Decisionmaking - An Essence to Problemsolving

Decision Making- An essence to problem solving

By: Sheeba Rehman

Organisational 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 organisational stakeholders”.

There are basically two kinds of decision that managers called upon to make:

Programmed and non-programmed

Types of Problems and Decisions

Structured problems * Involved goals that clear.*Are familiar(have occurred before)*Are easily and completely defined- information about the problem is available and complete.

Programmed decision *A repetitive decision the can be handled by a

routine approach.

Problems and Decisions ( cont’d)

Unstructured problems* Problems that are new or unusual and for which information is ambiguous or incomplete.

* Problems that will require custom-made solutions.

Non-programmed decisions* Decision that are unique and nonrecurring.

* Decision that generate unique responses.

Types of Programmed Decisions Policy* a general guideline for making a decision about a

structured problem. Procedure

* A series of interrelated steps that a manager can use to respond ( applying a policy) to a structured problem.

Rule* an explicit statement that limits what a manager or employee can or cannot do.

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

The Decision-Making Process

Define the Problem

Evaluate Alternatives

Implement the chosen Alternative

Gather facts and develop

alternatives.

Select the best alternative.

Follow up and evaluate the chosen

alternative.

Decision Making Process

Identify a problem and decision criteria and allocating weights to the criteria.

Developing, analyzing, and selecting an alternative that can resolve the problem.

Implemented and selected alternatives. Evaluating the decision’s effectiveness.

Step 1: Identifying the Problem

Problem* A discrepancy between an existing and desired state

of affairs. Characteristics of Problems

* A problem becomes a problem when a manager becomes aware of it.* there is a pressure to solve the problem.* the manager must have the authority, information, or resources needed to solve the problem.

Step 2: Identify the Decision Criteria

Decision criteria are factors that are important ( relevant) to resolving the problem.* Costs that will be incurred (investment required).* Risks likely to be encountered ( chance of failure).* Outcomes that are desired ( growth of the firm).

Step 3: Allocating Weights to the Criteria

Decision criteria are not of equal importance:

* Assigning a weight to each item.

* Places the items in the correct priority order of their importance in the decision making process.

Step 4: Developing Alternatives

Identifying viable alternatives.* Alternatives are listed ( without evaluation) that can resolve the problem.

Step 5 :Analyzing alternatives Appraising each alternative’s strengths and weaknesses

* An alternative’s appraisal is based on its ability to resolve the issues identified in step 2 and step 3.

Step 6: selecting the alternative

Choosing the best alternative

* The alternative with the highest total weight is chosen.

Step 7: Implementing the Alternative Putting the decision to and gaining

comment from those whose will carry out the decision.

Step 8: Evaluating the decision’s effectiveness

The soundness of the decision is judged by its outcomes.

* How effectively was the problem resolved by outcomes resulting from the chosen alternatives?

* if the problem was not resolve, what went wrong?

The decision making process-Example

Identification of a problem

Identification of Decision Criteria

Allocation of weights to criteria

Development of alternatives

Analyzing of alternatives

Selection of alternatives

Implementation of alternatives

Evaluation of decision alternatives

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The role of intuition

Intuitive decision making

* Making decisions on the basis of experience, feelings, and accumulated judgment.

intuition

Experience-based Decisions

Affect-Initiated Decisions

Cognitive-Based Decisions

Subconscious mental processing

Values or ethics-based Decisions

Their past experiences

Feelings or emotions

Skills,knowledge, and training

Data from subconscious mind

Ethical values and culture

What is Intuition ?

Decision Making Conditions

Certainty* A situation in which a manager can make an accurate decision because the outcome of every alternative choice is known.

Risk* A situation in which the manager is able to estimate the likelihood (probability) of outcomes that result from the choice of particular alternatives.

Decision-making Conditions

Uncertainty* limited information prevents estimation of outcome probabilities for alternatives associated with the problem and may force managers or rely on intuition, hunches, and “gut feelings”. # Maximax: The optimistic manager’s choice to maximize the maximum payoff.

# Maximin: The pessimistic manager’s choice to maximize the minimum payoff.

# Minimax: The manager’s choice to minimize maximum regret.

Decision-making styles

Dimensions of decision-making styles

* Ways of thinking

* Rational,orderly, and consistent.

* Intuitive, creative, and unique. Tolerance of ambiguity

*Low tolerance:require consistency and order.

*High tolerance: multiple thoughts simultaneously.

Decision-Making Styles (cont’d) Types of Decision Makers

* Directive # Use minimal information and consider few alternatives.* Analytic # Make careful decisions in unique situations.* Conceptual # Maintain a broad outlook and consider many alternatives in making decisions.* Behavioral # Avoid conflict by working well with others and being receptive to suggestions.

Common decision-Making errors and Biases

OverconfidenceImmediate Gratification

Anchoring Effect

Selective Perception

Confirmation

framingAvailability

representation

Randomness

Sunk costs

Self-serving

Hindsight

Decision-Making Errors & Biases

Characteristics of an Effective Decision-Making

It focuses on what is important It is logical and consistent. It acknowledges both subjective and objective

thinking and blends analytical with intuitive thinking. It requires only as much information and analysis as

is necessary to resolve a particular dilemma. It encourages and guides the gathering of relevant

information and informed opinion. It is straightforward,reliable, easy to use, and flexible.

A General-Decision Making Model

A General Decision-Making model

Improving the Flow of Knowledge– The flow of constructive tacit knowledge

between coworkers is a priority.– Knowing what you know, what you don’t

know, and how to find what you know yields better and more timely decisions.

Knowledge Management (KM): A Tool for Improving the Quality of Decisions– Developing a system to improve the creation

and sharing of knowledge critical for decision making.

– Tacit knowledge: personal, intuitive, and undocumented private information.

– Explicit knowledge: readily sharable public information in verbal, textual, visual, or numerical form.

(Cont’d)

Scanning the situation—identifying a signal that a decision should be made.

Receipt of authoritative communications from superiors.

Cases referred for decision by subordinates.Cases originating from the manager.Classify the decision as routine, apply the

appropriate decision rule; as nonprogrammed, begin comprehensive problem solving.

Monitor and follow-up as necessary.

Rational (Logical) Decision Model Steps

Individual Models of Decision-Making

Cognitive styleUnderlying personality dispositions toward the treatment of information, selection of alternatives, and evaluation of consequences.Systematic decision makerspeople who approach a problem by structuring it in terms of some formal method.Intuitive decision makerspeople who approach a problem with multiple methods in an unstructured manner, using trail and error to find a solution.Organizational models of decision makingModels of decision making that take into account the structural and political characteristics of an organization.

Bureaucratic models of decision makingwhere decisions are shaped by the organization’s standard operating procedures(SOPs).

Political models of decision makingwhere decisions result from competition and bargaining among the organization’s interest groups and key leaders.

“Garbage can” modelwhere states that organizations are not rational and that decisions are solutions that become attached to problems for accidental reasons.

Organizational Models of Decision-Making

Challenges for Decision Makers

Decision Making– The process of identifying and choosing alternative courses

of action to meet the demands of a situation.

Trends in Decision Making– The pace of decision making is accelerating: managers

report making more decisions and having less time to make them.

• Complex streams of decisions

• Sources of decision complexity

• Perceptual and behavioral decision traps

Dealing with Complex Streams of Decisions– Multiple criteria to be satisfied by a decision.– Intangibles that often determine decision alternatives.– Risk and uncertainty about decision alternatives.– Long-term implications of the effects of the choice of

a particular alternative.– Interdisciplinary input increases the number of

persons to be consulted before a decision is made.

(Cont’d)

– Pooled decision making increases the number of persons playing a part in the decision process.

– Value judgments by differing participants in the process create disagreement over whether a decision is right or wrong, good or bad, and ethical or unethical.

– Unintended consequences occur because the results of purposeful actions cannot always be predicted.

(Cont’d)

Classical model of managementTraditional description of management that focused on its formal functions of planning, organizing, coordinating, deciding and controlling.

Behavioral modelsDescriptions of management based on behavioral scientists observations of what managers actually do in their jobs.

Managers and Decision-Making

Guideline for making decision more effective

Categorical interpretation- the problem should be defined properly.

Application of limiting factor- limiting factor should be taken into account in order to analyze the external S & W.

Adequate information- more quantity of reliable information leads to effective decision making.

Considering other views- various views at the same point are taken into account for quality decision.

Timeliness- decision should be ,made at proper time to meet the competitive advantages.

Techniques for improving decision making

Brainstorming – idea generation for decision making.

Nominal group technique (NGT)- problem outlined, presentation of solution in written form, discussion over written solutions, and final decision.

Delphi technique- decision made on the basis of questionnaire filled by the respondents.

Consensus mapping- decision made on the basis of the report presented by the representative of each group after