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DECISION MAKINGDECISION MAKING A Presentation byA Presentation by

Deepti SharmaDeepti Sharma Parul Parul DahiyaDahiya

Prashant AroraPrashant Arora Ravish Ravish NagpalNagpal

Vishal ChawlaVishal Chawla

DECISION MAKINGDECISION MAKING• What is Decision Making?What is Decision Making?• The Phases in decision making process.The Phases in decision making process.

Our Route Map

• Decision making in organizations• Decision making techniques.• Factors Influencing decision making• Some Models of Decision making.• How do intuition, judgment, and creativity affect decision making?• Types of Decisions• Managing Decision Making Process-undestanding the reasons for failure

DECISION MAKINGDECISION MAKING

Define the Phases in decision making process.Define the Phases in decision making process.

Objectives of the session

• Discuss the Creative process.

• Understanding decision making techniques.

• Identify some Models of Decision making.

Defining Decision MakingDefining Decision Making

Chester Barnard gave a comprehensive analytical treatment of decision making.

A process of narrowing choice.

Decision making is universally defined as choosing between alternatives.

A Classical Thought :

Fayol & Urwick (Stressed Delegation)

Taylor alluded scientific methods only as ideal approach.


PhasesPhasesHerbert A. Simons Mintzberg

Intelligent Activity

Design Activity

Choice Activity Selection Phase

Development Phase

Identification Phase


ModelsModels Rational Model Rational Model Social Model Social Model Bounded Rationality ModelBounded Rationality Model Judgement Heuristics and Biases Judgement Heuristics and Biases

Model.Model.


Rational ModelRational Model

ABCABC EVAEVA MVAMVA CDCD


Assumptions of Complete Rationality

New Rational Techniques.

Social Social ModelModel

Opposite extreme of rational.

Model of psychology.

Human bundle of feeling, emotions, instincts


Reasons for escalation of commitment.

Project CharacteristicsPsychological Determinants.

Social Forces.Organizational Determinants.

Bounded Rationality Bounded Rationality ModelModel

Choosing between the alternatives.Choosing between the alternatives.


• More Realistic Model.Example: A Fair Price

Why Bounded ? Constraint Like Time & Cost

How do intuition, judgment, and How do intuition, judgment, and creativity affect decision creativity affect decision

making?making? Intuition.Intuition.

The ability to know or recognize quickly The ability to know or recognize quickly and readily the possibilities of a given and readily the possibilities of a given situation.situation.

A key element of decision making under A key element of decision making under risk and uncertainty.risk and uncertainty.


Intuitive Decision MakingIntuitive Decision Making An unconscious process of making An unconscious process of making

decisions on the basis of experience and decisions on the basis of experience and accumulated judgment.accumulated judgment. Making decisions on the basis of gut feeling Making decisions on the basis of gut feeling

doesn't happen independently of rational doesn't happen independently of rational analysis. The two complement each other. analysis. The two complement each other.

Although intuitive decision making will not Although intuitive decision making will not replace the rational decision-making replace the rational decision-making process, it does play an important role in process, it does play an important role in managerial decision making.managerial decision making.

Decision Making

How do judgment affect decision How do judgment affect decision making?making?

Judgmental heuristics.Judgmental heuristics. Simplifying strategies or “rules of Simplifying strategies or “rules of

thumb” used to make decisions.thumb” used to make decisions. Makes it easier to to deal with Makes it easier to to deal with

uncertainty and limited information.uncertainty and limited information. Can lead to systematic errors that Can lead to systematic errors that

affect the quality and/or ethics of affect the quality and/or ethics of decisions.decisions.

Decision Making

Creativity factors.Creativity factors. Creativity in decision making involves the Creativity in decision making involves the

development of unique and novel development of unique and novel responses to problems and opportunities.responses to problems and opportunities.

Creativity is especially important in a Creativity is especially important in a dynamic environment full of nonroutine dynamic environment full of nonroutine problems.problems.

Decision Making

CreativityCreativityPreparation

Concentration

Incubation

Illumination

verification

Decision Making

Decision environments include:

– Certain environments.

– Risk environments.

– Uncertain environments.

How are decisions madein organizations?

Decision Making

How are decisions madeHow are decisions madein organizations?in organizations?

Certain environments.Certain environments. Exist when information is sufficient to Exist when information is sufficient to

predict the results of each alternative predict the results of each alternative in advance of implementation.in advance of implementation.

Certainty is the ideal problem solving Certainty is the ideal problem solving and decision making environment.and decision making environment.

Decision Making


Risk environments.Risk environments. Exist when decision makers lack complete Exist when decision makers lack complete

certainty regarding the outcomes of certainty regarding the outcomes of various courses of action, but they can various courses of action, but they can assign probabilities of occurrence.assign probabilities of occurrence.

Probabilities can be assigned through Probabilities can be assigned through objective statistical procedures or objective statistical procedures or personal intuition.personal intuition.

Decision Making


Uncertain environments.Uncertain environments. Exist when managers have so little Exist when managers have so little

information that they cannot even information that they cannot even assign probabilities to various assign probabilities to various alternatives and possible outcomes.alternatives and possible outcomes.

Uncertainty forces decision makers to Uncertainty forces decision makers to rely on individual and group creativity rely on individual and group creativity to succeed in problem solving.to succeed in problem solving.

Decision Making

Factors Influencing Factors Influencing decision makingdecision making

TechnologyTechnology CultureCulture EthicsEthics

Decision Making

How do technology, culture, and How do technology, culture, and ethics influence decision making?ethics influence decision making?

Information technology and decision making.Information technology and decision making. Artificial intelligence.Artificial intelligence.

The study of how computers can be programmed to think The study of how computers can be programmed to think like human beings.like human beings.

Will allow computers to displace many decision makers.Will allow computers to displace many decision makers. Expert systems that support decision making by Expert systems that support decision making by

following “either-or” rules to make deductions.following “either-or” rules to make deductions.


Cultural factors and decision making.Cultural factors and decision making. Culture is “the way in which a group of people Culture is “the way in which a group of people

solves problems.”solves problems.” North American culture stresses decisiveness, North American culture stresses decisiveness,

speed, and the individual selection of alternatives.speed, and the individual selection of alternatives. Other cultures place less emphasis on individual Other cultures place less emphasis on individual

choice than on developing implementations that choice than on developing implementations that work.work.

The most important impact of culture on decision The most important impact of culture on decision making concerns which issues are elevated to the making concerns which issues are elevated to the status of problems solvable with the firm.status of problems solvable with the firm.


Ethical issues and decision making.Ethical issues and decision making. Ethical dilemma.Ethical dilemma.

A situation in which a person must decide A situation in which a person must decide whether or not to do something that, although whether or not to do something that, although personally or organizationally beneficial, may personally or organizationally beneficial, may be considered unethical and perhaps illegal.be considered unethical and perhaps illegal.

Ethical dilemmas are often associated with:Ethical dilemmas are often associated with:Risk and uncertainty.Risk and uncertainty.Nonroutine problem situations.Nonroutine problem situations.


Suggestions for integrating ethical Suggestions for integrating ethical decision making into the firm.decision making into the firm. Develop a code of ethics and follow it.Develop a code of ethics and follow it. Establish procedures for reporting violations.Establish procedures for reporting violations. Involve employees in identifying ethical issues.Involve employees in identifying ethical issues. Monitor ethical performance.Monitor ethical performance. Reward ethical behavior.Reward ethical behavior. Publicize ethical efforts.Publicize ethical efforts.

Types of DecisionsTypes of Decisions ProgrammedProgrammed Non - ProgrammedNon - Programmed

– Programmed decisions.• Involve routine problems that arise regularly and can be

addressed through standard responses.

– Non programmed decisions.• Involve nonroutine problems that require solutions

specifically tailored to the situation at hand

Decision Making

How can the decision-makingHow can the decision-makingprocess be managed?process be managed?

Reasons for decision making failure.Reasons for decision making failure. Managers too often copy others’ choices Managers too often copy others’ choices

and try to sell them to subordinates.and try to sell them to subordinates. Managers tend to emphasize problems and Managers tend to emphasize problems and

solutions rather than successful solutions rather than successful implementation.implementation.

Managers use participation too infrequently.Managers use participation too infrequently. Time ManagementTime Management

Decision Making

Thank youThank you We are open for Questions if We are open for Questions if

anyany