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Decision Making

Types of decision

Steps in rational decision making

Planning

Definition and characteristics



Decision Making Defination:

Decision Making is the process of

choosing the best alternative for reaching

objectives

Managers make decisions affecting the

organization daily and communicate thosedecisions to other organizational members



!ffective decision making

" major activity of management is the making of decisions#

Decisions need to be timely# There are times $hen a decision has to be

made# !ven if it turns out not to be the best decision it can be better than

not making a decision at all#Decisions often have to be made $hen there is insufficient information#

Decisions involve taking risks# !ffective decision making involves

gathering $hat information is kno$n% identifying the options% assessing

the risks and making the best decision

$ith the information available in a timely manner#



&hen do decisions need to be made

• Determining the project strategy'approach

• (esolving project issues

• Developing estimates

• Making purchases

• )ntervie$ing and selecting project team members

• Selecting e*ternal suppliers

• +andling disagreements and conflict resolution

• Scheduling $ork and allocating resources to tasks

• Managing meetings

Situations include:



Types of decision Planned and unplanned Temporary and permanent



The decision making process

.# /ather the facts

2# )dentify a number of alternatives

# "ssess the alternatives

0# Decide

1our simple steps:

&here uick decisions need to be made% these steps can

be done mentally 3on the fly4 or by one person# &hentime allo$s and the decision is important% more people

can be involved and a more thorough decision making

process used#



(ational Decision Making

56step Process .# )dentification of problem 2# )dentification of Decision 7riteria # "llocation of $eights to criteria 0# Development of alternatives ,# "nalysis of alternatives

-# Decide on an alternative 8# )mplementation of decision 5# !valuation of decision



The Decision6Making ProcessProblem

Identification

“My salespeople

need new computers”

Identification of

Decision Criteria

Price

Weight

Warranty

Screen type

Reliability

Screen sie

!llocation of

Weights to

Criteria

Reliability "#

Screen sie $

Warranty %

Weight %

Price &

Screen type '

De(elopment of

!lternati(es

!cer

Compa)

*ateway

+P

Micromedia

,-C

Sony.oshiba

Implementation

of an !lternati(e

*ateway -(aluationof Decision

-ffecti(eness

!nalysis of

!lternati(es

R S W W P S

!cer & ' & ' / 0Compa) ' & % / 0 1

*ateway 2 0 1 1 $ /

+P ' % 0 1 0 %

Micromedia / / ' & % &

,-C ' & % 0 1 /

Sony 1 % 0 & / $

.oshiba ' & % 0 1 '

Selection of an

!lternati(e

!cer "/%Compa) "&/

*ateway /&0

+P "1&

Micromedia "#'

,-C "%"

Sony "2/

.oshiba "%&



Decisions in the Management 1unctions



"bout (ational Decision

Making )s it al$ays possible to

make rational decisions

.;



RationalDecision

Making

Problem is

clear and

unambiguous

Single, well-

defined goalis to be achieved

All alternatives

and

consequences

are known

Preferences

are clear

Preferences

are constant

and stable

No time or cost

constraints eist

!inal choice

will maimi"e

#a$off



<ounded (ationality

behave rationally $ithin the parameters

of a simplified decision6making process

that is limited by an individual=s ability toprocess information

satisfice 6 accept solutions that are 3good

enough4



Intuitive decision making <ased on 3gut feeling4

subconscious process of making

decisions on the basis of e*perience%

values% and emotions does not rely on a systematic or thorough

analysis of the problem generally complements a rational analysis



Types of Problems >

Decisions

Well-Structured Problems 6 straightfor$ard%

familiar% and easily defined

Programmed Decisions 6 used to address

structured problems● minimize the need for managers to use discretion● facilitate organizational efficiency



Types of Problems and

Decisions

Poorly-Structured Problems 6 ne$% unusual

problems for $hich information is ambiguousor incomplete Nonprogrammed Decisions 6 used to

address poorly6 structured problems produce a custom6made response more freuent among higher6level managers

Procedure% (ule% > Policy



Types of Problems > ?evel )n

the @rganization

Programmed

Decisions

,onprogrammedDecisions ?evel in

@rganization

Top

?o$er &ell6structured

)ll6structured

Type of

Problem



Things to consider # # #

Certainty A ho$ certain is a particular

outcome Risk A ho$ much risk can you take expected value 6 the conditional return from each

possible outcome

ncertainty A ?imited information preventsestimation of outcome probabilities foralternatives#



&hat to do

maximax choice A optimistic

ma*imizing the ma*imum possible payoff

taking the best of all possible cases

maximin choice A pessimistic

ma*imizing the minimum possible payoff

taking the best of the $orst cases

minimax 6 minimize the ma*imum 3regret4

Bdifference bet$een $hat you get and the best

caseC



Decision6Making Styles

Dimensions of Decision6Making Styles

alue orientations Task and technical concerns

People and social concerns

Tolerance for ambiguity ?o$ tolerance: reuire consistency and order +igh tolerance: multiple thoughts simultaneously



Decision6Making Styles

Directive• Prefer sim#le,

clear solutions• Make decisions

ra#idl$• Do not consider

man$ alternatives• Rel$ on eisting

rules

%once#tual•

Sociall$ oriented• &umanistic and

artistic a##roach• Solve #roblems

creativel$• 'n(o$ new ideas

)ehavioral• %oncern for their

organi"ation• *nterest in hel#ing

others• +#en to

suggestions• Rel$ on meetings

• Prefer complex

problems• Carefully analyze

alternatives• Enjoy solving

problems• Willing to use

innovative

methods

Analytic

al



Decision Making Styles

"nalytical 7onceptual

Directive <ehavioral

Tasks and Technical

7oncernsPeople and Social

7oncerns

!alue "rientation

?o$

+igh

# o l

e r a n

c e

f o r $

m b

i g u

i t y



/ather the facts

• &rite do$n a statement of $hat needs to be decided#

• )s the decision statement clear and precise )f not refine

the statement#

•

)s the need for the decision a result of an underlyingproblem% $hich also needs to be addressed

• "re there assumptions underlying the decision that need

to be clarified and possibly challenged

• )s the decision part of a bigger decision that needs to be

made% or can this decision be decomposed into smallerdecisions

/uidelines



)dentify alternatives

• )dentify as many alternatives as possible#

• Ese brainstorming if appropriate#

• Do not filter out alternative options at this stage

6 assume they can all be made to $ork#• &hen you have generated lots of ideas% consider each one to

see if it is a viable alternative#

• Shortlist the viable alternatives#

/uidelines



Decision making behaviour People tend to adopt a particular decision making approach as a result

of factors such as:

• their o$n personality

• their current mood

• the organisational culture• the personality of the person'people they are dealing

$ith

• the nature of the relationship they have $ith the

people they are dealing $ith

• time pressure and perceived level of stress

<eing a$are of these influences can result in better decision

making% by adopting the best decision making approach for

each situation#



7ommon !rrors in Decision Making

@ver6confidence +indsight Self6serving Sunk costs (andomness (epresentation "vailability

1raming 7onfirmation Selective

perception "nchoring )mmediate

gratification



+elpful hints Do:

7learly identify the decision to

be made

)nvolve people ualified to help

in the decision making

)dentify the conte*t of thedecision Bthe bigger pictureC

)dentify all alternatives

"ssess each alternative

"ssess the risks

7onsider your 3gut feel4

Make the decision

and stick to it

Don=t:

– Make assumptions

– Procrastinate

– Fump to conclusions

– Make uninformed decisions

– 1avour one decision prior togathering the facts and

evaluating the alternatives

– "llo$ only technical people to

make the decisions

– "ttempt to make a decision inisolation of the conte*t

– ?et emotion override

objectivity



)dentify alternatives

• )dentify as many alternatives as possible#

• Ese brainstorming if appropriate#

• Do not filter out alternative options at this stage

6 assume they can all be made to $ork#• &hen you have generated lots of ideas% consider each one to

see if it is a viable alternative#

• Shortlist the viable alternatives#

/uidelines



"dvantages and Disadvantages of

/roup6"ided Decision Making

1. reater pool of !no"ledge 1. #ocial pressure

$. %ifferent perspectives $. &inority domination

'. reater comprehension '. (ogrolling

). *ncreased acceptance ). oal displacement

+. ,raining ground +. -roupthin!

Advantages %isadvantages



Decision-Making

Process

,ypes of Problems and %ecisions• Well/structured

/ programmed

• Poorly structured/ nonprogrammed

%ecision/&a!ing Conditions

• Certainty• 0is!

• ncertainty

%ecision &a!er #tyle• %irective• Analytic

• Conceptual• 2ehavioral

%ecision/&a!ing Approach• 0ationality

• 2ounded 0ationality• *ntuition

%ecision• Choose best

alternative

/ maximizing

/ satisficing• *mplementing• Evaluating



Decision making behaviour

People tend to adopt a particular decision making approach as a result

of factors such as:

• their o$n personality

• their current mood

• the organisational culture• the personality of the person'people they are dealing

$ith

• the nature of the relationship they have $ith the

people they are dealing $ith

• time pressure and perceived level of stress

<eing a$are of these influences can result in better decision

making% by adopting the best decision making approach for

each situation#



Decision making approaches

"pproachesG to decision making situations:

G"dapted from D <illo$s% Project Manager=s Hno$ledge<ase%

2nd edition% 2;;0% The +ampton /roup#

• &ithdra$ing: holding off making the decision#

• Smoothing: focusing on areas of agreement and

ignoring areas of difference#

• 7ompromising: trying to come up $ith a decision that

provides some degree of satisfaction for all parties#

• 7onfronting'problem solving: $orking through the

issues#

• 1orcing: e*ecuting a particular decision kno$ingagreement has not been reached#




&ithdra$ing:

• &ithdra$ to gather more information and perspective

• @nly a stop gap measure

• Eseful in 3cooling do$n4 an overheated situation

• Taking time out B3sleep on it4C before final decision

Smoothing:

• (elationship focused rather than solution focused

• "voids dealing $ith the issues

• 7an be useful in reducing the emotional tension $here the

decision is of lo$ importance#

• Does not provide a long6term solution

Skilled project managers and business analysts

select the best approach appropriate to the situation#




7onfronting'problem solving:

• Direct approach

• )dentifies alternatives and $orks through the issues

• Time6consuming

• Most likely method to develop the best solution

1orcing:• Esed $hen an urgent decision is reuired or as a last resort

• Iecessary for situations $hen decision making is blocked

• May result in reluctance in e*ecution of decision if not

handled $ell#

7ompromising:

• <argaining to get an acceptable agreement

• 1alls short of the best decision

• 7an be useful in resolving negotiation deadlocks



• !ID

5 decisionmaking 130217002458 phpapp02

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