5 Decisionmaking 130217002458 Phpapp02

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Decision Making

Types of decision

Steps in rational decision making

Planning

Definition and characteristics

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Decision Making Defination:

Decision Making is the process of

choosing the best alternative for reaching

objectives

Managers make decisions affecting the

organization daily and communicate thosedecisions to other organizational members

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!ffective decision making

" major activity of management is the making of decisions#

Decisions need to be timely# There are times $hen a decision has to be

made# !ven if it turns out not to be the best decision it can be better than

not making a decision at all#Decisions often have to be made $hen there is insufficient information#

Decisions involve taking risks# !ffective decision making involves

gathering $hat information is kno$n% identifying the options% assessing

the risks and making the best decision

$ith the information available in a timely manner#

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&hen do decisions need to be made

Determining the project strategy'approach

(esolving project issues

Developing estimates

Making purchases

)ntervie$ing and selecting project team members

Selecting e*ternal suppliers

+andling disagreements and conflict resolution

Scheduling $ork and allocating resources to tasks

Managing meetings

Situations include:

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Types of decision Planned and unplanned Temporary and permanent

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The decision making process

.# /ather the facts

2# )dentify a number of alternatives

# "ssess the alternatives

0# Decide

1our simple steps:

&here uick decisions need to be made% these steps can

be done mentally 3on the fly4 or by one person# &hentime allo$s and the decision is important% more people

can be involved and a more thorough decision making

process used#

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(ational Decision Making

56step Process .# )dentification of problem 2# )dentification of Decision 7riteria # "llocation of $eights to criteria 0# Development of alternatives ,# "nalysis of alternatives

-# Decide on an alternative 8# )mplementation of decision 5# !valuation of decision

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The Decision6Making ProcessProblem

Identification

My salespeople

need new computers

Identification of

Decision Criteria

Price

Weight

Warranty

Screen type

Reliability

Screen sie

!llocation of

Weights to

Criteria

Reliability "#

Screen sie $

Warranty %

Weight %

Price &

Screen type '

De(elopment of

!lternati(es

!cer

Compa)

*ateway

+P

Micromedia

,-C

Sony.oshiba

Implementation

of an !lternati(e

*ateway -(aluationof Decision

-ffecti(eness

!nalysis of

!lternati(es

R S W W P S

!cer & ' & ' / 0Compa) ' & % / 0 1

*ateway 2 0 1 1 $ /

+P ' % 0 1 0 %

Micromedia / / ' & % &

,-C ' & % 0 1 /

Sony 1 % 0 & / $

.oshiba ' & % 0 1 '

Selection of an

!lternati(e

!cer "/%Compa) "&/

*ateway /&0

+P "1&

Micromedia "#'

,-C "%"

Sony "2/

.oshiba "%&

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Decisions in the Management 1unctions

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"bout (ational Decision

Making )s it al$ays possible to

make rational decisions

.;

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RationalDecision

Making

Problem is

clear and

unambiguous

Single, well-

defined goalis to be achieved

All alternatives

and

consequences

are known

Preferences

are clear

Preferences

are constant

and stable

No time or cost

constraints eist

!inal choice

will maimi"e

#a$off

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Intuitive decision making

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Types of Problems >

Decisions

Well-Structured Problems6 straightfor$ard%

familiar% and easily defined

Programmed Decisions6 used to address

structured problems minimize the need for managers to use discretion facilitate organizational efficiency

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Types of Problems and

Decisions

Poorly-Structured Problems6 ne$% unusual

problems for $hich information is ambiguousor incomplete Nonprogrammed Decisions6 used to

address poorly6 structured problems produce a custom6made response more freuent among higher6level managers

Procedure% (ule% > Policy

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Types of Problems > ?evel )n

the @rganization

Programmed

Decisions

,onprogrammedDecisions ?evel in@rganization

Top

?o$er&ell6structured

)ll6structured

Type of

Problem

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Things to consider # # #

CertaintyA ho$ certain is a particular

outcome RiskA ho$ much risk can you take expected value6 the conditional return from each

possible outcome

ncertaintyA ?imited information preventsestimation of outcome probabilities foralternatives#

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&hat to do

maximaxchoice A optimistic

ma*imizing the ma*imum possible payoff

taking the best of all possible cases

maximinchoice A pessimistic

ma*imizing the minimum possible payoff

taking the best of the $orst cases

minimax6 minimize the ma*imum 3regret4

Bdifference bet$een $hat you get and the best

caseC

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Decision6Making Styles

Dimensions of Decision6Making Styles

alue orientations Task and technical concerns

People and social concerns

Tolerance for ambiguity ?o$ tolerance: reuire consistency and order +igh tolerance: multiple thoughts simultaneously

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Decision6Making Styles

Directive Prefer sim#le,

clear solutions Make decisions

ra#idl$ Do not consider

man$ alternatives Rel$ on eisting

rules

%once#tual

Sociall$ oriented &umanistic and

artistic a##roach Solve #roblems

creativel$ 'n(o$ new ideas

)ehavioral %oncern for their

organi"ation *nterest in hel#ing

others +#en to

suggestions Rel$ on meetings

Prefer complex

problems Carefully analyze

alternatives Enjoy solving

problems Willing to use

innovative

methods

Analytic

al

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Decision Making Styles

"nalytical 7onceptual

Directive

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/ather the facts

&rite do$n a statement of $hat needs to be decided#

)s the decision statement clear and precise )f not refine

the statement#

)s the need for the decision a result of an underlyingproblem% $hich also needs to be addressed

"re there assumptions underlying the decision that need

to be clarified and possibly challenged

)s the decision part of a bigger decision that needs to be

made% or can this decision be decomposed into smallerdecisions

/uidelines

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)dentify alternatives

)dentify as many alternatives as possible#

Ese brainstorming if appropriate#

Do not filter out alternative options at this stage

6 assume they can all be made to $ork# &hen you have generated lots of ideas% consider each one to

see if it is a viable alternative#

Shortlist the viable alternatives#

/uidelines

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Decision making behaviourPeople tend to adopt a particular decision making approach as a result

of factors such as:

their o$n personality

their current mood

the organisational culture the personality of the person'people they are dealing

$ith

the nature of the relationship they have $ith the

people they are dealing $ith

time pressure and perceived level of stress

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7ommon !rrors in Decision Making

@ver6confidence +indsight Self6serving Sunk costs (andomness (epresentation "vailability

1raming 7onfirmation Selective

perception "nchoring )mmediate

gratification

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