Download - Organizational Decision Making
Organizational Decision Making
Module 4
Sreenath B.Roll No.45
Organizational decision making
• “The process of responding to a problem by searching for and selecting a solution or course of action that will create value for organizational stakeholders.”
• Organizational decision-making occurs when problem solving includes seeking & selecting a solution to create value for stakeholders.
• Managers make programmed & non programmed decisions.
Organizational decision making: Types
• Programmed decisions are routine decisions, developed in advance through rules, standard operating procedures (SOPs), and norms. – Programmed decisions increase efficiency and
reduce costs.
• Non programmed decisions are new and unstructured decisions, without programmed rules to manage them. – Managers rely on intuition and judgment, and
solutions are found as problems occur. – It require more search activity.– It assist in adapting and managing a changing
environment.
Organizational decision making: MODELS
1. RATIONAL MODEL• Traditional models depict decision-making as
a rational process.• The rational model proposes that decision-
making is a three-staged process. 1. Identify the problem: Managers analyze the
environment and recognize opportunities & threats.
2. Generate alternatives: Managers analyze skills and resources to respond to opportunities and threats.
3. Select the best solution.
The Rational Model of Decision Making
Stage 1:
Identify & definethe problem
Stage 2:Generate alternative
solutions to the problem
Stage 3:Select solution
& implement it
Rational model
• Under ideal conditions, managers know a decision is right because no uncertainty exists.
• All alternatives and their effects are known, and the same objective criteria are used to evaluate each alternative.
• Managers have the ability to make the right decision to maximize stakeholder value.
• The rational model assumes this ideal state. • Yet, these conditions do not exist, so the
assumptions of the rational model seem unrealistic:
Assumptions of the Rational Model
• Information and uncertainty: – The model assumes that managers know all
alternative courses of action. – It is not feasible to know every alternative in an
uncertain environment, and the cost of collecting information would far outweigh the benefits.
• Managerial abilities: – The rational model assumes the ability to evaluate
all alternatives and select the best solution. – Managers cannot process all the information to
make perfect decisions and lack the time to follow the rational model.
– Many managers would be needed, and managers are costly.
Assumptions of the Rational Model
• Preferences and values: – The model assumes that managers agree about
preferences, values, and goals. – This assumption is false due to subunit
orientations. – A production manager is concerned about costs
whereas an engineering manager is concerned about design.
Carnegie Model: a model that addresses the realities of decision making:
Satisficing
Bounded rationality
Organizational coalitions
The Carnegie Model of Decision Making
Carnegie Model
• Satisficing: – Managers satisfice or determine the criteria to evaluate
solutions, limiting the range of alternatives. – Satisficing is less costly & less work than searching for
every alternative.
• Bounded rationality: – Managers are restricted by bounded rationality, a limited
ability to process information. – Managers improve decision-making by strengthening
analytical skills and using computers. However, they don’t know all possible alternatives.
Carnegie Model
• Organizational coalitions: – The organization is a coalition of different interests
with decisions made by compromise, bargaining, and negotiation. Selected solutions are approved by the dominant coalition, those with the power to implement the chosen alternative.
– Over time, interests change and the dominant coalition changes. Thus decision-making changes.
Differences:
Rational Model
• Information is available.• Decision making is
costless• Decision making is “value
free.”
• All possible alternatives are generated.
• Solution is chosen by unanimous agreement.
• Solution chosen is best for the organization.
Carnegie Model
• Limited information is available.
• Decision making is costly.• Decision making is affected by
the preferences and values of decision makers
• A limited range of alternatives is generated.
• Solutions are chosen by compromise, bargaining, and accommodation between organizational coalitions.
• Solution chosen is satisfactory for the organization.
The Unstructured Model of Decision Making
• It describes how decision making takes place in environments of high uncertainty.
• This model was developed by Henry Mintzberg.• Decisions are made in a series of little steps that
result in a major decision over time.• Consists of 3 stages similar to the but understands
that problems may require rethinking alternatives & going back to the drawing board.
1. Identification stage: Managers develop routines to recognize problems.
2. Development stage: Managers generate problem-solving alternatives.
3. Selection stage: Managers make decisions using judgment, intuition, and formal analysis.
Unstructured Model
• The unstructured model requires rethinking alternatives when facing obstacles and even starting from scratch.
• Decision-making evolves in an unpredictable manner.
• Managers use intuition that requires continuous adaptation to respond to changing situations.
• The unstructured model concentrates on making non programmed decisions.
The Garbage Can Model of Decision Making
• Views decision-making as a highly unstructured process.
• Instead of identifying a problem, the model proposes that decisions begin with the solution. When solutions emerge, problems arise.
• An organization that makes a high quality product may expand globally. The solution is the quality competence; the problem is transferring it globally.
• The organization seeks solutions to identify problems whereas coalitions promote their own alternatives.
• The organization faces anarchy as problems, answers, and coalitions blend in a “garbage can” and compete.
• The selection of an alternative depends on the dominant coalition.
• Chance and timing play a role in decision-making.
VARIOUS TECHNIQUES OF DECISION-MAKING
QUALITATIVE TECHNIQUE
»DELPHI TECHNIQUE»BRAINSTORMING TECHNIQUE»SWOT ANALYSIS»CONSENSUS DECISION-MAKING»NOMINAL GROUP TECHNIQUE
QUANTITATIVE TECHNIQUE
PROBABILITY
LINEAR PROGRAMMING
DELPHI TECHNIQUE
• This technique developed by OLAF HELMER and his colleagues at RAND Corporation, has a degree of scientific respectability and acceptance.
• A panel of expert on a particular problem area is selected, usually from both inside and outside the organization.
DELPHI TECHNIQUE
• The expert are asked to make (Secretly, so that they will not influenced by others) a forecast as to what they think will happen, and when, in various areas of new discoveries or development.
DELPHI TECHNIQUE
CONSENSUS
PROBLEM PRESENTED
QUESTIONNAIRE COMPLETED
RESULT COMPILED, DISTRIBUTED
SECOND & SUBSEQUENT QUESTIONNAIRE COMPLETED
BRAINSTORMING TECHNIQUE
• Alex F Osborn is called farther of Brainstorming.
• In the brainstorming session, a multiplication of ideas is sought.
• The purpose of this approach is to improve problem solving by finding new and unusual solution.
BRAINSTORMING TECHNIQUE
The rules of brainstorming are follows:
No ideas are ever criticized.The more radical (far-reaching); the
ideas are, the better.The quantity of idea production is
stressed.The improvement of ideas by others
is encouraged
SWOT ANALYSIS
• This is a technique which help decision making by analyzing organization’s internal strength and weaknesses and external opportunities and threats.
CONSENSUS DECISION MAKING• Consensus decision-making is a
group decision making process that not only seeks the agreement of most participants, but also the resolution or mitigation of minority objections.
• Consensus is usually defined as meaning both general agreement, and the process of getting to such agreement. Consensus decision-making is thus concerned primarily with that process.
FLOWCHART OF BASIC CONSENSUS DECISION-MAKING PROCESS
By A3 26
Nominal group technique
• The nominal group technique is a decision making method for use among groups of many sizes, who want to make their decision quickly, as by a vote, but want everyone's opinions taken into account (as opposed to traditional voting, where only the largest group is considered)
• The method of tallying is the difference. First, every member of the group gives their view of the solution, with a short explanation.
• Then, duplicate solutions are eliminated from the list of all solutions, and the members proceed to rank the solutions, 1st, 2nd, 3rd, 4th, and so on.
Nominal group technique
• The numbers each solution receives are totaled, and the solution with the lowest (i.e. most favored) total ranking is selected as the final decision.
PROBABILITY• A probability is a numerical statement about the
likehood that an event will occur.
• The probability, P, of any event or state of occurring is greater than or equal to 0 and less than or equal to 1.
• The probability of 0 indicates that an event is never expected to occur.
• A probability of 1 means that an event is always expected to occur.
LINEAR PROGRAMMING• It was conceptually developed before World
War II by Soviet Mathematician A.N.Kolmogorov.
• A mathematical model for optimal solution of resource allocation problems.
• A branch of mathematics that uses linear inequalities to solve decision-making problems involving maximums and minimums.
LINEAR PROGRAMMING
Assumptions Of Linear Programming
Certainty Proportionality Divisibility Nonnegative Variable
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