Decision Making

Reported by : Celeste C. Jumagbas

Decision Making
Definition:
Decision Making is the process of choosing the best
alternative for reaching objectives
Managers make decisions affecting the organization
daily and communicate those decisions to other
organizational members
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When do decisions need to be made?
Determining the project strategy/approach
Resolving project issues
Developing estimates
Making purchases
Interviewing and selecting project team members
Selecting external suppliers
Handling disagreements and conflict resolution
Scheduling work and allocating resources to tasks
Managing meetings
Situations include:
The decision making process
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1. Gather the facts
2. Identify a number of alternatives
3. Assess the alternatives
4. Decide
Four simple steps:
Where quick decisions need to be made, these steps can
be done mentally on the fly or by one person. When time
allows and the decision is important, more people can be
involved and a more thorough decision making process
used.
Rational Decision Making
8-step Process
1. Identification of problem
2. Identification of Decision Criteria
3. Allocation of weights to criteria
4. Development of alternatives
5. Analysis of alternatives
6. Decide on an alternative
7. Implementation of decision
8. Evaluation of decision
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The Decision-Making Process
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Problem
Identification
My salespeople
need new computers
Identification of
Decision Criteria
Price
Weight
Warranty
Screen type
Reliability
Screen size
Allocation of
Weights to
Criteria
Reliability 10
Screen size 8
Warranty 5
Weight 5
Price 4
Screen type 3
Development of
Alternatives
Acer
Compaq
Gateway
HP
Micromedia
NEC
Sony
Toshiba

Implementation
of an Alternative

Gateway

Evaluation
of Decision
Effectiveness
Analysis of
Alternatives
R S W W P S
Acer 4 3 4 3 2 6
Compaq 3 4 5 2 6 7
Gateway 9 6 7 7 8 2
HP 3 5 6 7 6 5
Micromedia 2 2 3 4 5 4
NEC 3 4 5 6 7 2
Sony 7 5 6 4 2 8
Toshiba 3 4 5 6 7 3
Selection of an
Alternative

Acer 125
Compaq 142
Gateway 246
HP 174
Micromedia 103
NEC 151
Sony 192
Toshiba 154
Decisions in the Management Functions
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Types of Decision Making
Programmed Decisions: routine,
almost automatic process.
Managers have made decision many times
before.
There are rules or guidelines to follow.
Example: Deciding to reorder office
supplies.
Non-programmed Decisions: unusual
situations that have not been often addressed.
No rules to follow since the decision is new.
These decisions are made based on
information, and a managers intuition,
and judgment.
Example: Should the firm invest in a new
technology?

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Types of Programmed Decisions
A Policy
A general guideline for making a decision
about a structured problem.
A Procedure
A series of interrelated steps that a
manager can use to respond (applying a
policy) to a structured problem.
A Rule
An explicit statement that limits what a
manager or employee can or cannot do
in carrying out the steps involved in a
procedure.
Slide 20

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Problems and Decisions (contd)
Non-programmed Decisions
Decisions that are unique and
nonrecurring
Decisions that generate unique
responses.

Unstructured Problems
Problems that are new or unusual and for
which information is ambiguous or incomplete.
Problems that will require custom-made
solutions.


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Things to consider . . .
Certainty how certain is a particular
outcome?
Risk how much risk can you take?
expected value - the conditional return from
each possible outcome
Uncertainty Limited information prevents
estimation of outcome probabilities for
alternatives.

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What to do?
maximax choice optimistic
maximizing the maximum possible payoff
taking the best of all possible cases
maximin choice pessimistic
maximizing the minimum possible payoff
taking the best of the worst cases
minimax - minimize the maximum regret (difference
between what you get and the best case)

Decision-Making Styles
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Directive
Prefer simple,
clear solutions
Make decisions
rapidly
Do not consider
many alternatives
Rely on existing
rules
Conceptual
Socially oriented
Humanistic and
artistic approach
Solve problems
creatively
Enjoy new ideas
Behavioral
Concern for their
organization
Interest in helping
others
Open to
suggestions
Rely on meetings

Prefer complex
problems
Carefully analyze
alternatives
Enjoy solving
problems
Willing to use
innovative
methods
Analytical
Gather the facts
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Write down a statement of what needs to be decided.
Is the decision statement clear and precise? If not
refine the statement.
Is the need for the decision a result of an underlying
problem, which also needs to be addressed?
Are there assumptions underlying the decision that
need to be clarified and possibly challenged?
Is the decision part of a bigger decision that needs to
be made, or can this decision be decomposed into
smaller decisions?
Guidelines
Identify alternatives
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Identify as many alternatives as possible.
Use brainstorming if appropriate.
Do not filter out alternative options at this stage
- assume they can all be made to work.
When you have generated lots of ideas,
consider each one to see if it is a viable
alternative.
Shortlist the viable alternatives.
Guidelines
Decision making behaviour
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People tend to adopt a particular decision making
approach as a result of factors such as:
their own personality
their current mood
the organizational culture
the personality of the person/people they are dealing with
the nature of the relationship they have with the people
they are dealing with
time pressure and perceived level of stress
Being aware of these influences can result in better
decision making, by adopting the best decision making
approach for each situation.
Helpful hints
Do:
Clearly identify the
decision to be made
Involve people qualified to
help in the decision
making
Identify the context of the
decision (the bigger
picture)
Identify all alternatives
Assess each alternative
Assess the risks
Consider your gut feel
Make the decision
and stick to it
Dont:
Make assumptions
Procrastinate
Jump to conclusions
Make uninformed decisions
Favour one decision prior to
gathering the facts and
evaluating the alternatives
Allow only technical people
to make the decisions
Attempt to make a decision
in isolation of the context
Let emotion override
objectivity
Advantages and Disadvantages of
Group-Aided Decision Making
1. Greater pool of knowledge 1. Social pressure
2. Different perspectives 2. Minority domination
3. Greater comprehension 3. Logrolling
4. Increased acceptance 4. Goal displacement
5. Training ground 5. Groupthink
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Advantages Disadvantages

Decision making approaches
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Approaches* to decision making situations:
*Adapted from D Billows, Project Managers KnowledgeBase,
2
nd
edition, 2004, The Hampton Group.
Withdrawing: holding off making the decision.
Smoothing: focusing on areas of agreement and ignoring
areas of difference.
Compromising: trying to come up with a decision that provides
some degree of satisfaction for all parties.
Confronting/problem solving: working through the issues.
Forcing: executing a particular decision knowing agreement
has not been reached.
Decision making approaches
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Withdrawing:
Withdraw to gather more information and perspective
Only a stop gap measure
Useful in cooling down an overheated situation
Taking time out (sleep on it) before final decision
Smoothing:
Relationship focused rather than solution focused
Avoids dealing with the issues
Can be useful in reducing the emotional tension where the
decision is of low importance.
Does not provide a long-term solution
Skilled project managers and business analysts select the
best approach appropriate to the situation.
Decision making approaches
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Confronting/problem solving:
Direct approach
Identifies alternatives and works through the issues
Time-consuming
Most likely method to develop the best solution
Forcing:
Used when an urgent decision is required or as a last resort
Necessary for situations when decision making is blocked
May result in reluctance in execution of decision if not
handled well.
Compromising:
Bargaining to get an acceptable agreement
Falls short of the best decision
Can be useful in resolving negotiation deadlocks
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