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8/6/2019 Decision Making Final
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Fundamentals of Decision–Making
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Concept
Decision- Making is a process to arrive at adecision, the process by which an
individual or organization selects one position or action from several alternatives.
Decision-Making , connects the organizations present circumstances to actions that willtake the organization into future.
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Characteristics of Decision-Making
• Integral Part of Planning• Goal Oriented.
• Alternatives.• Analytical-Intellectual.• Pervasive Function and a
continuous activity.• Human and Social Process .
Search
choice
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Types of Decisions
Basic and Routine Decisions.Programmed and Non-Programmed
Decisions.
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Programmed Decisions
Are one which are of Routine andrepetitive in nature.
Deal with Situations that occur oftenenough to enable decision rules to be
developed and applied in the futureMade in response to recurring
organizational problems.
e.g. A hospital establishes a procedure for admitting new patients.and A supervisor administers disciplinary actions againstworkers reporting late at work.
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Non-Programmed Decisions
Deal with Unique and Unusual problems.
The decision maker has to make adecision , in a poorly structured
situation.Situations are Novel and non-
recurring.
e.g Deciding to take over a sick unit ,how to restructure the organization toimprove efficiency. Where to locate anew warehouse.
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Linking levels with the type of
Plan
Well structured Lower
TopUn structured
T y p e
O f P r o b
l e m
Programmed
Decision
Non-Programmed
Decision
Level InOrganization
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Decision-Making
Process
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Identification of a problem
Identification of a decision
criteria.
Allocation of weights to
criteria
Development of alternatives
I need to decide the best Franchisee to
Purchase.
-Financial Qualifications.-Franchisor History.
-Start up Costs .
-Suitable GeographicalLocations.
Start up Costs --------------------------10Financial qualification
----------------8 Franchisor History --------------------6 Suitablegeographical Locations----4
McDonalds Pizza HutPizza Corner KFC
Café Coffee DayBarista
The Decision-making Process
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The Decision-making Process
Analysis Of Alternatives
Selection Of anAlternative
Implementation Of an Alternative
Evaluation of Decision
Effectiveness
McDonalds Pizza HutPizza Corner KFC
Café Coffee DayBarista
McDonalds Pizza Hut
Pizza Corner KFCCafé Coffee Day
Barista
McDonalds
Identification of a problem
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Evaluating Alternatives
Is thealternative
Feasible
No
Yes
Drop the alternative
Is thealternative
Satisfactory
No
Yes
Drop the alternative
Will thealternativehave +ive/Neutral
Consequences
No
Yes
Drop thealternative
Conduct
furtherevaluations
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Continuum of Decision-MakingConditions
Certainty Risk Uncertainty
HIGH LOW
Managerial Control
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Bounded Rationality
Bounded rationality : The concept thatmanager make the most logical decisionsthey can within the constraints or limited
information and ability.
Satisficing: Means that decision makers
choose the first solution alternative thatsatisfies minimal decision criteria.
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Decision-Making Styles
Analytic Conceptual
Directive Behavioral
Way Of Thinking
Rational Intuitive
ToleranceForAmbiguity
Low
High
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Directive • People who prefer simple, clear-cut
solutions to problems• Make decisions quickly• May consider only one or two
alternatives• Efficient and rational• Prefer rules or procedures
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Analytic • Complex solutions based on as much
data as they can gather • Carefully consider alternatives
• Base decision on objective, rationaldata from management controlsystems and other sources
• Search for best possible decision based on information available
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Conceptual • Consider a broad amount of information
• More socially oriented than analyticalstyle
• Like to talk to others about the problemand possible solutions
• Consider many broad alternatives
• Relay on information from people andsystems
• Solve problems creatively
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Behavioral • Have a deep concern for others as
individuals
• Like to talk to people one-on-one
• Understand their feelings about the problem and the effect of a givendecision upon them
• Concerned with the personal
development of others• May make decisions to help others
achieve their goals
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Common Decision-Making Errors and BiasesOverconfidence
Availability
Randomness
Selective PerceptionSunk Costs
Anchoring EffectSelf-serving
Immediate Gratification
Decision-MakingErrors and Biases
