decision making jaya sgvu
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DECISION MAKING
Prof. Jayashree SadriManagement Consultant
AndVisiting Professor of HR
and Business Ethics
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UNDERSTANDING DECISION MAKING A decision is a choice from among
the available alternatives. Decision-making is the process of developing and analyzing alternatives and making a choice.
Most decisions are prompted by problems. A problem is a discrepancy between a desirable and an actual situation.
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DECISIONS AND THE MANAGEMENT FUNCTIONS. Planning What are the organization’s long-term
objectives? What strategies will best achieve these
objectives? What should the organization’s short
term objectives be? How difficult should individual goals be?
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Organizing How many subordinates should I have report
directly to me? How much centralization should there be in
the organization? How should jobs be designed? When should the organization implement a
different structure?.
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Leading How do I handle employees who appear to be
low in motivation? What is the most effective leadership style in
a given situation? How will a specific change affect worker
productivity? When is the right time to stimulate conflict?
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Controlling What activities in the organization need to be
controlled? How should these activities be controlled? When is a performance deviation significant? What type of management information system
should the organization have?
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SOME DECISIONS BUSINESS-TEAM MANAGERS MAKE Examples of decisions different managers
face Accounting manager what accounting firm should we use? Who should process our payroll? Should we give that customer credit?
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Finance manager what bank should we use? should we sell bonds or stocks? should we buy back some of our company’s stock?
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Human Resource Manager
From where should we recruit our employees? Should we set up a testing program? should I advice settling the
employment complaint?
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Production Manager
Which supplier should be use? Should we build the new plant? Should we buy the new machine?
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Sales Manager
Which sales representative should we use
in this district? Should we start this advertising
campaign? Should we lower prices in response to
our competitor’s doing so?
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PROGRAMMED/NON PROGRAMMED DECISIONS The two differ in the extent to which the
decision must be handled as a completely new situation.
Programmed decisions are decisions that are repetitive and routine and that can be solved through mechanical procedures such as by applying rules.
Up to 90 percent of management decisions are of the programmed variety.(Koonz)
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NON-PROGRAMMED DECISIONS
These are unique, and mechanical procedures are not available for making them.
Crisis decisions- like managing the rescue work of a plane crash- are one example.
Generally speaking , non-programmed decisions rely heavily on judgment and focus on the firm’s long-term strategic development and survival.
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THE RATIONAL DECISION MAKING PROCESS
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SIX STEPS OF RATIONAL DECISION MAKING PROCESS
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HOW MANAGERS MAKE DECISIONS: LIMITS TO RATIONALITY
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DECISION MAKING IN PRACTICE: BOUNDED RATIONALITY
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HOW TO MAKE BETTER DECISIONS Overcoming the many decision-making barriers
identified can lead to better decisions by almost anyone.
Increase your knowledge:
- Many bad decisions stem from the decision
maker’s lack of experience with the
problem at hand.
- Through a lack of experience you make a questionable
decision and through over confidence you blindly stick
to it.
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De-bias your judgment :
These biases include overconfidence, the tendency to seek confirmatory information, and escalation of commitment. At least four steps needed:
1. understand that the possibility of bias exists;
2. understand how the bias can affect your judgment;
3. analyze previous decisions made to get feedback on
whether and how bias has influenced your judgment;
4. accept the fact that such biases exist but can be
reduced/eliminated through your diligent efforts.
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Be creative :
Creativity is the process of developing original, new responses to a problem.
Creativity is essential for decision-making activities like developing new alternatives and correctly defining the problem.
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Use your intuition:
- Many behavioral scientists argue that overemphasizing rationality and
logical can actually backfire by blocking you from using your intuition.
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Don’t overstress the finality of your decision.
- Do not get frozen in the finality of
your decision.
Make sure the timing is right:
- Managers should not let their decisions be
swayed by passing moods.
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USING GROUPS TO MAKE BETTER DECISIONS Whether they are called work
groups, teams or committees, groups accomplish much of the work in organizations.
A group is defined as two or more persons who interact together for some purpose and in such a manner that each person influences and is influenced by each other person.
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Groups are important at work in part because of the effect they have on their members. For example, pressure by other group members can cause a member to raise or lower his or her output.
In turn, the extent to which a group can influence its members depends on several things, including
- the cohesiveness of the group- the
attraction of the group or its members – and
- on the group’s norms – the informal rules that groups adopt to regulate and regularize group members’ behavior.
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PROS AND CONS OF GROUP DECISION MAKING
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TOOLS FOR IMPROVING GROUP DECISION MAKING Brainstorming
- Brainstorming is a way to simplify the creative energies of a group.
- It is defined as a group problem-solving technique whereby group members introduce all possible solutions before evaluating any of them.
- The technique is aimed at encouraging everyone to introduce solutions without fear of criticism.
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TOOLS FOR IMPROVING GROUP DECISION MAKING
The Delphi Technique
a. A problem is identified.
b. Expert’s opinions are solicited anonymously and individually through questionnaires.
c. The expert’s opinions are then analyzed and resubmitted to other experts for a second round of options.
d. This process is continued for several more rounds until a consensus is reached.
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THE NOMINAL GROUP TECHNIQUE Another process for reducing group decision-
making barriers like group think.
It can be defined as a group decision-making process in which participants do not attempt to agree as a group on any solution, but rather meet face to face and vote on all the solutions proposed after privately ranking the proposals in order of their preference.
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STEPS IN THE NOMINAL GROUP TECHNIQUE
1. Each group member writes down ideas.
2. Each member presents ideas which are written on a board for the other participants to see.
3. After all ideas have been presented, the entire group discusses all ideas simultaneously.
4. Group members individually and secretly vote on each proposed solution; and
5. Participants do not try face-to-face consensus; solution with the most individual votes wins.
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HOW TO LEAD A GROUP DECISION-MAKING DISCUSSION
The person leading the group discussion can have a big effect on whether the group’s decision is useful or not.
An effective discussion leader therefore has a responsibility to do the following:
- see that all group members participate.
- distinguish between idea getting and idea evaluation.
- do not respond to each participant or dominate the
discussion.
- see that the effort is directed toward overcoming
surmountable obstacles.
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SUMMARY1. A decision is a choice from among available
alternatives. Decision making is the process of developing and analyzing alternatives and making a choice.
2. Decisions can be either programmed (repetitive and routine) or nonprogrammed (unique and new). Nonprogrammed decisions require more intuition and judgment of decision-making.
3. Rational decision-making assumes ideal conditions such as accurate definition of the problem and complete knowledge about all relevant alternatives and their values.
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4. Decision making in reality is bounded by differences in managers’ ability to process information.
5. Bounded rationality describes decision making in reality and often implies satisficing alternatives.
6. Guidelines for making better decisions include: increase your knowledge, de-bias your judgment, use creativity, use intuition, don’t overstress finality, and make sure the timing is right.
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7. Group decision-making can result in the pooling of resources and strengthened commitment to the decision, but it can also be flawed by group think, or an overwhelming desire for unanimity.
8. Tools for better group decisions include brainstorming, the Delphi and nominal group techniques.
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THANK YOU