Decision Making:

The Essence of Managers

Job
by Muhammad Iqbal Malik

Key Topics
Introduction
The Decision-making process
Decision-making models
Decision Styles
A discussion on Group Decisions

Part I
Introduction

Organizations
Organizations are systems
Involve people, structure and a
common purpose
Have limited resources
Need to perform a series of functions to
meet its objectives

Managers
Managers are responsible for effective
and efficient execution of these
organizational functions.
A typical manager performs a number
of functions that are categorized as:
Interpersonal
Informational
Decisional

Managers
One of the key traits that distinguish
managers from operatives is the ability to
make independent decisions.

Part II
Decision-making

What is decision-making?
The word decision is defined as:
A choice between two or more
alternatives.
Thus decision-making can be defined as:
the selection of a course of action from
among alternatives .

Decision-making Process
Identifying a problem
Identifying decision criteria
Allocating weights to criteria
Developing alternatives
Analyzing alternatives
Selecting an alternative
Implementing the alternative
Evaluation (of decision effectiveness)

Problem Definition
Problem is a discrepancy (difference)
between an existing and a desired state.
Example:
The manager has resigned, and we need
another manager
Here the phrase manager has resigned
reflects the current state while need
another manager represents a desired
state.

Identifying Decision Criteria

The word criteria, is defined as a
standard by which something can be
judged.
A decision criteria therefore, is the basis
of a decision, which outlines the relevant
and important factors for a decision. And
implicitly, it also defines what is not
important.

Decision Criteria: Example

In the above-cited scenario, the decision
criteria may include the following factors:
Relevant qualifications
Leadership skills
Communication skills
Planning and analytical skills
Professional experience

Allocating Weights to Criteria

The next step in the decision making
process is prioritization.
Prioritization is achieved by assigning
quantitative weights to each criteria
element.
The weightage defines the relative
significance of each element.

Allocating Weights: Example

Criterion

Weight

Relevant qualifications

Leadership skills

Communication skills

Analytical skills

Professional experience

Developing Alternatives
Involves defining the possible
alternatives (or choices) that would
resolve the problem.
In our case, the alternatives would be a
list of candidates or job applicants.

Analyzing Alternatives
Alternatives are rated and analyzed
on the basis of the criteria
The rating can be based on a specified
scale, say 1 5 etc.
Rating may be subjective in nature
and thus,may depend on the judgment
of the individual(s)

Criteria Rating: Example

CANDIDATES RATING AND ASSESSMENT

Candidate

Qualification

Leadership

Communication

Analysis

Experience

Kamran Ashraf

Rahila Mushtaq

Tasaduq Hussain

Zubair Ahmed

Maliha Javed

Analyzing & Assessment:

Example
EVALUATION OF CANDIDATES
Candidate

Qualification

Leadership

Communication

Analysis

Experience

Total

Kamran Ashraf

15

38

Rahila Mushtaq

12

33

12

10

42

Zubair Ahmed

25

16

54

Maliha Javed

12

25

12

12

63

Tasaduq Hussain

Selecting an alternative
Involves choosing the best alternative,
based on the above rating and analysis
Generally implies selecting the
alternative with the highest score.

Implementing the Alternative

Putting the decision into action
Involves clear communication of the
decision to all concerned and obtaining
their commitment

Evaluation
Evaluation forms an integral part of any
process
Involves evaluation of the outcome based on
the desired goal and criteria
Involves assessing the effectiveness and
efficiency of the outcome (or the entire
process)
In case of any undesired results, each step
of the process is carefully reviewed to trace
the root causes

Decision-making Models
Model
A simplified representation or description
of a system or complex entity
Examples
A model of a building
A globe (Earth model)

Rational/Bounded Rational
So Rational and Bounded Rational Models
are cognitive models that describe how
managers make rational decisions

The Rational Model

1. Define and
diagnose the
problem
7. Follow up
and control

2. Set goals

External and
internal
Environ. forces

3. Search for
alternative
solutions

6. Implement
the solution
selected
5. Choose 4. Compare
among
and evaluate
alternative
solution
solutions

Rational Model: Assumptions

Clear and unambiguous problem
Single, well-defined goal
All alternatives are known
Clear preferences (ranking criteria)
Constant/stable preferences
No time or cost constraints
Decision will maximize payoff

Rational Model: Criticism

Not all decisions made on rational basis
Most problems, goals and preferences
are not clear or well defined
Not practical to know all possible
alternatives
Time and cost constraints exist in all
practical problems
Result not maximized in most cases

Bounded Rational: Assumptions

Limited set of criteria
Self-interest influences ratings
Limited no. of alternatives
Alternatives are assessed one at a
time till a satisficing (or good
enough) alternative is found
Politics influences acceptance and
commitment of decision

Intuition
An unconscious process of making
decisions on the basis of experience and
judgment

Intuition
Involves gut feeling
May also have rational basis
The feeling arises from past
experience and knowledge
Involves quicker response
Does not involve systematic analysis

Decision Types
Effective managers make various kinds of
decisions. In general, these decisions are
either
Programmed decisions
Non-programmed decisions

Programmed Decisions
A decision that is repetitive and routine
A definite method for its solution can be
established
Does not have to be treated a new each time
it occurs
Procedures are often already laid out
Examples: pricing standard customer
orders, determining billing dates, recording
office supplies etc.

Non-programmed Decisions
A decision that is novel (new or unique)
or Ill structured
No established methods exist, because
it has never occurred before or because
It is too complex

Non-programmed Decisions
Organizational

Levels

Nature of
Problems

Nature of
Decision-making

Non-programmed Decisions
Are tough decisions that involve risk
and uncertainty and
call for entrepreneurial abilities
Such decisions draw heavily on the
analytical abilities of the manager
Examples: Moving into a new market,
investing in a new unproven
technology, changing strategic direction

Decision Styles
Decision-making, though a rational
process does include some subjective
elements
Thus in real organizational settings, the
quality of decision does depend on the
ability, style and approach of the
manager

Decision Styles: Directive

Directive
Represents low tolerance for
ambiguity and uncertainty
Reflects rational thinking of the
manager
Such decision styles are more suitable
for routine procedural tasks

Decision Styles: Analytic

Analytic
Analytical style is also a rational style
of thinking
Involves a very high tolerance for
ambiguity and uncertainty
Such managers generally seek detailed
information before making a decision

Decision Styles: Behavioural

Behavioural
Represents a creative way of thinking
Involves a low tolerance for
ambiguity or uncertainty
Managers with a behavioural style
introduce new ways of doing things

Decision Styles: Conceptual

Conceptual
Conceptual style also reflects a creative
and intuitive way of thinking
Conceptual style managers have a very
broad vision and generally look at
numerous alternatives for decision-making
Focused on the long run and often result
in creative outcomes or alternatives

Vroom and Yetton Model

Vroom and Yetton have identified five
decision styles for managers, and are
classified as follows:
Autocratic
AI
The decision is made individually, using
the information available to the individual
only

Vroom and Yetton Model

AII
The manager obtains information from
subordinates and himself makes the
decision
May or may not share with subordinates, the
purpose of questions or the nature of
problem
Subordinates do not play any role in
problem definition or selection of alternatives

Vroom and Yetton Model

Consultative
CI
The manager shares the problem with
relevant subordinates individually
Getting their input individually and not
as a group. The manager then makes
the decision independently, and may or
may not be influenced by the
subordinates suggestions

Vroom and Yetton Model

CII
The problem is shared to subordinates in a
group
Their ideas and suggestions are sought in a
group meeting
The decision is then made by the manager
which
May or may not reflect the subordinates
influence

Vroom and Yetton Model

Group Consensus
GI
The problem is shared to subordinates
as a group
Alternatives are generated and
evaluated collectively
Effort is made to reach a consensus

Vroom and Yetton Model

GI (Contd.)
The decision is made collectively and
the manager functions as a coordinator
Does not press the group in adopting
the managers solution
The manager is willing to accept and
implement the decision of the group

Group Decision-making
The factors requiring group decisions
include:
Involving sensitive issues
High cost alternatives
Involving very high risk factor
Strategic impact

Group Decisions: Advantages

Acceptance of group members
Coordination is easier
Communication is easier
Existence of large alternatives
More information can be processed
Diversity of experience and
perspectives

Group Decisions: Disadvantages

Take longer time
Group can be indecisive
Groups can compromise
Groups can be dominated
Groups can play games
Victim to Groupthink

Situational Factors for

Individual Decision-making

Short time

Unimportant to group
Manager can take decision
Dominate the decision
Destructive conflict
Members hesitant

Situational Factors for

Individual Decision-making

Confidential data

Incapability of members
Managers dominance
Indirect effect on group members

Situational Factors for

Group Decision-making

Need for innovation and creativity

Data collection
Importance of acceptance
Importance of solution
Complex problem
Democratic process

Situational Factors for

Group Decision-making

Risk taking solution needed

Better understanding
Whole responsibility
Feedback required

 Brainstorming

Improving Group
Decision-making

Nominal group techniques

Electronic meeting