Decision Making

By: Karim Ismail (9185) & Nausheen Anwer (9350)

Concepts to be covered
 To examine different decision making models. How to make an effective decision making (key factors) Different decision skills Steps of rational decision making Common biases and Error Intuitive decision making Ethical decision making

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Video
 Decision making.wmv

Decisions are center point of our existence , everything goes in and out of it.

“A decision is a judgment. Uncertainty is his opponent. “A manager by profession is a decision maker. It is rarely a choice between right and wrong. overcoming it is his mission. It is at best a choice between “almost right” __ DRUCKER” and “probably wrong”.” . It is a choice between alternatives.

.Definition Decision Making: The process of examining your possibilities options. comparing them. and choosing a course of action.

but thinking makes it so" – Shakespeare .then go ahead. Johnson.Related Quotes “Be sure you are right -.” Davy Crocket. “Doing what's right isn't hard --Knowing what's right is. "There is nothing either good or bad.” Lyndon B.

in God or gods Social self Our friends .Decisions Reflected in Ourselves Material Self Decisions about life(what we want in life. intangible beliefs. communities etc. food. relatives. . decorations etc Spiritual self Our believe in unknown. choices of car. what we want from life. ethnic groups. societies. clothes. materialism(opting for material desires). our lifestyle). career.

A unit of cultural information that represents a basic idea that can be transferred from one individual to another. and subjected to mutation. “memes are the cultural counterpart of genes". A cultural unit (an idea or value or pattern of behavior) that is passed from one generation to another by nongenetic means (as by imitation). .Fundamental Factors & Constraints Of Decision Making Equation = M x G x S Meme . crossover and adaptation.

process information. . to analyze. your psychology. bearings of surrounding. intuition and cognitive abilities. assessment.Fundamental Factors & Constraints Of Decision Making Gene Your genetic ability.

political climate. . the world and worldwide policies.Your environment (Financial and Societal).Fundamental Factors & Constraints Of Decision Making Scene .

 6.  3. Collect. Commit.  2. Construct.Six C's of Decision Making  1.  5. Compare. . Compile.  4. Consider.

 Compile a list of requirements that must be met.Six C's of Decision Making  Construct a clear picture of precisely what must be decided. Collect information on  alternatives that meet the requirements. .

Consider the "what might go wrong" factor with each alternative. Commit to a decision and follow through with it.Six C's of Decision Making  Compare alternatives that meet the requirements.   .

Acceptability. Values. Priority.Making Effective Decisions Factors: g g g g g Perception. Demands. g g g g g Goals. Style. Resources. Risk. Judgment .

Decision Making Watch your thoughts. it becomes your destiny. Watch your habits. Watch your actions. they become character. they become actions. they become habits. they become words. Watch your character. ___ Shakespeare . Watch your words.

Approach Type Knowledge Probability of risk Alternatives available Goals Rational/Objective Prescriptive (Idealized situation) Complete Low Many Defined Satisfying Approach Descriptive (Reality Based) Fragmentary High Only a few Broad Spectrum . 4. 5. 6. 2.MODEL OF DECISION MAKING D E C IS IO N P R O G R A M M E D N O N P R O G R A M M E D ON GOING / RULES STRUCTURED EMPRICAL REQUIRES THINKING UNSTRUCTURED NOT UNIQUE M O D E L C L A S S IC A L A D M IN IS T R A T IV E 1. 3.

The decision maker strives for conditions of certainty. 3. Criteria for evaluating alternatives are known. The decision maker operates to accomplish goals that are known and agreed upon. 2. 4. The decision maker is rational and use logic to assign values. order preferences. evaluate alternatives and make the decision that will maximize the attainment of organizational goals . All alternatives and the potential results of each are calculated. Problems are precisely formulated and defined. The decision maker selects the alternative that will maximize the economic return to the organization.Classical Model Assumptions 1. gathering complete information.

Manager’s search for alternatives is limited because of human. 4. 2. Decision goals are often conflicts and lack consensus among managers. Rational procedures are not always used 3. information and resource constraints. . Managers are often unaware of problems or opportunities that exist in the organization.Administrative Model Assumptions 1. Most managers settle for a satisficing rather than a maximizing solution.

10% decrease in production Decision maker aware Decision maker aware that a problem exists that a problem exists and decision needs to and decision needs to be made be made Perception of Perception of the decision the decision maker maker Outcomes . Decisions Choices made from among alternatives developed from data perceived as relevant.The Link Between Perceptions and Individual Decision Making Decision Making occurs as a reaction to Problem Problem A perceived discrepancy between the current state of affairs and a desired state.

Focus on alternatives Take longer time to decide. 2. Always in a hurry to decide quickly. . 3.DIFFERENCES WESTERN 1. 3. 1. Struggle for the right answer. EASTERN Defining the question. 2. Finding an answer.

DECISION STYLES Analytical Careful decision makers Adapt to new situation Conceptual Broad outlook Examine more alternative Long range Find creative solution Directive Efficient. logical Use less information. Few alternative make decision fast Focus on short-term Way of Thinking Behavioral Work well with others Receptive to suggestions Avoid conflicts .

How decision should be made? Assumptions of the Rational Decision-Making Model Rational DecisionMaking Model Describes how individuals should behave in order to maximize some outcome. Model Assumptions Model Assumptions •• Problem clarity Problem clarity •• •• •• •• Known options Known options Clear preferences Clear preferences Constant preferences Constant preferences No time or cost No time or cost constraints constraints •• Maximum payoff Maximum payoff .

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as your mind cant absorb the whole situation.Activity Scene#1 You can say it is one of the good day of your life. you are happy and content. you are out for dinner with your partner who ends up with to be your boss’s daughter and suddenly your eyes catch the entrance door where your boss is coming with few people. Now what? . you just can’t recall who they are. Remember your boss hates you….

. you work hard whole year for it. Now what you will do??????? .Scene#2 Its an appraisal time. But it didn’t happen while other colleagues got it…. you expect this year you will be have 20% increment in your gross….

Select the best alternative. Develop the alternatives. Implement the selected one. 6. Analyze the alternatives. 7. 2. Evaluate the decision’s effectiveness . Identify the decision criteria.Steps in the Rational DecisionMaking Model 1. 5. 3. Define the problem. 8. Allocate weights to the criteria. 4.

. information.Step 1: Define the problem  Problem * A discrepancy between an existing and desired state of affairs. * There is a pressure to solve the problem. or resources needed to solve the problem. * The person must have the authority.  Characteristics of Problems * A problem becomes a problem when a person becomes aware of it.

* Costs that will be incurred (investment required). * Outcomes that are desired ( growth of the firm). * Risks likely to be encountered (chance of failure). .Step 2: Identify the decision criteria  Decision criteria are factors that are important ( relevant) to resolving the problem.

. * Places the items in the correct priority order of their importance in the decision making process.Step 3: Allocating weights to the criteria  Decision criteria are not of equal importance: * Assigning a weight to each item.

* Alternatives are listed ( without evaluation) that can resolve the problem.Step 4: Developing alternatives  Identifying viable alternatives. Step 5 :Analyzing alternatives  Appraising each alternative’s strengths and weaknesses * An alternative’s appraisal is based on its ability to resolve the issues identified in step 2 and step 3. .

.Step 6: Selecting the best alternative  Choosing the best alternative * The alternative with the highest total weight is chosen. Step 7: Implementing the alternative  Putting the decision to and gaining comment from those whose will carry out the decision.

Step 8: Evaluating the decision’s effectiveness  The soundness of the decision is judged by its outcomes. * How effectively was the problem resolved by outcomes resulting from the chosen alternatives? * if the problem was not resolve. what went wrong? .

The Decision-Making Process 6–34 .

first received information as the basis for making subsequent judgments.Common Biases and Errors  Overconfidence Bias – Believing too much in our own ability to make good decisions.  Confirmation Bias – Using only the facts that support our decision.  Anchoring Bias – Using early. .

• Recent  Representative Bias – “Mixing apples with oranges” – Assessing the likelihood of an occurrence by trying to match it with a pre- existing category using only the facts that support our decision.Common Biases and Errors  Availability Bias – Using information that is most readily at hand.  Randomness Error – Creating meaning out of random events .

feelings.The role of intuition  Intuitive decision making * Making decisions on the basis of experience. and accumulated judgment. .

What is Intuition ? Their past experiences Ethical values and culture Values or ethicsbased Decisions Subconscious mental processing Data from subconscious mind Experience-based Decisions Intuition Feelings or emotions Affect-Initiated Decisions Cognitive-Based Decisions Skills. knowledge. and training .

– Justice • Imposing and enforcing rules fairly and and and and impartially.Ethics in Decision Making  Ethical Decision Criteria • Seeking the greatest good for the greatest number. – Rights • Respecting and protecting basic rights of individuals. .

Ethics in Decision Making  Ethics and National Culture – There are no global ethical standards. – The ethical principles of global organizations that reflect and respect local cultural norms are necessary for high standards and consistent practices. .

 Ethical Decision Making.wmv .

Analyze the situation and adjust your decision making style to fit the situation. 3. 4. 2. Combine rational analysis with intuition to increase decision-making effectiveness. Be aware of biases and try to limit their impact. Enhance personal creativity by looking for novel solutions or seeing problems in new ways. . 5. and using analogies. Don’t assume that your specific decision style is appropriate to every situation.Ways to Improve Decision Making 1.

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Any Questions? .

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