Professional Documents
Culture Documents
Decision Making
available options”.
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What is Decision Making?
Decision: a reasoned choice among alternatives
Examples:
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Where to advertise a new product
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What stock to buy
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What movie to see
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Where to go for dinner
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Decision making vs. problem solving?
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ART or SCIENCE?
Importance of Decision making
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Decision-making is a primary function of management. A
manager's major job is sound/rational decision-making. He
takes hundreds of decisions consciously and subconsciously.
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Decision-making is the key part of manager's activities.
Decisions are important as they determine both managerial
and organizational actions.
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A decision may be defined as "a course of action which is
consciously chosen from among a set of alternatives to
achieve a desired result." It represents a well-balanced
judgment and a commitment to action.
Importance of Decision making
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It is rightly said that the first important function of
management is to take decisions on problems and situations.
Decision-making pervades all managerial actions. It is a
continuous process. Decision-making is a necessary
component of the management process itself.
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Decision is a choice from among a set of alternatives. The
word 'decision' is derived from the Latin words de ciso which
means 'a cutting away or a cutting off or in a practical
sense' to come to a conclusion. Decisions are made to
achieve goals through suitable follow-up actions. Decision-
making is a process by which course of action is taken.
Importance of Decision making
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According to Peter Drucker, "Whatever a manager does, he
does through decision-making". A manager has to take a
decision before acting or before preparing a plan for execution.
Moreover, his ability is very often judged by the quality of
decisions he takes because action is not possible unless a firm
decision is taken about a business problem or situation.
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Decision-making is necessary in planning, organizing,
directing, controlling and staffing. For example, in planning
alternative plans are prepared to meet different possible
situations. Out of such alternative plans, the best one (i.e., plan
which most appropriate under the available business
environment) is to be selected.
Importance of Decision making
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Decision-making has priority over planning function.
According to Peter Drucker, it is the top management which is
responsible for all strategic decisions such as the objectives of
the business, capital expenditure decisions as well as such
operating decisions as training of manpower and so on.
Without such decisions, no action can take place and naturally
the resources would remain idle and unproductive. The
managerial decisions should be correct to the maximum extent
possible. For this, scientific decision-making is essential.
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Decision making involves a certain commitment. A decision
results into the commitment of resources and reputation of the
organisation.
Importance of Decision making
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Decision making is always related to the situation or the en
vironment. A manager may take one decision in a particular
situation and an opposite decision in a different situation. In
some situations, there may just be a decision not to decide.
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Decision making is a human and social process. It involves
the use not simply of the intellectual abilities but also of
intuition, subjective values and judgment.
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It is not a purely intellectual process. Perception and human
judgment are indispensable and no technique can replace them.
But knowledge and experience also provide basis for correct
decisions.
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The choice in decision making implies freedom to choose from
among alternative courses of action without coercion. It also
implies uncertainty about the final outcome.
Steps in Decision Making
Decision Making Models (Simon’s Model)
According to this model, a decision must be reached in following
steps:
Intelligence phase
Reality is examined
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Design phase
Representative model is constructed
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Choice phase
Includes a proposed solution to the model
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Implementation phase
Solution to the original problem
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Includes
Understanding the problem
Testing solutions for feasibility
A model is constructed, tested, and validated
Modeling
Conceptualization of the problem
Abstraction to quantitative and/or qualitative forms
Types of Decisions
Type of structure - Nature of task
Structured Unstructured
Managerial
Operational
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Nature of Decision
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Structured Problems
Routine and repetitive with standard solution
o
defined
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Semi-structured Problems
Has some structured aspect
o
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Unstructured Problems
All phases of decision making process are unstructured
o
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Scope of Decision
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Operational Planning and Control:
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Focus on efficient and effective execution of specific
tasks.
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They affect activities taking place right now
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E.g... What should be today's production level
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Management Control and Tactical Planning
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Focus on effective utilization of resources
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more longer range planning horizon
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E.g... What is next years production level
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Strategic Planning
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Long-range goals and policies for resource allocation
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E.g... What new products should be offered
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Simon’s Model – Choice Phase
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Search, evaluation, and recommending an appropriate solution
to the model
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Specific set of values for the decision variables in a selected
alternative
Important Issues
Resistance to change
Degree of top management support
Users’ roles and involvement in system development
Users’ training
Decision Support Systems
Specific MSS technologies relationship to the decision making
process
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3 types of leadership behavior
1. Autocratic – leader makes individual decision (little or no
group input)
2. Consultative – leader asks for input, then makes decision
3. Group – leader shares info with group, group makes
decision together
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Vroom-Yetton Model
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Autocratic Type 1 (AI) Leader makes own decision using
information that is readily available to him at the time. This
type is completely autocratic.
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Autocratic Type 2 (AII) Leader collects required information
from followers, then makes decision alone. Problem or
decision may or may not be informed to followers. Here,
followers' involvement is just providing information.
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Consultative Type 1 (CI) Leader shares problem to relevant
followers individually and seeks their ideas and suggestions
and makes decision alone. Here followers do not meet each
other and the leader’s decision may or may not reflect his
followers' influence. So, here followers involvement is at the
level of providing alternatives individually.
Vroom-Yetton Model
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Consultative Type 2 (CII) Leader shares problem to relevant
followers as a group and seeks their ideas and suggestions and
makes decision alone. Here followers meet each other, and
through discussions they understand other alternatives. But the
leader’s decision may or may not reflect his followers'
influence. So, here followers involvement is at the level of
helping as a group in decision-making.
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Group-based Type 2 (GII) Leader discuss problem and
situation with followers as a group and seeks their ideas and
suggestions through brainstorming. Leader accepts any
decision and does not try to force his idea. Decision accepted
by the group is the final one.
Vroom-Yetton Model
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Vroom & Yetton formulated following seven questions on decision
quality, commitment, problem information and decision acceptance, with
which leaders can determine level of followers involvement in decision.
Answer to the following questions must be either ‘Yes’ or ‘No’ with the
current scenario.
Cognition Theory
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Cognition: Activities by which an individual resolves
differences between an internalized view of the environment
and what actually exists in that same environment
(Ability to perceive and understand information)
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Cognitive models are attempts to explain or understand
various human cognitive processes
Cognitive Style
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The subjective process through which individuals perceive,
organize, and change information during the decision-making
process
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Often determines people's preference for human-machine
interface
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Impacts on preferences for qualitative versus quantitative
analysis and preferences for decision-making aids. Cognitive
style research impacts on the design of management
information systems
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Analytic decision making.
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Heuristic decision making.
Decision in Groups
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Most major decisions in medium and large organizations are
made by groups
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Conflicting objectives are common
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Variable size
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People from different departments
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People from different organizations
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The group decision making process can be very complicated
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Consider Group Support Systems (GSS)
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Organizational DSS can help in enterprise-wide decision
making situations