Decisionmaking - An Essence to Problemsolving

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Decision Making

Text of 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 ( contd) 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 DecisionsCharacteristics Type of problem Managerial level Frequency Information Time frame for solution Solution relies on Programmed decisions Structured Lower level Repetitive Readily available Short Procedures,rules, and policies Non-programmed decisions Unstructured Upper level New,unusual Ambiguous or incomplete Relatively long Judgment and creativity

The DecisionMaking 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 decisions 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 alternatives strengths and weaknesses * An alternatives 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 decisions 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-ExampleIdentification of a problem

My sales Reps need new computers!

Identification of Decision Criteria

Allocation of weights to criteria

Memory and Storage, Display Quality, Better Life,Warranty, Carrying weight Memory and Storage-10, Display Quality -8, Better Life -6,Warranty -4, Carrying weight-3Toshiba, HP, Soni Vaio, Qosmio, Gateway, Apple iBook, Lenovo, Dell

Development of alternatives

Analyzing of alternatives

Selection of alternatives

Toshiba, HP, Soni Vaio, Qosmio, Gatewa Apple iBook, Lenovo, Dell Toshiba, HP, Soni Vaio, Qosmio, Gateway, Apple iBook, Lenovo, Dell Toshiba!

Implementation of alternatives

Evaluation of decision alternatives

The role of intuition Intuitive decision making * Making decisions on the basis of experience, feelings, and accumulated judgment.

What is Intuition ?Their past experiences Ethical values and culture Values or ethicsbased Decisions Subconscious mental processing

Experience-based Decisions intuition

Feelings or emotions

Affect-Initiated Decisions Cognitive-Based Decisions

Data from subconscious mind

Skills,knowledge, and training

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 managers choice tomaximize the maximum payoff.

# Maximin: The pessimistic managers choice tomaximize the minimum payoff. # Minimax: The managers 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 (contd) 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 BiasesOverconfidenceHindsight Self-serving Sunk costs Decision-Making Errors & Biases Immediate Gratification Anchoring Effect Selective Perception Confirmation representation Availability framing

Randomness

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

(Contd)

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.

Rational (Logical) Decision Model StepsScanning the situationidentifying 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.

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

Organizational Models of Decision-MakingBureaucratic models of decision making where decisions are shaped by the organizations standard operating procedures(SOPs). Political models of decision making where decisions result from competition and bargaining among the organizations interest groups and key leaders. Garbage can model where states that organizations are not rational and that decisions are solutions that become attached to problems for accidental reasons.

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 deci