20MBA101
INTRODUCTION TO BUSINESS
Module 4 – Basics of Decision Making
Dr. Jayasree K
Basics of Decision Making:
• Critical thinking and Creativity,
• Managerial Creativity,
• Techniques to enhance Creativity,
• Barriers to creativity,
• Decision making process,
• Types of decision making,
• Decision making tools and techniques,
• Individual and Group decision making and Conflict and
Negotiation
Dr. Jayasree K
Critical decision making is a process that involves purposely analyzing information to make better judgments
and decisions. It uses logic, reasoning, and creativity to draw conclusions and generally understand things
better. This process is planned and is knowingly used when we’re presented with difficult problems or
important decisions..
Basic steps involved in critical decision making:
• Identify the Problem: Clearly define the problem that needs to be solved.
• Gather Information: Collect all necessary information related to the problem.
• Generate Alternatives: Come up with a list of all possible solutions.
• Evaluate Alternatives: Analyze each solution to determine its pros and cons.
• Make the Decision: Choose the best solution based on your evaluation.
• Implement the Decision: Put the chosen solution into action.
• Review the Decision: Assess the outcome of the decision to see if it solved the problem.
For example, if a business is deciding whether to launch a new product, they would first identify the problem
Dr. Jayasree K
(need for a new product), gather information (market research), generate alternatives (different product
Critical Thinking: is the ability to effectively analyze information and form a judgment. It
involves being aware of your own biases and assumptions when meeting information, and applying
consistent standards when evaluating sources. Critical thinking skills help to identify
credible sources, evaluate and respond to arguments, assess alternative viewpoints,
and test hypotheses against relevant criteria.
Dr. Jayasree K
E.g. Imagine that you are a manager at a retail company that has been experiencing a decline in sales
over the past few months. People need to figure out why this is happening and how to turn it around.
Here’s how person might use critical thinking:
1. Identify the Problem
2. Gather Information
3. Analyze the Information
4. Develop Solutions
5. Evaluate Solutions
6. Implement and Monitor Solution
Dr. Jayasree K
Critical Thinking in Business:
Critical thinking is an essential skill in the business world.
• It empowers us to make better decisions,
• Challenge and validate our beliefs and assumptions,
• Understand and interact with the world in a more effective and meaningful way.
• Self-Evaluation
• Problem-Solving
Dr. Jayasree K
• Creativity: Creativity is the ability to think
about a task or a problem in a new or
different way, or the ability to use the
imagination to generate new ideas.
• Creativity enables to solve complex problems or find
interesting ways to approach tasks.
• If you are creative, you look at things from a
unique perspective. You can find patterns and
make connections to find opportunities.
Dr. Jayasree K
Example of Apple Inc.
• Apple is renowned for its creativity in business. The company didn’t just
improve on existing technology – it used creative thinking to transform
the tech industry entirely.
• Before the introduction of the iPhone in 2007, mobile phones were
primarily for making calls and sending text messages. Apple, however,
envisioned a device that could do much more. They created a product
that combined a phone, an iPod, and an Internet communication device
into one single handheld device. This was a game-changer and
redefined what consumers expected from their phones.
• Apple used creativity to see beyond the existing market trends and
customer expectations, leading to groundbreaking products and
services that reshaped the industry.
Dr. Jayasree K
E.g. You’re the owner of a small coffee shop.
Business has been steady, but you’re looking for
ways to attract more customers and stand out from
the competition. Here’s how you might use
creativity:
1. Brainstorming
2. Innovative Products
3. Unique Marketing Strategies
4. Improving Customer Experience
5. Implement and Evaluate
Dr. Jayasree K
Creativity in Business: Creativity is equally important in business as it allows for
greater interpersonal connection and tends to lead to higher loyalty, productivity,
and even innovation.
1. Innovation
2. Productivity
3. Adaptability
4. Growth.
Dr. Jayasree K
• Managerial creativity refers to the ability of
managers or leaders in an organization to come
up with innovative solutions to problems,
manage resources in novel ways, and find unique
approaches to improve the organization’s performance.
• It involves both a process and an outcome.
• The process includes engaging in certain cognitive
and behavioral processes, such as linking ideas
from multiple sources.
• The outcome is the generation of ideas, solutions,
or processes that are novel and useful.
Dr. Jayasree K
E.g. Southwest Airlines, a major U.S. airline, is well-known for its creative management strategies.
The airline’s business model is based on providing low-cost, no-frills air travel to its customers.
• Employee Empowerment: Southwest Airlines places a strong emphasis on employee
satisfaction. The company believes that happy employees lead to happy customers. Managers
are encouraged to think creatively about ways to boost morale and maintain a positive work
environment.
• Operational Efficiency: Southwest’s managers came up with the innovative idea of using
a single type of aircraft (Boeing 737) across their entire fleet. This decision has led to lower
training and maintenance costs, quicker turnaround times at airports, and ultimately, lower
ticket prices for customers.
• Customer Service: Managers at Southwest are known for going above and beyond to
ensure customer satisfaction. They are given the freedom to come up with creative solutions
to problems. For instance, in case of flight delays or cancellations, managers have been
known to personally apologize to customers and offer perks like free drinks or flight Dr. Jayasree K
TECHNIQUES THAT CAN ENHANCE CREATIVITY
1. Brainstorming: diversity of ideas, freedom of expression,
building up on ideas, problem solving and encouraging risk
taking.
2. Negative brainstorming: identify obstacles, encouraging
innovative solutions, promoting critical thinking, preventing
complacency, enhance preparedness.
3. Reading: Expand knowledge, improve imagination, introduce
new perspectives, enhance problem solving skills, inspire and
motivates.
4. Journaling: Make a room for new ideas, build a confidence in
your own ability, promotes clear thinking, Realize you can
create whenever you want to
5. Listening to Music: Promotes Different Thinking, Stimulates
the Brain, Improves Mood and Lowers Anxiety
6. Taking a Break: Scheduled Breaks Encourage Creativity,
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Refresh Your Thinking, Improves Focus, Improves
Barriers to creativity:
1. Fear of Failure - Fear of Being Wrong, Anticipation of Failure, Fear of Criticism or Rejection,
Creates Mental Blocks etc.
2. Conformity and Groupthink - Hesitation to Voice Unconventional Ideas, Suppresses
Exploration of Alternative Perspectives, Lack of Ideas or Feedback, Reduces Team Harmony
3. Lack of Commitment – Depends on leadership, No Encouragement, Lack of Follow-through
4. Lack of Time and Resources – prioritizing immediate tasks, time pressure,
5. Distraction : Distractions can be both beneficial and detrimental to creativity
6. Lack of Knowledge.
7. Rigid Thinking
8. Poor Leadership and Commitment to Innovation
9. Bureaucratic Policies and Red Tape
[Link] to Produce Immediate Results
Dr. Jayasree K
DECISION-MAKING PROCESS
• Describe the problem: Clearly define the problem you need to
solve or the opportunity you want to take advantage of. This step is
crucial because it helps you focus on the right issue.
• Create potential solutions: Brainstorm a list of possible
solutions to the problem. This step encourages creativity and helps
you generate a range of options.
• Collect data: Gather information about each potential solution.
This step helps you evaluate each option objectively.
• Evaluate the options: Analyze the pros and cons of each potential
solution. This step helps you identify the best option.
• Choose an option: Select the best solution based on your analysis
in step 4.
• Take action: Implement your chosen solution.
• Evaluate the impact: Assess the effectiveness of your chosen
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solution and make any necessary adjustments.
Problem: You’re considering buying a new car, but you’re not sure
which one to choose.
• Describe the problem: You need to decide which car to buy.
• Create potential solutions: Research different car models, ask friends for
recommendations, test drive cars at dealerships, etc.
• Collect data: Look up reviews and ratings for each car model, compare
prices, consider fuel efficiency, etc.
• Evaluate the options: Weigh the pros and cons of each car model based
on your research and data collection.
• Choose an option: Select the car model that best meets your needs and
budget.
• Take action: Purchase your chosen car model.
• Evaluate the impact: Assess how well your new car meets your needs and
make any necessary adjustments (e.g., sell it and buy a different model if it
doesn’t meet your expectations). Dr. Jayasree K
Problem: If you’re considering
modernizing your business, but you’re
not sure which way you should
modernize your business.
• Describe the problem:
• Create potential solutions
• Collect data
• Evaluate the options
• Choose an option
• Evaluate the impact
Dr. Jayasree K
THERE ARE SEVERAL TYPES OF DECISION-MAKING
• Programmed Decisions: According to Herbert Simon, programmed decisions are related to
routine and repetitive problems. Information about these problems is readily available
and can be processed using pre-established methods. These decisions have a short-term
impact and are relatively simple, typically made at lower management levels. Decision
rules and procedures are in place to streamline the decision-making process and save time.
Little thought and judgment are required, as the decision-maker follows
predetermined solutions.
E.g. For instance, dealing with a consistently late employee can be addressed through
established procedures.
• Non-programmed Decisions : On the other hand, non-programmed decisions tackle unique
or unusual problems that demand a high level of executive judgment and
consideration. There are no ready-made solutions for such problems, as they require
creative and thoughtful approaches. Dr. Jayasree K
There are two types of decisions in an organization: routine (or operating) decisions and
strategic (or policy) decisions.
• Routine decisions are repetitive in nature and have a short-term impact, mainly concerning
day-to-day operations. They are typically made at lower levels of management, using established
procedures to ensure quick and efficient handling.
• For example, a supervisor may make routine decisions regarding employee overtime pay.
Other examples of routine decisions include deciding to send samples to government test
house, deciding to place an order with the supplier who has given a favorable quotation,
deputing an employee to annual conferences
• Strategic Decisions on the other hand, involve long-term commitments and significant
investments, influencing the entire organisation’s future. These decisions require careful
deliberation and judgment and are usually made at higher levels of management.
• Examples of strategic decisions include launching a new product, selecting the location for a
new plant, or implementing major organisational changes. Other examples strategic
decisions include capital expenditure decisions, decisions related to pricing, expansion
Dr. and
Jayasree K
Organizational decisions are made by managers in their official capacity to further the
interests of the organization. These decisions are based on rationality, judgement, and
experience and have the capacity to be delegated to lower levels of managers or
subordinates. They affect the functioning of the organization as a whole.
E.g. any business-oriented decision is an organizational decision, such as changing labor
structure, introducing new technology, and altering dividend policy.
On the other hand, personal decisions are made by managers on their own behalf and are
not delegated. While making personal decisions, personal interests are kept in mind. These
decisions are personal in nature and hence, may not always be rational. They may affect the
organization directly or indirectly. These include any decision of a personal nature such as
presenting an application for resignation or furthering dissent in the form of grievances.
E.g. A manager who decides to resign from their job and leaves the organization is making a
personal decision.
Dr. Jayasree K
There are several decision-making tools and techniques that can
help individuals and organizations make informed decisions.
Here are some of the most popular ones:
• SWOT Analysis: SWOT stands for Strengths, Weaknesses,
Opportunities, and Threats. This technique helps identify the
internal and external factors that affect a decision .
• Decision Matrix: A decision matrix is a tool that helps
evaluate and prioritize different options based on a set of
criteria.
Dr. Jayasree K
• Pareto Analysis: Pareto analysis is a technique
used to identify the most important problems or
issues that need to be addressed. It is based on
the Pareto principle, which states that 80% of the
effects come from 20% of the causes.
• Cost-Benefit Analysis: Cost-benefit analysis is
a technique used to evaluate the costs and
benefits of different options. It helps determine
whether the benefits of a decision outweigh its
costs.
Dr. Jayasree K
• Fishbone Diagram: A fishbone diagram, also known
as an Ishikawa diagram, is a tool used to identify the
root cause of a problem. It is called a fishbone diagram
because it looks like a fish skeleton.
• Brainstorming: Brainstorming is a technique used
to generate ideas and solutions to a problem. It
involves a group of people coming together to share
their ideas and thoughts.
• Decision Trees: A decision tree is a tool used to
visualize the different options and outcomes of a
decision. It helps identify the best course of action
based on the available information.
Dr. Jayasree K
• Stakeholder Analysis: Stakeholder analysis is a
technique that helps you identify the people or groups
that are affected by your decision. It is useful when you
need to consider the impact of your decision on
different stakeholders.
• Root Cause Analysis: Root cause analysis is a
technique that helps you identify the underlying causes
of a problem. It is useful when you need to investigate
the root cause of an issue and find a solution.
Dr. Jayasree K
• Vro o m - Y e tto n -
Jago Decision
Model: The
Vroom-Yetton-Jago
decision model is a
tool that helps you
determine the best
decision-making
style to use in
different
situations. It is
useful when you
need to decide
whether to involve
others in the
decision-making
process.
Dr. Jayasree K
Individual and group decision-making are two different approaches to making decisions. Individual
decision-making is when a single person makes a decision, while group decision-making involves a group
of people making a decision together.
1. Individual decision-making is less costly and can be made quickly. It is useful in situations
where there is a crisis or emergency. However, it is based on limited information gathered
by managers and does not involve moral commitment on the part of members to accept
and implement them. Individual decisions do not affect morale or job satisfaction of employees and
introduce one-man control.
1. Group decision-making is more costly in terms of time and money, but it is based on
extensive information collected by members of the group. Group decisions are easier to
implement as group members feel committed to them. Group decisions positively affect
morale and job satisfaction of employees and promote superior-subordinate
interaction and healthy relationships amongst them. Group decisions are taken when the
problem requires creativity and expert knowledge of a group. It usually results inDr. Jayasree K
high-
An example of how individual and group decision-making can be used:
Problem Statement: A company wants to determine whether to launch a new product.
Data: The company has collected data on the following attributes for similar products:
1. Price
2. Quality
3. Brand
4. Customer Reviews
Individual Decision-Making: An individual decision-maker can use the data to make a decision on
whether to launch the new product. The decision will be based on the individual’s expertise and
experience in making such decisions.
Group Decision-Making: A group of decision-makers can use the data to make a decision on
whether to launch the new product. The group can brainstorm ideas and evaluate the data together to
make a decision that is based on the collective expertise and experience of the group.
Dr. Jayasree K
Conflict and negotiation are two important concepts in organizational behavior.
Conflict refers to a situation where two or more parties have incompatible goals, interests, or opinions, and
they perceive a threat to their interests.
Negotiation, on the other hand, is a process where two or more parties come together to reach an agreement
or resolve a conflict. Negotiation can be used to resolve conflicts in a peaceful and constructive manner.
• There are different types of conflict, such as interpersonal conflict, intergroup conflict, and intragroup
conflict. The causes of conflict can be attributed to differences in goals, values, and
perceptions. Conflict can have both positive and negative consequences, depending on how it is
managed.. Effective conflict management can lead to better decision-making, improved
relationships, and increased creativity and innovation
• Negotiation is a process that involves five stages: preparation, opening, bargaining,
closing, and implementation . A successful negotiation requires good communication
skills, the ability to understand the other party’s perspective, and the willingness to
compromise. Negotiation can be used to resolve conflicts in a variety of settings, such as business,
politics, and personal relationships. Dr. Jayasree K