Management & Decision Making

Decision
A decision is a choice made from available alternatives Decisions are taken at all levels of management
At lower level decision is structured At middle level it is both structured & unstructured At top level it is unstructured (innovative, strategic and long term)

Management
It is the art of getting things done through people

A manager is a person who achieves the organizational goals by motivating others to perform not only by performing himself. The management has to utilize the resources Human, Financial and Physical effectively by doing right things, and efficiently, by doing things right so that it is able to get things done and deliver goods/results

Characteristics of Decision Making

Sequential in nature

Exceedingly complex due to risks and

trade offs

Influenced by personal value Made in institutional settings and business environment context

Trade Offs
A trade-off (or tradeoff) is a situation that involves losing one quality or aspect of something in return for gaining another quality or aspect. It implies a decision to be made with full comprehension of both the upside and downside of a particular choice. In economics the term is expressed as opportunity cost, referring to the most preferred alternative given up.

Decision making environment

Decisions can be made under different types of environment
Ambiguity Certainty Uncertainty

Decision Types
Programmed Decisions Non-programmed Decisions

Decision Making at Different Levels

Unstructured

Policy Planning (Strategic)

Tactical Planning
Operational Planning Structured

Transaction Planning

Decision Making Process

Determine existence of problems and/or opportunities Generate alternative courses of action Analyze/choose/select a course of action Implement the course of action Monitor, follow-up and initiate coursecorrective action

Steps in Decision Making

Recognizing and defining the situation Identifying alternatives Evaluating alternatives Selecting the best alternative Implementing the chosen alternative Follow up and evaluation

Decision Making Styles

Taken by the individual manager Consultative decisions formal or informal Group Decisions
Co-actions Task groups Interacting groups Brain storming Delphi Techniques Nominal Grouping Techniques Consensus Mapping

Decision Making Tools

Pay off matrix Decision Tree / Decision Table Queuing Models Distribution Models Inventory Models Game Theory Devils Advocacy Dialectic Inquiry

Principles in Decision Making

Apart from various tools and techniques the following principles are also used in decision making process
The Principle of Bounded Rationality The Principle of Logic and Intuition

The Principle of Bounded Rationality

It implies that it is practically impossible to take a completely rational decision It highlights the fact that as it is not possible to arrive at a scientific solution, it is worth while to carry on and arrive at workable decisions which fit into the Principle of Rationality Workable solution is the starting point of a scientific solution which is the ultimate goal that one must strive to achieve.

Principle of Logic and Intuition

The principle refers to taking a number of decisions based on their own logic and intuition/hunch The focus should be to arrive at a decision mainly based on data/information, while giving due weightage to logic and intuition.

Decision Making Models

The Classical Model
The decision would be in the best interest of the organization

The Administrative Model

The decision may not be in the interest of the organization but would certainly in the interest of the manager

The Herbert Simon Model

The Intelligence Phase The Design Phase The Choice Phase

The Intelligent Phase

Requires extensive & comprehensive data base. Involves searching or scanning of the environment internal and external for conditions which indicate or suggest problem or opportunity Three types of Environments
Societal Environment Competitive Environment Organizational Environment

Design Phase
Consists of inventing, developing and analyzing possible alternatives to the problems/opportunity situations Following iterative steps are used
Support in understanding the problem. A correct model need to be created & the assumptions of the model be tested Support for generating solutions by: Manipulating the model to develop insights and Creating database retrieval system that may help in generating solution Support for testing feasibility of solutions, by analyzing it in terms of the environment it affects

Choice Phase
Leads to the selection of a specific alternative or course of action from the ones generated and considered during the Design Phase. Requires the application of a choice procedure and implementation of the chosen alternative