decision making - timothy mahea

8/8/2019 Decision Making - Timothy Mahea

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DECISION MAKING

It is the act of choosing one alternativefrom among a set of alternativesThe person making the decision mustrecognize that a decision is necessaryand identify a set of feasible alternativesbefore selecting oneEffective Decision Making requires thatthe decision maker understands the

situation driving the decision. Aneffective decision may be one thatminimizes loss, expenses, or employeeturnover


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TYPES OF DECISIONSP rogrammed Decisions :- They are fairlystructured or recur with some frequency or both.Many decisions regarding basic operating systemsand procedures and standard organizationaltransactions are of this varietyN on P rogrammed Decisions :- They are relativelyunstructured decisions and occur much less often(non- routine). Managers faced with such decisionsmust treat each as unique, investing enormousamounts of time, energy and resources exploringthe situation from all perspectives

Note: Most of the decisions made by top managersinvolving strategy and organization design are nonprogrammed


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DECISION MAKINGCONDITIONS

Decision Making under CertaintyIf the decision maker knows with reasonable certainty whatalternatives are and what conditions are associated with eachalternative, a state of certainty existsFew organizational decisions are made under these conditions. Thecomplexity and turbulence of the contemporary business world makesuch situations rareDecision Making Under RiskIts a more common decision making condition. Here, the availabilityof each alternative and its potential payoffs and costs are allassociated with probability estimates

Decision Making Under UncertaintyMost of the decision making in modern day organizations is doneunder a state of uncertainty. The decision maker does not know allthe alternatives, the risks associated with each. This uncertainty isdue to the complexity and dynamism of modern organizations andtheir environments


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DECISION MAKING MODELS

These models help reveal factors that managers and other decision makers must beware of in order to improve thequality of their decision makingThe Classical Model of Decision MakingThis is an approach that tells managers how they shouldmake decisions. It rests on the assumptions that managersare logical and rational and that they make decisions that arein the best interests of the organizationThe model assumes:-

Decision makers have complete information about the decisionsituation and possible alternativesThey can effectively eliminate to achieve a decision situation of certaintyThey evaluate all aspects of the decision situation logically andrationally

Note:- These conditions rarely, if ever exist


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Steps in Rational Decision MakingR ecognizing and Defining the Decision Situation i.e.recognizing that a decision is necessary (There must be somestimulus to initiate a process). The stimulus may either be positive or negative. A manager must develop a complete understanding of theproblem, its causes, and its relationship to other factorsIdentifying Alternatives :- A manager should then generate a set of

feasible alternative courses of action to take a response to theopportunity or threat. Generally, the more important the decision, themore attention is directed to develop alternatives. Though managersshould seek creative alternatives and solutions, they must recognizethe various constraints such as legal restrictions, moral and ethicalnorms, authority or constraints imposed by the power and authorityof the manager etc.

Evaluating Alternatives :- The first question to ask is whether analternative is feasible i.e. is it practical? If yes, it must be examinedto see how well it satisfies the conditions of the decision situation.Finally, when it has proven both feasible and satisfactory, itsprobable consequences must be assessed.


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Steps ContSelecting an Alternative :- After the alternativeshave passed the tests of feasibility,satisfactoriness and affordable consequences,one has to be chosen. Choosing the best is the

real crux of decision making.One approach is to choose the one with thehighest combined level of feasibility,satisfactoriness and affordable consequencesAlthough most situations do not lendthemselves to objective, mathematical analysis,the manager can often develop subjectiveestimates and weights for choosing thealternative.


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Steps Cont..Implementing the Chosen Alternative :- The manager needs toput into effect the alternative. In some situations, its fairly easy whilein others its more complexFor example, in the case of an acquisition, managers must decidehow to integrate all activities of the new business like purchasing,human resource practices into an ongoing organization framework

Managers must also consider peoples resistance to change whenimplementing decisionsFollowing up and Evaluating the R esults :- It requires managersto evaluate the effectiveness of their decisions i.e. the chosenalternative has served its original purposeIf an implemented alternative appears not to be working, a manager can adopt the second best alternative or recognize that the situationwas not correctly defined at the start and begin the decision makingprocess again


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DECISION MAKING MODELSCONT..

The Administrative Model :- R ather than prescribing howdecisions should be made, this model describes howdecisions are often made. It assumes managers:-

Have incomplete and imperfect information Are constrained by bounded rationality

Tend to satisfice when making decisionsBounded rationality suggests that decision makers

are limited by their values and unconscious reflexes,skills and habits. They are also limited by less thancomplete information and knowledgeSatisficing suggests that rather than conducting an

exhaustive search for the best possible alternative,decision makers tend to search only until they identifyan alternative that meets some minimum standard of sufficiency


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Cont..Because of the inherent imperfection of information, bounded rationality and satisficing, thedecisions made by a manager may or may notactually be in the best interests of the organizationTherefore, the Classical and Administrative modelspaint quite different pictures of decision making,however, each can be used to better understandhow managers make decisionsThe Classical model is prescriptive as it explainshow managers can attempt to be logical andrational in their approach to decisionsThe Administrative model can be used bymanagers to develop a better understanding of their inherent biases and limitations


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GROUP DECISION MAKINGIn todays organizations important decisions are made by groups rather thanindividualsThe most common methods include:-

Interacting Groups :- Its the most common and it involves an existing or a newly designated group being asked to make a decision. Existinggroups may be functional departments, regular groups or standingcommittees. Newly designated groups includes ad hoc committees, taskforces or work teams. The group members talk amongst themselves,argue, agree, argue some more, form internal coalitions e.t.c. Finallyafter some period of deliberation, the group makes a decision\Delphi Groups:- Its used for developing a consensus of expert opinion.This procedure solicits input from a panel of experts who contributeindividually. Their opinions are combined and averaged. The experts areasked to anonymously predict a time frame for the expected solution.The persons coordinating the Delphi group collects the responses,

averages them and as the experts. When the predictions stabilize, theaverage prediction is taken.

Nominal Groups:- Unlike the Delphi method where group members donot see one another, the nominal group members are brought together but do not talk freely to one another like members of interacting groups.They are used mostly to generate creative and innovative alternatives or ideas


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Nominal Groups Cont.A manager assembles a group of

knowledgeable people and outlines the problemto themThe group members are then asked individuallywrite down as many alternatives as they canthink of. The members then take turns statingtheir ideas which are recorded on a flipchart/blackboard at the front of the roomDiscussion is limited to simple clarification andafter all alternatives have been listed, morediscussions take place.Group members then vote by rank ordering thealternatives or ideas and the highest rankingalternative represents the decision of the group


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Advantages of Group DecisionMaking

More information and knowledgeMore alternatives generatedMore acceptance of the final decisionEnhanced communicationGenerally better decisions

DisadvantagesProcess takes longer thus costlyCompromise decisionsOne person may dominateGroup think may occur (The withholding by groupmembers of different views in order to appear to bein agreement)


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decision making - timothy mahea

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