Decision Making-DR. TANUSHREE CHAKRABORTY

8/9/2019 Decision Making-DR. TANUSHREE CHAKRABORTY

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DR. TANUSHREE CHAKRABORTY, Ph.D

Faculty Member,OB/HR

INTERNATIONAL SCHOOL OF BUSINESS AND MEDIA

EN 22 & 26, SALT LAKE CITYKOLKATA-700091


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What is a decision?

y Choices made from among two or more alternatives

Formulation Implementation


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yRationality

yBounded rationality

yIntuition


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Solution Types

y Optimization model

y Finding the best solutiony Satisficing model

y Finding a good -- but not necessarily the best --solution to a problem

y Heuristics

y Commonly accepted guidelines or procedures thatusually find a good solution


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Models of Behavioural Decision MakingThe role and importance of human behavioris emphasized by the behavioral model ofdecision making.

y The Economic Rationality Model

y Simons Bounded Rationality Model

y Judgemental Heuristics and Biases Model

y The Social Model

y Scanlon Plan


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The Economic Rationality Model

y Decision maker is believed to be rational while making

decision

y Understands links and does good means end analysis

y This model maximises profitability

y Undermines human behaviour and seeks a detached and

analytical justification of decisions


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Simon's bounded rationality model

y Simon's bounded rationality model proposes that

decision makers operate with a 'bounded' rationality.

y Bounded rationality is said to occur when decision

makers get satisfied with a 'less-than-ideal' solution

to a particular problem


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Judgmental heuristics and Biases model

y Decision maker uses rules of thumb

y This model identifies three heuristics- the availability,representative and the anchoring and adjustment heuristics.

yTheAvailability heuristic- decision is influenced by remarkableand readily available information (recency in appraisal)

y The Representative Heuristic- Predicted probability of anoutcome based on previous experience

y TheAnchoring and Adjustment Heuristic-Decision is made byanchoring the process to an initial value and then adjustmentcontinues


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The Social Modely Human feelings and emotions, by and large, affect

the decisions made by the decision maker

y People tend to conform to social pressures

y Unconscious desires also influence decision

y Sometimes irrational decisions can result from thistechnique


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The Scanlon Plan

y It is a traditional participative technique of decision

making

y It involves creation of formal committees to

encourage labor participation in the decision making

process.

y Introduction of suggestion boxes is another

technique of problem solving.


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Modern Decision Making Techniques

y Empowerment of lower level employees

y Work groups

y Self managed teams

y Quality Circles


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Bias and Errors

y Overconfidence bias

yAnchoring bias

y Confirmation bias

yAvailability bias

y Escalation of commitment

y Randomness error

y Winners curse

y Hindsight bias


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Steps in Decision Making

y Verify, Define, and Detail the problem

y Generate all possible solutions

y Generate objective assessment criteriay Choose the best solution which we have already

generated

y Implementing the preferred alternative

y Monitoring and evaluating outcomes and results

y Feedback


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Types of Decision Making-

y Brainstorming

y Ideas writing

y Setting well formed outcomes

y Mind Mapping

y Lateral thinking

y Six thinking hats

y Decision trees

y Force field analysis


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CREATIVITY AND

DECISION MAKING


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Creativity-

Creativity is a mental and social process involving thegeneration of new ideas orconcepts, or new associationsof the creative mind between existing ideas or concepts.

Creativity is fueled by the process of either conscious orunconscious insight.

An alternative conception of creativeness is that it issimply the act of making something new.


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Steps in Creative Thinking

y Orientation: pointing up the problem

yPreparation: gathering pertinent data

y Analysis: breaking down the relevant material

y Ideation: piling up alternatives by way of ideas

y Incubation: letting up, to invite illumination

y Synthesis: putting the pieces together

y Evaluation:judging the resulting ideas


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Decision Making and Creativityy Creativity is a function of knowledge, evaluation and

imagination

y Creative process in individuals are manifestedthrough divergent thinking and cognitive complexity

y There is a high positive correlation between

innovation skills and divergent thinking and cognitive

complexityy Creativity is not equated with intelligence


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Decision Making Styles

Dir ctiv A lytic l C c t l B h vi r l

Prefer simpleclear solutions

Makedecisionsrapidly

Do notconsider manyalternatives

Rely onexisting rules

Prefercomplexproblems

Carefullyanalyzealternatives

Enjoy solvingproblems

Willing to useinnovativemethods

Sociallyoriented

Humanisticand artisticapproach

Solveproblemscreatively

Enjoy newideas

Concern fortheirorganization

Interest inhelping others

Open tosuggestions

Rely onmeetings


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Group Influences

inDecision Making

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Group decision making

y Groups decision making is decision making in groups

consisting of multiple members/entities.

y The challenge of group decision is deciding what action a

group should take.


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BRAINSTORMING.

y Brainstorming involves group members verbally suggesting ideas or alternativecourses of action.

y The "brainstorming session" is usually relatively unstructured.

y

Group membersMUST understand the issue or problem.

y The group leader is a facilitator

y The "generation of alternatives" stage is clearly differentiated from the "alternativeevaluation" stage, as group members are not allowed to evaluate suggestions until allideas have been presented. Once the ideas of the group members have beenexhausted, the group members then begin the process of evaluating the utility of the

different suggestions presented.

y Brainstorming is a useful means by which to generate alternatives, but does not offermuch in the way of process for the evaluation of alternatives or the selection of aproposed course of action.


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DIALECTICAL INQUIRY.

y Focuses on ensuring full consideration of

alternatives.

y Debate the advantages and disadvantagesof proposed solutions or decisions.

y A similar group decision-making method, devil's advocacy, requiresthat one member of the group highlight the potential problems with aproposed decision.

y Both of these techniques are designed to try and make sure that thegroup considers all possible ramifications of its decision.


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NOMINAL GROUP TECHNIQUE.

y Involves composing a comprehensive list of ideas orproposed alternatives in writing.

yAll ideas or alternatives have been publicly recordedon a flip chart or marker board.

y Clarification of ideas is allowed

y Proposed ideas are ranked in order of preferences


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DELPHI TECHNIQUE.

y Individual members are in different physical locations.

y Members have specific domain knowledge

y Group members are asked to independently provide ideas,input, and/or alternative solutions to the decision problem in

successive stages.y These inputs may be provided in a variety of ways, such as e-

mail, fax, or online in a discussion room or electronic bulletinboard.

y After each stage in the process, other group members askquestions and alternatives are ranked or rated in some

fashion.y After an indefinite number of rounds, the group eventually

arrives at a consensus decision on the best course of action.


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Problems

y Groupthink

y Group polarization


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Difficulties in DecisionM

aking

Individual differences

y Personality

y Gender

Organizational Constraints

y Performance evaluation

y Reward Systems

y Formal Regulations

y System imposed time constraints


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Levels of Decision Making

Strategic

Tactical

Operational


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Why Decision Making in OB?

y Senior Management: makes decisions based on internalbusiness information but also external industry and societychanges; decisions affect long-term and strategic goals andthe firm's objectives.

y Middle Management and project teams: decisions affectresource allocation, short-range plans and performance ofspecific departments, task forces, teams, and special projectgroups.

y Operational management and project teams: decisionsaffect subunits and individual employees regarding theresources, schedules and personnel decisions for specificprojects.

y Individual employees: decisions affect specific vendors,other employees and most importantly the customer.


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Systems for Decision Support

y Unstructured: requires judgment, evaluation, and insight into non-

routine situations. Usually made at senior levels of management.

y Structured: repetitive, routine, with definite procedures for makingthe decision. Usually made at the lowest organizational levels.

y Semistructured:A combination of the two. Usually made by middle

managers.


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Effective Decisions-y It focuses on whats important

y It is logical and consistent

y It acknowledges both subjective and objective thinkingand blends with logical and analytical thinking

y I needs minimum information- just to resole adilemma

y Encourages gathering of relevant informationy It is straight forward, reliable and easy to use and

flexible


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What managers need to know?

y Understand cultural differences

y Know when it is time to call it quits

y Use an effective decision making process

y Develop highly reliable organizations


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THANK YOU

Documents

Decision Making-DR. TANUSHREE CHAKRABORTY