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DECISION MAKING

SUBMITTED BY:
Name :- ATHIRA R NAIR Class no :- 04 Course :- MBA[FT]

DECISION MAKING
Decision- the choices made from among two or more alternatives.

Its an important ort of organizational behavior. Why we need decision making?- occurs as a reaction to PROBLEM PROBLEM- discrepancy between an existing and desired state of affairs. One persons Problem another persons satisfactory state of affairs. Decision requires:-Interpretation - Evaluation Individual perception will have a large bearing on final outcome. Decision making process are:-

Specific objectives

Results

Identification of problems

Implementation of the alternative

Search for alternatives

Choice of alternative

Evaluation of alternatives
3

PROBLEM IDENTIFICATION
One persons problem is others acceptable status quo. Problems that are visible tend to have a higher probability of being selected than ones that are important. Visible problems catches decision makers attention. Decision makers self interest tends to influence the process. Decision makers want to appear competent and on on top of problems. There is a big difference between problem selection and problem definition.

CREATIVITY IN DECISION MAKING


CREATIVITY: The ability to combine ideas in a unique way or to make unusual associates between ideas. It helps the decision maker to fully appraise and understand the problem. METHODS FOR STIMULATING INDIVIDUAL CREATIVITY: *Direct-instruction method *Attribute listing * Lateral thinking *Synectics

DECISION MAKING AND ORGANIZATION


In some exceptional cases decision makers resort to rational model. Most do not follow rational method. Decision makers generally make limited use of their creativity Confined to -neighborhood of problem symptom - neighborhood of the current alternative

DECISION MAKING MODELS

RATIONAL DECISION MAKING PROCESS


RATIONAL- choices that are consistent and value maximizing RATIONAL DECISION MAKING MODEL- that describes how individuals should behave in order to maximize some outcome. Six steps involved in this process: 1) Defining the problem 2) Identifying the decision criteria 3) Weight the previously identified criteria 4) Generate possible alternatives 5) Rating each alternative on each criterion. 6) Computing the optimal decision

ASSUMPTIONS OF THE MODEL


PROBLEM CLARITY: he is assumed to have complete information regarding the decision situation KNOW OPTIONS: Identify all criteria and list out all alternatives and aware about consequence. CLEAR PREFERNCE: It assumes that criteria and alternatives can be ranked and weighted to reflect on their importance. CONSTANT CRITERIA: Assumes that specific decision criteria are constant and weight assigned to them are stable over time. MAXIMUM PAYOFF: He will choose the alternatives that yeilds the highest perceived value.

BOUNDED RATIONALITY
BOUNDED RATIONALITY: Individuals make decisions by constructing simplified models that extract the essential features from problems without capturing all their complexity. Since capacity of humans to solve the problems far too small they use BOUNDED RATIONALITY The decision maker identify choices that are easy to find and tend to be highly visible. Models extract essential features from problems without their capturing complexity Working process: *Review of identified alternatives(not comprehensively) *Review of alternatives slightly in difference with the problem . *Selects alternative that meets acceptable level of performance. * Final solution is only represents a satisfying choice and not optimum.

INTUITIVE DECISION MAKING


An unconscious process created out of distilled experience. Nowadays in certain instances, relying on intuition can improve decision making. Intuition isnt independent of rational analysis. They two complement each other.

Why intuitive decision making?


When a high level of uncertainty exists. When there is little precedent to draw on. When variables are less scientifically predictable. When facts are limited. When facts dont clearly point the way to go. When analytical data are of little use. When there are several plausible alternative solutions to choose from with good arguments for each.

HEURISTICS MODEL
To avoid information overload Heuristic model is adopted. HEURISTICS- Judgmental shortcuts in decision making. Two categories of heuristics are: *Availability heuristic * Representative heuristic AVAILABILITY HEURISTIC: The tendency for people to base their judgments on information that is readily available to them. It explains why managers give more weight to recent behaviors than past behaviors. REPRESENTATIVE HEURISTIC: Assessing the likelihood of an occurrence by drawing analogies and seeing identical situations where they dont exist. They tend to assess the likelihood of an occurrence by trying to match it with preexisting category.

INDIVIDUAL DECISION MAKING STYLES


Basic foundation is recognition that people differ in two dimensions: *Way of thinking- logical or rational * Tolerance of ambiguity Four styles of decision making: * Directive style * Analytical style * Conceptual style * Behavioral style

ORGANIZATIONAL CONSTRAINTS
Decisions are influences by the criteria by which the managers are evaluated. Various constrains by which managers are evaluated are: *Performance Evaluation * Reward Systems * Programmed routines *System imposed time constraints *Historical precedents

INDIVIDUAL DECISION MAKING


Decision made by the managers can e improved by the following process: a) Analyze the situation. b)Be aware of biases. c) Combine rational analysis with intuition. d) Dont assume that your specific decision style is appropriate for every job. e) Use creativity stimulation techniques.