DECISION MAKING
What would we learn
What are the basic characteristics of managerial decision-
making?
What are the two systems of decision-making in the brain?
What is the difference between programmed and
nonprogrammed decisions?
What barriers exist that make effective decision-making
difficult?
How can a manager improve the quality of her individual
decision-making?
What are the advantages and disadvantages of group
decision-making, and how can a manager improve
the quality of group decision-making?
DECISION MAKING
➢ Decision-making is a conscious and human
process, involving both individual and social
phenomenon based upon factual and value
premises which concludes with the choice of
one behavioral activity among one or more
alternatives with intention of moving toward
some desired state of affairs.”
Fremont A. Shell
DECISION MAKING OBJECTIVES
What are we trying to achieve?
What are we trying to preserve?
What are we trying to avoid?
What are we trying to eliminate?
What would things look like if they were going
right?
What will serve as evidence of success? Failure?
IMPORTANCE OF DECISION MAKING
Better Utilization of Resources
Facing Problems and Challenges
Business Growth
Achieving Objective
Increases Efficiency
Facilitates Innovation
Motivates Employees
CHARACTERISTICS
Various alternatives and most desirable
alternative is to be chosen
Freedom to choose an alternative.
It is goal-oriented.
It is mental or intellectual process
It can be expressed in words / Behaviour.
Decision making is rational.
Weighing the consequences of the various
alternatives.
PROBLEM
It is a situation that occurs when
an actual state of affairs differs
from a desired state of affairs.
OPPORTUNITY
It is a situation that occurs when
circumstances offer an organization
the chance to exceed stated goals and
objectives
PROBLEM FINDING
PROCESS
According to William Pounds problem solving process
is informal and intuitive. Four situations alert
managers to possible problems.
Deviation from past experience.
For e.g. fall in sales as compared to last year.
Deviation from set plan
For e.g. marketing department exceeding its budget.
People bringing problems to the manager.
For e.g. Employee resignation.
Performance of competitors.
For e.g. increase in sales of a new product launch by
competitors.
TYPES OF DECISIONS
Programmed Decisions
These are solutions to routine problems determined
by rule , procedure or habit. These decisions are used for
dealing with recurring situations by limiting or excluding
alternatives.
Non programmed decisions
These are specific solutions created through an
unstructured process to deal with non routine problems.
These deal with unusual and exceptional problems.
Ideally in this kind of decision making the problem has not
come often enough to be covered by a policy.
Characteristics of Effective Decision
Action- Orientation
Goal-Direction
Effective in Implementation
Barriers to Effective Decision
Making
Bounded Rationality: one can not be completely
rational especially in complex issues.
Escalation of commitment: Tendency to remain
committed to poor decisions.
Time Constraints: Time constraints cause panic and
could lead to not a good decision
Uncertainty: uncertainty make it difficult for
managers to make good decisions.
Barriers to Effective Decision
Making cont..
Personal Biases: “similar to me” bias and
preference for the familiar can lead to a variety of
problems for managers
Conflict: Effective decision making can be difficult
because of the conflict.
DECISION MAKING PROCESS
Be Critical while evaluating the options
Are you thinking critically about the options?
Have you considered the long-term implications?
Are there ethical implications?
Ethical Decision Tree
(Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)
Components to ethical Decision
Making
Moral sensitivity—recognizing that the issue has a
moral component;
Moral judgment—determining which actions are
right vs. wrong;
Moral motivation/intention—deciding to do the
right thing; and
Moral character/action—actually doing what is
right.
Decision Making Conditions
Certainty: Reasonable surety about what will happen.
Cause and effect relationships are known.
Risk: Factual information may exist but it may be
incomplete.
Decision has clear-cut goal
Future outcomes associated with each alternative are
subject to chance.
Decision Making Conditions cont..
Uncertainty: a meagre data base and not known
whether reliable or not, even unpredictable
situation about the change.
Managers know which goal they wish to achieve.
Information about alternatives and future events is
in complete
Managers may have to come up with creative
approaches to alternatives
Decision Making Conditions cont..
Ambiguity:
The most difficult decision situation
Goals to be achieved or the problem to be solved
is unclear
Alternatives are difficult to define
Information about outcomes is unavailable
Personal Decision-Making Styles
Directive
Analytical
Conceptual
behavioral
Personal Decision-Making Styles
Directive:
1. used for quick decisions
2. May only consider few alternatives
only
3. Generally efficiency based managers
Personal Decision-Making Styles
Analytical:
1. acquires as much data as possible
2. carefully considers all alternatives
3. rational, objective decisions
Personal Decision-Making Styles
Conceptual:
1. more socially oriented
2. seeks group consensus
3. rely on information from people and
system
Personal Decision-Making Styles
Behavioral:
1. deep concern for others
2. understand feeling of those involved
3. concerned with personal development
affected by decisions
Group Decision Making
Involving more people in the decision-
making process can greatly improve the
quality of a manager’s decisions and
outcomes. However, involving more
people can also increase conflict and
generate other challenges.
Advantages and Disadvantages of
Group Decision Making
Advantages:
It incorporates different perspectives and Ideas.
Reduces the effect of bias on outcomes.
Unique information and knowledge
More options and greater intellectual simulation
Brainstorming
Greater understanding of the issues or problems
and greater commitment to solutions
Advantages and Disadvantages of
Group Decision Making
Disadvantages:
Conflict
Some dominate in the group
Group think
Satisficing
Goal displacement