DECISION MAIKING

BY:JAWED
ANWAR
MBA-2C

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Decision
Making

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 PROBLEM

A DISCREPANCY BETWEEN THE

CURRENT STATE OF AFFAIRS AND SOME
DESIRED STATE

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 DECISION MAKING

 Decision making is the process of making

a choice between a number of options
and committing to a future course of
actions.

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How Should Decisions Be Made?
 Rational Decision-
Making

– The “perfect world”

model assumes
complete information, all
options known, and
maximum payoff.

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Steps in the Rational Decision-
Making Model
1.
Define the
problem
6. 2.
Select the Identify the
best alternative criteria

Making a Decision
5. 3.
Evaluate the Allocate weights
alternatives to the criteria
4.
Develop
alternatives

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 Assumptions of the Rational
Decision-Making Model
 Problem clarity
– The problem is clear and unambiguous.

 Known options
– The decision maker can identify all relevant criteria and
viable alternatives.

 Clear preferences
– Rationality assumes that the criteria and alternatives can
be ranked and weighted.
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Assumptions of the Rational
Decision-Making Model
 Constant preferences
– Specific decision criteria are constant and the
weights assigned to them are stable over time.

 No time or cost constraints

– Full information is available because there are no
time or cost constraints.

 Maximum payoff
– The choice alternative will yield the highest 12-8
perceived value.
Bounded Rationality
 The limited information-processing capability of
human beings makes it impossible to assimilate and
understand all the information necessary to optimize
 So people seek solutions that are satisfactory and
sufficient, rather than optimal
 Bounded rationality is constructing simplified models
that extract the essential features from problems
without capturing all their complexity

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Intuitive Decision Making

• An unconscious process
created out of distilled
experience
• Complements rational
analysis
• Can be a powerful force in
decision making

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Common Biases in Decision
Making
 Overconfidence Bias
– Believing too much in our own ability to make good decisions – especially
when outside of own expertise
 Anchoring Bias
– Using early, first received information as the basis for making subsequent
judgments
 Confirmation Bias
– Selecting and using only facts that support our decision
 Availability Bias
– Emphasizing information that is most readily at hand
 Recent
 Vivid

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 Group Decision Making
Strengths of Group
Decision Making
 More complete information
and knowledge.
 Increased diversity of views.
 Generates higher-quality
decisions.
 Leads to increased
acceptance of a solution.
Weaknesses of Group
Decision Making
 More time consuming.
 Conformity pressures in
groups.
 Discussion can be dominated
by one or a few members.
 Decisions suffer from
ambiguous responsibility.
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 CONCLUSION

 The process of organizing and distributing an

organization’s collective wisdom so the right
information gets to the right people at the right
time.

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DECISION MAKING

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