Decisionmaking in Management

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The process of examining your possibilitiesoptions, comparing them, and choosing a course of action.

Text of Decisionmaking in Management

  • HBL

  • PresentedBy:ViqarA.Usmani

    RecommendedBook:

    MakingManagementDecisionsby SteveCooke ,NigelSlack

  • PresentedBy:ViqarA.Usmani

  • Pleasewriteaonesentencedefinitionofdecisionmaking.

    Theprocessofexaminingyourpossibilitiesoptions,comparingthem,andchoosingacourseofaction.

    PresentedBy:ViqarA.Usmani

  • The word decision has been derived from the Latin word

    "decidere" which means "cutting off".

    Thus, decision involves cutting off of alternatives between those

    that are desirable and those that are not desirable.

    In the words of George R. Terry,

    "Decision-making is the selection based on some criteria from

    two or more possible alternatives".

    PresentedBy:ViqarA.Usmani

  • Characteristics of Decision Making

    Decision making implies that there are various

    alternatives and the most desirable alternative is chosen to

    solve the problem or to arrive at expected results.

    The decision-maker has freedom to choose an alternative. Decision-making may not be completely rational but may bejudgmental and emotional.

    Decision-making is goal-oriented.

    Decision-making is a mental or intellectual process because

    the final decision is made by the decision-maker.

    (Cont.)

    PresentedBy:ViqarA.Usmani

  • A decision may be expressed in words or may be implied frombehavior.

    Choosing from among the alternative courses of operation implies

    uncertainty about the final result of each possible course of

    operation.

    Decision making is rational.

    It is taken only after a thorough analysis and reasoning and

    weighing the consequences of the various alternatives.

    PresentedBy:ViqarA.Usmani

  • Decision making: the process by which managers respond to opportunities and threats by analyzing options, and making decisions about goals and courses of action.

    Decisions in response to opportunities:managers respond to ways to improve organizational performance.

    Decisions in response to threats: occurs when managers are impacted by adverse events to the organization.

    PresentedBy:ViqarA.Usmani

  • Programmed Decisions: routine, almost automatic process. Managers have made decision many times before. There are rules or guidelines to follow.

    Programmed decisions are routine and repetitive and are made within theframework of organizational policies and rules.

    These policies and rules are established well in advance to solve recurring problems in the organization.

    Programmed decisions have short-run impact.

    Example: Deciding to reorder office supplies.PresentedBy:ViqarA.Usmani

  • PresentedBy:ViqarA.Usmani

    Non-programmed Decisions:unusual situations that have not been often addressed.No rules to follow since the decision is new.These decisions are made based on information, and a mangers intuition, and judgment.Non-programmed decisions are decisions taken to meet non-repetitive

    problems.

    Non-programmed decisions are relevant for solving unique/ unusual

    problems in which various alternatives cannot be decided in advance.

    A common feature of non-programmed decisions is that they are novel and non-

    recurring and therefore, readymade solutions are not available.

    Example: Should the firm invest in a new technology?

  • Classical model of decision making:a prescriptive model that tells how the decision should be made.

    Assumes managers have access to all the information needed to reach a decision.

    Managers can then make the optimum decision by easily ranking their own preferences among alternatives.

    Unfortunately, mangers often do not have all (or even most) required information.

    PresentedBy:ViqarA.Usmani

  • Rankeachalternativefromlowtohigh

    Selectbestalternative

    Listalternatives&consequences

    Assumesallinformationisavailabletomanager

    Assumesmanagercanprocessinformation

    Assumesmanagerknowsthebestfuturecourseof

    theorganization

    PresentedBy:ViqarA.Usmani

  • AdministrativeModelofdecisionmaking:Challenges the classical assumptions that managers have and process all the information. As a result, decision making is risky.

    Bounded rationality: There is a large numberofalternativesandinformationisvastsothatmanagerscannotconsideritall. Decisionsarelimitedbypeoplescognitiveabilities.

    Incompleteinformation:mostmanagersdonotseeallalternativesanddecidebasedonincompleteinformation.

    PresentedBy:ViqarA.Usmani

  • Uncertainty&risk

    AmbiguousInformation

    Timeconstraints&informationcosts

    IncompleteInformation

    PresentedBy:ViqarA.Usmani

  • Recognizeneedforadecision

    Frametheproblem

    Generate&assessalternatives

    Chooseamongalternatives

    Implementchosenalternative

    Learnfromfeedback

    PresentedBy:ViqarA.Usmani

    1. Recognize need for a decision: Managers must first realize the need for which a decision must be made.

  • PresentedBy:ViqarA.Usmani

    A problem is a felt need, a question which needs a solution. In the words

    of Joseph L Massie

    "A good decision is dependent upon the recognition of the right

    problem".

    The objective of problem identification is that if the problem is

    precisely and specifically identifies, it will provide a clue in finding

    a possible solution. A problem can be identified clearly, if managers

    go through diagnosis and analysis of the problem.

  • Recognizeneedforadecision

    Frametheproblem

    Generate&assessalternatives

    Chooseamongalternatives

    Implementchosenalternative

    Learnfromfeedback

    PresentedBy:ViqarA.Usmani

    2. Frame the problem:managers must frame problem for whichdecision is to be made.

    Recognizeneedforadecision

  • Diagnosing the real problem implies knowing the gapbetween what is and what ought to be,

    Diagnosis gives rise to analysis. Analysis of a problem requires:

    Who would make decision?

    What information would be needed?

    From where the information is available?

    PresentedBy:ViqarA.Usmani

  • Recognizeneedforadecision

    Frametheproblem

    Generate&assessalternativesChooseamongalternatives

    Learnfromfeedback

    PresentedBy:ViqarA.Usmani

  • 3. Generate alternatives: managers must develop feasiblealternative courses of action.

    If good alternatives are missed, the resultingdecision is poor.

    It is hard to develop creative alternatives, somanagers need to look for new ideas.

    Evaluate alternatives: what are the advantages and disadvantages of each alternative?

    Managers should specify criteria, then evaluate.

    PresentedBy:ViqarA.Usmani

  • Recognizeneedforadecision

    Frametheproblem

    Generate&assessalternatives

    Chooseamongalternatives

    Implementchosenalternative

    Learnfromfeedback

    PresentedBy:ViqarA.Usmani

  • 4. Choose among alternatives: managers rank alternatives and decide.

    While ranking, all information needs to be considered.

    PresentedBy:ViqarA.Usmani

    The decision maker must check proposed alternatives against limits,

    and if an alternative does not meet them, he can discard it.

    Having narrowed down the alternatives which require serious

    consideration The decision maker will go for evaluating how each

    alternative may contribute towards the objective supposed to be

    achieved by implementing the decision

  • PresentedBy:ViqarA.Usmani

    A decision maker can use several sources for identifying

    alternatives:

    His own past experiences

    Practices followed by others and

    Using creative techniques.

  • Recognizeneedforadecision

    Frametheproblem

    Generate&assessalternatives

    Chooseamongalternatives

    Implementchosenalternative

    Learnfromfeedback

    PresentedBy:ViqarA.Usmani

  • 5.Implement choose alternative: managers must now carry out the alternative.

    Often a decision is made and not implemented.

    PresentedBy:ViqarA.Usmani

  • Once the alternative is selected, it is put into action.

    The actual process of decision making ends with the choice of an

    alternative through which the objectives can be achieved

    PresentedBy:ViqarA.Usmani

  • Recognizeneedforadecision

    Frametheproblem

    Generate&assessalternatives

    Chooseamongalternatives

    Implementchosenalternative

    Learnfromfeedback

    PresentedBy:ViqarA.Usmani

  • 6. Learn from feedback: managers should consider what went right and wrong with the decision and learn for the future.

    Without feedback, managers never learn from experience and might repeat the same mistake.

    When the decision is put into action, it brings certain results.

    These results must correspond with objectives, the starting point of

    decision process, if good decision has been made and implemented

    properly.

    Thus, results provide indication whether decision making and its

    implementation is proper.

    PresentedBy:ViqarA.Usmani

  • Isthepossiblecourseofaction:

    Legal?

    Ethical?

    Economical?

    Practical?

    PresentedBy:ViqarA.Usmani

  • Is it legal? Managers must first be sure that an alternative is legal both in this country and abroad for exports.

    Is it ethical? The alternative must be ethical and not hurt stakeholders unnecessarily.

    Is it economically feasible? Can our organizations performance goals sustain this alternative?

    Is it practical

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