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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