NATIONAL UNIVERSITY OF MODERN

LANGUAGES

SUBMITTED TO Dr. Sehar Zulfiqar

SUBMITTED BY ANUM BIBI
System ID NUML-S20-11033
Section M.COMMERECE (Morning) I A
ASSIGNMENT 02
Subject Contemporary Management
Date 06/04/2020

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Decision Making, Learning , Creativity,
And Entrepreneurship
CHAPTER :7
The Natural of Managerial Decision Making :
The process by which managers respond to opportunities and threats by
analyzing options and making determination about specific organizations
goals and courses of action .

Programmed and Non-programmed Decision Making :

Programmed decisions are made in accordance with written or unwritten policies, procedures,
or rules that simplify decision making in recurring situations by limiting or excluding
alternatives. For example, managers rarely have to worry about the salary range for a newly
hired employee because organizations generally have a salary scale for all positions. Routine
procedures exist for dealing with routine problems.

Programmed decisions are used for dealing with recurring problems, whether complex or
uncomplicated. If a problem recurs, and if its component elements can be defined predicted
and analyzed then it may be a candidate for programmed decision making. For example,
decisions about how much inventory of a given product to maintain an involve a great deal of
fact finding and forecasting, but careful analysis of the elements in the problem may yield
series of routine, programmed decisions. For Nike, buying television advertising time is a
programmed decision. For example, deciding how to handle customer complaints on an
individual basis would be time consuming and costly, but a policy stating ‘exchanges will be
permitted on all purchases within 14 days simplifies matters considerably. The customer
service representative is then freed to deal with thornier issues.

Non-programmed decisions deal with unusual or exceptional problems. If a problem has not
come up often enough to be covered by a policy or is so important that it deserves social
treatment it must be handled as a non-programmed decision. Problems such as how to
allocate an organization’s resources, what to do about a failing product line, how community
relations should be improved — in fact, most of the significant problems a manager will face
– usually require non-programmed decisions. How to design and market newer more
advanced basketball shoes is an example of a non-programmed decision at Nike.

 As one moves up the organizational hierarchy the ability to make non-programmed decisions
becomes more important. For this reason, most management development programs try to
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improve managers’ abilities to make non-programmed decisions, usually teaching them to
analyze problems systematically and to make logical decision.

More and more organizations have made their commitment to social responsibility a matter of
policy involving both programmed and non-programmed decision. For example, Lotus the
computer software company has a policy of donating one percent of its profits to
philanthropic events and organizations. Thus how much to spend on charity is a programmed
decision. Exactly how the money is sent is a non-programmed decision. A committee made
up of all ranks of employees decides where the money will be allocated. Past projects have
included the funding of the television documentary on the civil rights movement, Eyes on the
Prize and sponsorship of the 1991 AIDS Walk in Boston. The committee’s focus is to
concentrate on under-funded projects.

The Classical Model:

A prescriptive approach to decision making based on assumptions that the decision maker can
identify and evaluate all possible alternatives and their consequences and rationally choose the most
appropriate course of action.

Classical approach is also known as prescriptive, rational or normative model. It specifies

how decision should be made to achieve the desired outcome. Under classical approach,
decisions are made rationally and directed toward a single and stable goal. It is applied in
certainty condition which the decision maker has full information relating to the problem and
also knows all the alternative solutions. It is an ideal way in making decision. It is rational in
the sense that it is scientific, systematic and step-by-step process.

There are four main assumptions behind the classical model:

 First is a clearly defined problem. The model assumes that the decision-maker has clearly set
goals and knows what is expected from him.
 Next is a certain environment. The model further suggests that it is in the power of the
decision-maker to eliminate any uncertainty that might impact the decision. As a result, there
are no risks to account for.
 The third assumption is full information. The decision-maker is able to identify all alternatives
available to him and to evaluate and rank them objectively.
 The final assumption is rational decisions. The decision-maker is believed to always be acting
in the best interests of the organization.

This model assumes the manager as a rational economic man who makes decisions to meet
the economic interest of the organization. Classical approach is based on the following
assumptions:

 The decision maker has clear and well-defined goal to be achieved.

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  All the problems are precisely defined.
 All alternative courses of action and their potential consequences are known.
 The decision maker can rank the entire alternatives on the basis of their preferred
consequences.
 The decision maker can select the alternative that maximizes outcome.

The classical model is supposed to be idealistic and rational but it is rarely found in practice.
Therefore, this approach has many criticisms. It is known by normative theory rather than
descriptive theory. Generally, managers operate under the condition of risk and uncertainty
rather than the certainty condition. in many situations, complete goal stability can never be
realized due to continuous environmental changes. It is applied only in the close system and
not practicable in real life situations where environment is changing rapidly.

Steps in the Classical Model

The classical model proposes three main steps for decision-making:

First is listing all available alternatives. Under the classical model, the decision-maker is not
limited by time or resources and can continue looking for alternatives until he identifies the
one that maximizes the utility from the decision.

The second step is ranking listed alternatives. The decision-maker is believed to possess not
only all required information but also the cognitive ability to prioritize the alternatives
accurately and objectively.

The last step of the classical model is selecting the best-suited alternative.

The Administrative model:

In the foundation of the administrative model of decision making lies the belief that decision
makers often settle for a less than ideal solution because of time and motivation shortages. Instead
of seeking the best solution that maximizes the value of the decision, the decision maker accepts the
first available 'good enough' alternative producing a value above the minimally acceptable. The
concept of settling for a less than perfect solution is called satisficing.
Because of the limited rationality of the decision maker, the model is also known as the bounded
rationality model. The limited rationality entails that the decision maker has a limited number of
criteria and considers a limited number of alternatives. The degree to which the choice will be limited
will depend upon the values and skills of the decision maker. This model is based on ideas first
expressed by Herbert Simon. He called the decision maker with limited rationality

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an Administrative Man and opposed him to a perfect Economic Man, who is takes into
consideration all possible criteria and evaluates all possible alternatives.

Steps in the Decision Making Process:

Decision making is the process of making choices by identifying a decision, gathering information,
and assessing alternative resolutions.
Using a step-by-step decision-making process can help you make more deliberate, thoughtful
decisions by organizing relevant information and defining alternatives. This approach increases the
chances that you will choose the most satisfying alternative possible.

Step 1: Recognize the Need for a Decision

You realize that you need to make a decision. Try to clearly define the nature of the decision you
must make. This first step is very important.

Step 2: Generate Alternatives

Collect some pertinent information before you make your decision: what information is needed, the
best sources of information, and how to get it. This step involves both internal and external “work.”
Some information is internal: you’ll seek it through a process of self-assessment. Other information is
external: you’ll find it online, in books, from other people, and from other sources.

Step 3: Asses alternatives

As you collect information, you will probably identify several possible paths of action, or alternatives.
You can also use your imagination and additional information to construct new alternatives. In this
step, you will list all possible and desirable alternatives.

Step 4: Weigh the evidence

Draw on your information and emotions to imagine what it would be like if you carried out each of the
alternatives to the end. Evaluate whether the need identified in Step 1 would be met or resolved
through the use of each alternative. As you go through this difficult internal process, you’ll begin to
favor certain alternatives: those that seem to have a higher potential for reaching your goal. Finally,
place the alternatives in a priority order, based upon your own value system.

Step 5: Choose among alternatives

Once you have weighed all the evidence, you are ready to select the alternative that seems to be
best one for you. You may even choose a combination of alternatives. Your choice in Step 5 may
very likely be the same or similar to the alternative you placed at the top of your list at the end of Step
4.

Step 6: Implement the chosen Alternative

Once a decision has been made and an alternative has been slected,it must be implement and many
subsequent and related decision must be made after a course of action has been decisided say to
develop a new line women clothing – thousands of subsequent decisions are necessary to implement
it .

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Step 7:Learn from Feedback
In this final step, consider the results of your decision and evaluate whether or not it has resolved the
need you identified in Step 1. If the decision has not met the identified need, you may want to repeat
certain steps of the process to make a new decision. For example, you might want to gather more
detailed or somewhat different information or explore additional alternatives.

Cognitive biases and Decision Making :

Decision making is inherently a cognitive activity, the result of thinking that may be either rational or
irrational (i.e., based on assumptions not supported by evidence). Individual characteristics including
personality and experience influence how people make decisions. As such, an individual’s
predispositions can either be an obstacle or an enabler to the decision-making process.

From the psychological perspective, decisions are often weighed against a set of needs and
augmented by individual preferences. Abraham Maslow’s work on the needs-based hierarchy is one
of the best known and most influential theories on the topic of motivation—according to his theory, an
individual’s most basic needs (e.g., physiological needs such as food and water; a sense of safety)
must be met before an individual will strongly desire or be motivated by higher-level needs (e.g., love;
self-actualization.

Types of congnative bias:

The most common cognitive biases are confirmation, anchoring, halo effect, and overconfidence.

1. Confirmation bias: This bias occurs when decision makers seek out evidence that confirms their
previously held beliefs, while discounting or diminishing the impact of evidence in support of differing
conclusions.

2. Anchoring: This is the overreliance on an initial single piece of information or experience to make
subsequent judgments. Once an anchor is set, other judgments are made by adjusting away from
that anchor, which can limit one’s ability to accurately interpret new, potentially relevant information.

3. Halo effect: This is an observer’s overall impression of a person, company, brand, or product, and
it influences the observer’s feelings and thoughts about that entity’s overall character or properties. It
is the perception, for example, that if someone does well in a certain area, then they will automatically
perform well at something else regardless of whether those tasks are related.

4. Overconfidence bias: This bias occurs when a person overestimates the reliability of their
judgments. This can include the certainty one feels in her own ability, performance, level of control, or
chance of success.

Group conflict as a Barrier to Decision Making :

Delegating key decision making to groups, teams, or committees occurs often within organizations.
Decisions made by groups can be better informed by broader perspectives and different sources of
information and expertise than those made by an individual decision maker. Along with these

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advantages, however, interpersonal and group dynamics presents dilemmas that can make it more
difficult for groups to make effective choices.

Group cohesion, or positive feelings between individuals and productive working relationships,
contributes to effective group decision making. In cohesive groups information is more easily shared,
norms of trust mean it is easier to challenge ideas, and common values help focus decisions around
shared goals. Encouraging constructive disagreements and even conflict can result in more-creative
ideas or more solutions that are easier to implement.

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