Unit 2 - Decision Making

8/3/2019 Unit 2 - Decision Making

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DECISION MAKING


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DECISION-MAKING DEFINED Decision Making is a managerial

process involving selection of a

particular course of action out ofalternatives for solving a problem orachieving objectives.


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DECISION MAKINGAccording to Peter Drucker:

Whatever a manager does,he does through Decision-

making


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DECISION MAKINGA Decision is a choice from

among two or more alternatives.

Decision making permeates everypart of management practice.

It is, however, not the sole

province of the managers.Sometimes it is a reflex action,but otherwise it is a wellthought activity.


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CHARACTERISTICS

OF DECISION MAKING

Is a human and social process.Involves judgment & discretion of thedecision-maker.

Purposive activity.

Requires giving freedom to themanager.

Not entirely a rational process.

Integral part of all the management

functions.


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GENERAL DECISION- MAKING

PROCESSPerception of the deviation and

Defining the problem

Collection of all relevant data

Diagnosis and analysis

of the problem

Finding the root cause

of the problem

Identification of resources and

constraints

Continued

1

2

3

4

5


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GENERAL DECISION- MAKING PROCESSDevelopment of criteria for

Successful solution

Generation and development of

alternatives

Evaluation of alternatives

and selection of an alternative

Implementation of the decision

Monitoring and feedback 10

9

8

7

6

Cont..


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GENERAL DECISION- MAKING PROCESSSTEP 1: Perceptionofthedeviationand

definingtheproblem

Realizationthataproblemexistsandthen

addressingit. Howdo yourealize?

Actual state

Desired state

Deviation / Discrepancy Problem exists

Problem once isolated, must be defined and preferably

be written.


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STEP 2: Collectionofrelevantdata

Information relevant to the problem mustbe gathered.

Data can be collected from external sourcesor internal sources.

Adequate data should be collected.Excessive information requires time and

effort which is costly. Inadequateinformation results in bad decisions.

GENERAL DECISION- MAKING PROCESS


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STEP 3: Diagnosisandanalysisoftheproblem

Collected information is subjected to in-depthanalysis.

Information should be as much accurate aspossible.

4 kinds of information are there:

Facts (Totally accurate and highly reliable)

Inference (Deduction about a situationbased on evidence)

Speculation (Subjective in nature, notverifiable, personal in nature)

Assumptions (Least reliable, Based on person)



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STEP 4: Findingtherootcauseoftheproblem

Most important aspect of understanding theproblem.

Process is complex as there can beinterdependent variables.

Difference should be made between symptomsand causes.

eg: Recurrent sore on a finger-skin cancer. So

treatment should be for cancer and not sore.



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STEP 5: Identificationofresourcesandconstraints

Before solving the problem, critical look must betaken at the resources available and theconstraints that might make solution unfeasible.

E.g.: NASA-had sent two satellites in space, wentout of controlled orbit.

Had to be brought back to earth.So, cost ofretrieval studied plus the technical and financial

constraints for the same. Then the solution wasdecided.



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STEP 6: Developmentofcriteriaforsuccessfulsolution

Criteria is a set standard and all the alternativesare checked against these criterion.

Two types of criteria Must criterion (what isessential and has to be there)

andWant criterion (Desirable things)

Eg: We have a guest lecture. Speaker will be usingLCD and collar mike. 200 students are requiredto attend the lecture.



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STEP 7: GenerationandDevelopmentofalternatives

All potential possible alternatives or solutions tothe problems should be considered.

Then, all these alternatives should be analyzed.

Creativity should be encouraged as it can lead toa unique solution.

Brainstorming technique can be used in case of

group decision making. It helps in generation oflot of ideas.



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STEP 8: Evaluatingalternativesandselectinganalternative

Evaluation of an alternative and choosing thebest alternative with the maximum advantages is

the most critical step of this process.

Alternatives should be evaluated against thecriterion set in STEP 6.



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STEP 9: Implementationofthedecision

Implementation means putting the selectedalternative into action and seeing it through toits completion.

Implementation becomes easier if the personimplementing it was also involved in theDecision-making process.

The details of this should be communicated to all

the people concerned.



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STEP 10: Monitoringand Feedback

Feedback provides us information about theeffectiveness of the implemented decision.

Periodic reports on the implementation of thesolution should be taken. This helps in

Preventive and Curative maintenance.



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RATIONAL DECISION- MAKING MODELDefine the problem

Identify Decision criteria

Weight the criteria

Generate alternatives

Rate each alternative on

each criteria

Continued

1

2

3

4

5

Compute the optimal decision 6


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RATIONAL DECISION- MAKING MODEL

ALTERNATIVES

A

B

C

35 40 20

3530

20

35 0 20

TOTAL(100)

95

85

55

EG:TOCHOOSEACLASSROOM FOR TAKINGLECTURE

CRITERION

SEATINGCAPACITY(40) Benches(20)LCD(40)

1 2 3


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PHASES IN DECISION MAKING

(HERBERT SIMON)

1) INTELLIGENCEACTIVITY Searching the environment.

2) DESIGN ACTIVITY Inventing, developing and analyzingpossible courses of action.

3)CHOICEACTIVITY Selecting a particular course ofaction from the available alternatives.

(I D C)


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PHASES IN DECISION MAKING

(MINTZBERG)

Phase 1IDENTIFICATION

1) Recognition2) Diagnosis

Phase 2DEVELOPMENT

1) Search2) Design

Phase 3SELECTION1) Judgment2) Analysis

3) Bargaining

Authorization


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SOME COMMON ERRORS IN

DECISION MAKING Sometimes people are indecisive and take longer

time in taking decisions.

Postponing the decision until the last moment.

Failure to isolate the root cause of the problem.

Failure to assess the reliability of informationalsources.

Method for analyzing the information may not bea sound one.

Bias in Decision making.

Decisions will not be good if taken in anemotional state.


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DECISION-MAKING

STYLES

CONCEPTUAL

BEHAVIOURALDIRECTIVE

ANALYTICAL

WAYOF THINKING

Rational Intuitive

High

Low

TOLERANCEFORAMBIGUITY


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DECISION-MAKING

STYLESThis model identifies four different individual

approaches to making decisions :

DIRECTIVE : Make decisions fast, efficient andlogical.

ANALYTICAL: Desire more information and considermore alternatives. Careful decision makers.

CONCEPTUAL: Broad in outlook and consider many

alternatives. Find creative solutions to problems.BEHAVIOURAL: They work well with others. Try to

avoid conflicts and seek acceptance.


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GROUP DECISION-MAKINGBased on the adage-

Two Heads are better than one.

There can be consensus or thedecision can be arrived atthrough simple majority.


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GROUP DECISION-MAKING

ADVANTAGESMore information and greater number ofalternatives.Implementation of decision easier as the people

responsible for implementation participated indecision making.Inputs from large number of people eliminates thebiases that are there in individual decisions.Gives opportunity to many people to participate indecision making process.Group decision making is more democratic whereasindividual decision making is autocratic in nature.


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DISADVANTAGESHighly time consuming process.Personality conflicts can create problems.Social pressures can force people to hide their trueopinions.Focus effect- group may focus on few or onesuggested alternative and spend all time evaluatingthat.

Groups inclined to invest more in initial decisions,simply to justify having made these in the firstplace.


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DISADVANTAGESGroup think - a word coined by Irving Janis. Itindicates a situation where members desire forcomplete consensus overrides their motivation todisagree with an argument or critically andrealistically evaluate other alternatives.

This specially true when the group is a highcohesive one.

Groups may shift either towards more risk takingor towards less risk taking than the individualsand either of the shift may be undesirable.


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TECHNIQUESBRAINSTORMING

Involves a group of people(5-10), sitting around

a table in classroom setting, generating ideas.Primary focus is Generation of ideas ratherthan Evaluation of ideas. (Reason:- More ideaswill lead to better creativity)

All ideas written on blackboard so thateverybody can see it and try to improve onthat.

Leader defines the nature of problem and therules to be followed.


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TECHNIQUESBRAINSTORMING

No judgment on the ideas when they are generated.

Welcome wild ideas. They sometimes result inunique solutions.

Strive for quantity and not quality.

All participants are encouraged to improve or

modify other participants suggestions.Time consuming process but democratic in nature.


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TECHNIQUESDELPHI TECHNIQUE

Modification of Brainstorming technique.

Involves obtaining opinions of expertsphysically separated from each other and indifferent geographical locations

Process not for specific problems, but forassessing the impact of future events on oursociety.

Group members are not influenced by eachother.


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TECHNIQUESProblem defined

by theDelphi leader

A Sample ofexpertsselected.

Questionnairesdeveloped andsent to them

Responsescompiled andsummarized

into 2nd

questionnaire

Participantsasked to re-

evaluateresponses

New responsescompiled andnew questionsare prepared

Cycle stopswhen

consensus isreached

Solution isdeveloped.


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TECHNIQUESNOMINALTECHNIQUE

Very similar to Brainstorming but it is considered

to be more effective.Group members all physically present, but do notdirectly interact with each other.

Highly structured procedure used for generatingand analyzing various ideas and alternatives.


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TECHNIQUESNOMINALTECHNIQUE

Small group sits

around the table

Leader definesand explains the

problem

Members silentlywrite down all

possible solutions

Leader collects

and records allthese solutions

Ideas are discussed,

clarified andevaluated by members

Ideas are ranked

and highest rankedidea is chosen.


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GROUP DECISION-MAKINGTECHNIQUES

FISHBOWLINGAnother variation of Brainstorming but it is more

structured and to the point.Decision making group of experts is seated around in acircle with a single chair in the center. Group leadersits on that chair and gives his views on the problemand proposes solutions.

Other members can ask him questions but no irrelevantdiscussion or cross talk is allowed.

Centrechair


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GROUP DECISION-MAKINGTECHNIQUES

FISHBOWLING - STEPS

Group of expertssit around the

table

Leader invited tosit in the centerand give his views

Turn by turn eachmember gets a

chance to sit oncentre chair andexpress his views.

Questions addressedOnly to the centrechair and no cross

talks allowed

After all experts expressviews, alternatives arediscussed and

choose one by consensus.


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DIDACTIC INTERACTION:

Applicable in situations which can have only 2solutions (Yes or No).

E.g.: To buy or not to buy, To merge or not tomerge.

Such situation requires exhaustive andextensive discussion & investigation since a

wrong decision can have serious consequences.


TECHNIQUES


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DIDACTIC INTERACTION: STEPS


TECHNIQUES

Group divided intotwo sub-groups1) Favouring go

2) Other favouring No go

1st

Group listsallpros and 2nd

all cons

Both groupsmeet anddiscuss theirview points

Now groups switchsides and try to find

weaknesses in their originalview points

Discussion again andthen a final decisionby mutual agreement


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CREATIVITYIN

DECISION MAKING Essential for making effective and unique

decisions.

Creativity refers to the process by which novel

but situationally appropriate outcomes arebrought in picture.

Essence of creativity is the element

of freshness, originality, and novelty

that is appropriate to the context.


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THE CREATIVE PROCESSPREPARATION

INCUBATION

PERSISTENCE

INSIGHT

VERIFICATION


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CHARACTERISTICS OF

CREATIVE INDIVIDUALS A willingness to give up immediate gains to

reach long-range goals.

A great amount of energy. An irritation with the status-quo.

Perseverance

A belief that daydreaming is not

a waste of time Inventive thinking style.

Sound knowledge in their

respective fields.

Documents

Unit 2 - Decision Making