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UNIT II

PLANNI
NG

- DECISION
MAKING

Decision making is the process of selecting the


required course of action, from a set of available
alternative scenarios, to achieve a desired
organizational goal.
A goodmanagershould be capable of performing
proper decision making.

eps involved in Decision Making:

Identification
of Problem

Evaluating
the Problem

??

Implementat
ion and
Follow up

Choosing the
appropriate
alternative

Searching for
solution
alternatives

Evaluating
the available
alternatives

DHONI

RATAN TATA

Identification of Problem ( Batsman or Bowler

As a chairman decision to be
taken on long term process
(Identification
investments)
of Problem (Tata nano failure)

or Fielder )

Evaluating the Problem (Reason for Tata nano

Evaluating the Problem ( Bowler ( fast or

failure)

spin ))

Searching for solution alternatives ( How to

Searching for solution alternatives

correct it)

( Alternative Bowler )

Evaluating the available alternatives (Possible

As a captain decision to be
taken on each over.

1. Identification of
Problem:
It is the first step in the process of decision
making. It involves identifying the problem for which
solution is to be made.
A well defined problem is half solved.
An organization may have several problems.
Each problem should be identified individually so
that a desired course of action can be followed.

2. Evaluating the Problem:


This is the second step in decision making.
In this process, the problem is completely
analyzed and evaluated.
Once all the aspects of a problem are evaluated,
the manager can proceed to the next step
searching alternatives.

Searching for Solution Alternatives:


Once the problem is completely identified and evaluated, a
manager should search for all possible solution alternatives.
Solution for a problem can be achieved in several ways.
If a manager chooses the first feasible way neglecting other
alternatives, course of action may not be effective.
Hence solution alternatives should be searched and listed so
that the most appropriate alternative can be selected.
Also, the search should not be broad. It must be as narrow as
possible.

valuating the available alternatives:


This is the fourth step.
Once all alternatives are searched and listed, each of
them should be completely evaluated.
Evaluation is the process of identifying the positive and
negative impacts of an alternative.
It helps in choosing the appropriate alternative.

Choosing the appropriate alternative:

It is the process of choosing the optimum alternative i.e.,


alternative with high positive impact and less negative impact.
If evaluation process is done correctly and completely,
choosing the appropriate alternative is easy.

Implementation and Follow up:


Once an alternative is chosen, it must be implemented into the
organization.
Implementation involves the following processes:
Communication about the decision to sub-ordinates
Acceptance of the decision by sub-ordinates
Time setting and manpower allocation
Resource allocation
Every decision should be reviewed periodically so that it can
be changed according to the circumstances.
Decision making is an important process inmanagement.
Good decision making always yields good results.

TYPES OF
DECISIONS

a) Programmed and Non-Programmed


Decisions:
i) Programmed decisions:
ii) Non-Programmed Decisions

b) Strategic and Tactical Decisions:


i) Strategic Decisions
ii) Tactical Decisions

Programmed
decisions:
Routine , almost automatic process.
Managers have made decision many times
before.
There are rules or guidelines to follow.
Example : Deciding to reorder office
supplies.

n Programmed decisions:
Un Usual Situations that have not been
often addressed.
No rules to follow since the decision is
new.
These decisions are made based on
information, and a managers intuition ,
and judgment.
Example : Buying new photo copier
machine

Strategic Decisions
Provides Direction to organization by establishing

Vision
Mission and
Long term goals

Example : Building new office

Tactical
Decisions
Decision taken in order to
implement and support strategic
decision.
Example : Arranging loans and docs to build
new office.

Strategic vs. Tactical


Strategic

Tactical

Direction

Implementation

Strategy statement

Annual plan

Broad

Specific, detailed

Unstructured

Structured

Long-term

Short-term

Difficult to evaluate

Easy to evaluate

RATIONAL DECISION MAKING


MODEL
Rational decision makingis a multi-step process
formakinglogically sounddecisionsthat aims to follow
the orderly path from problem identification through
solution.
Most popular type of model.

RATIONAL DECISION MAKING


MODEL
The Six-Step Rational DecisionMaking Model
1. Define the problem.
2. Identify decision criteria
3. Weight the criteria
4. Generate alternatives
5. Rate each alternative on each
criterion
6. Compute the optimal decision

DECISION MAKING UNDER VARIOUS


CONDITIONS
a) Certainty,

b) Uncertainty
c) Risk

CERTAINTY

DECISION
MAKERS
FACES

RISK

UNCERTAINTY

Level of Ambiguity and chances of


making bad decision
Moderate
Lower
Higher

END
OF
DECISION
MAKING