance for
ambiguity and uncertainty
Such managers generally seek
detailed information before making a
decision

Decision Styles: Behavioural


Behavioural
Represents a creative way of thinking
Involves a low tolerance for
ambiguity or uncertainty
Managers with a behavioural style
introduce new ways of doing things

Decision Styles: Conceptual


Conceptual
Conceptual style also reflects a creative
and intuitive way of thinking
Conceptual style managers have a very
broad vision and generally look at
numerous alternatives for decisionmaking
Focused on the long run and often result
in creative outcomes or alternatives

Group Decision-making
The factors requiring group decisions
include:
Involving sensitive issues
High cost alternatives
Involving very high risk factor
Strategic impact

Group Decisions: Advantages


Acceptance of group members
Coordination is easier
Communication is easier
Existence of large alternatives
More information can be processed
Diversity of experience and
perspectives

Group Decisions: Disadvantages


Take longer time
Group can be indecisive
Groups can compromise
Groups can be dominated
Groups can play games
Victim to Groupthink

Situational Factors for Individual Decision-making

Short time
Unimportant to group
Manager can take decision
Dominate the decision
Destructive conflict
Members hesitant

Situational Factors for Individual Decision-making

Confidential data
Incapability of members
Managers dominance
Indirect effect on group members

Situational Factors for


Group Decision-making

Need for innovation and creativity


Data collection
Importance of acceptance
Importance of solution
Complex problem
Democratic process

Situational Factors for


Group Decision-making

Risk taking solution needed


Better understanding
Whole responsibility
Feedback required

Improving Group
Decision-making

Brainstorming
Nominal group techniques
Electronic meeting