A Presentation on

Decision Making

by

A.P.PRODUCTIVITY COUNCIL HYDERABAD

Nothing is so exhausting as indecision, and
nothing so futile.
~ Bertrand Russell
We can try to avoid making choices by doing
nothing, but even that is a decision.
~ Gary Collins
 Choice Making

The narrow set of

activities
associated with
choosing one
option from among
already identified
alternatives
 Decision Making

The process of
specifying a problem
or opportunity, Site 1
identifying Pros/Cons
alternatives & criteria,
evaluating
alternatives, and Site 2
selecting from among
Pros/Cons
the alternatives
1
Identify The Decision-Making
Problem Process

2 Develop 3 Allocate 6 Select

Decision Weights to Alternative
Criteria Criteria
7 Implement
4 5 Alternative
Develop Analyze
Alternatives Alternatives
8 Evaluate
Results
Step 1: Identify a Problem

The difference between what is

and what it ought to be
 Step 2: Decision Criteria
• Price
 Factors that are • Interior comfort
relevant in making • Durability
the decision
• Repair record
• Performance
• Handling
Step 3: Allocating Weights
Determining the relative
priority of each of the
criteria
 Problem: To purchase a
new car
Criterion Weightage
Price 10
Interior comfort 8
Durability 5
Repair record 5
Performance 3
Handling 1
 Step 4: Alternatives
Generate a list of possible vehicle
manufacturers
Step 5: Analyzing Alternatives
Assessing the value of each
alternative by making a
value judgment of the
feature
Concluding Steps in Making a
Decision

Step 6: Select the “best”

Step 7: Implement decision

Step 8: Evaluate decision

 Assumptions Of Rationality
Single, well-
defined goal
is to be achieved
All alternatives Problem is
and clear and
consequences unambiguous
are known
Rational
Decision
Final choice
Preferences Making will maximize
are clear
payoff

Preferences
No time or cost
are constant
constraints exist
and stable

© Prentice Hall, 2002

 Groupthink
 One process by which a group can make
bad or irrational decisions.
 In a groupthink situation, each member
of the group attempts to conform his or
her opinions to what they believe to be
the consensus of the group.
 This results in a situation in which the
group ultimately agrees on an action
which each member might normally
consider to be unwise (the risky shift).
 A group drive for consensus so strong
that dissent is (intentionally and
unintentionally) suppressed
 Groupthink Symptoms

• Belief that the group is impervious to

threats
• Illusion of morality
• False perceptions of unanimity
• Internal censoring of ideas
• Peer pressure to conform to norms
• Negative stereotyping of opponents
• Rationalization of actions
• Use of mindguards
 Groupthink Process
Errors
• Restricted search for information
• Restricted analysis of alternatives
• Expert opinions ignored
• Contingency plans not developed
 60

50

40

Common Groupthink
30

20

10

Consequences
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

• Inferior decisions
• Ineffective group performance
• Wasted expenditures of time, money,
materials, and personnel
• Failure to take advantage of
opportunities
 Potential Groupthink
Remedies

Organization Leader

Member Process
 Potential Groupthink
Remedies
• Organizational remedies
– Multiple groups examine same issue
– Teach managers methods they can use to
recognize and overcome symptoms
• Leader-oriented remedies
– Encourage all members to evaluate ideas critically
– Bring in outsiders to evaluate ideas critically
– Pick a member to play devil’s advocate
– Encourage focus on objective information

Cont.
 Potential Groupthink
Remedies (Cont.)
• Member-oriented remedies
– Make no decisions until all ideas have been
evaluated
– Go outside the group for opinions and share them
within group
• Process-oriented remedies
– Use subgroups to develop alternatives and
compare solutions
– Compare to other organizations’ solutions
– Prior to implementation, hold “second chance”
meetings
Individual Vs Group Decisions

• often quicker • takes longer

• less conflict • potential for conflict
• clear • unclear
responsibility accountability
• lower compliance • higher compliance
• less expertise • more expertise
 1. The Rational Model
(Classical Model)
• The classical model of decision-making is a
prescriptive model that tells how the decision
should be made
– Assumes managers have access to all the
information needed to reach a decision
– Managers can then make the optimum decision by
easily ranking their own preferences among
alternatives
• Unfortunately, mangers often do not have all
(or even most) required information
 The Classical Model
List alternatives Assumes all information
& consequences is available to manager

Assumes manager can

Rank each alternative process information
from low to high

Assumes manager knows

the best future course of
Select best
the organization
alternative
 Rational Decision-Making Model
Phase 1: Define Phase 2: Phase 3: Phase 4:
and diagnose Set goals Search for Compare and
the problem alternative evaluate
solutions alternative
solutions
External and internal
environmental factors
and stakeholders
Phase 7: Phase 6: Phase 5:
Follow up Implement the Choose among
and solution alternative
control selected solutions
 2. Bounded Rationality
(The Administrative Model)
• Administrative Model of decision-making: Challenges the
classical assumption that managers have, and process, all
the information
– As a result, decision-making is risky
• Bounded rationality: Since the number of alternatives is large
and the amount of information vast, managers cannot be
expected to consider everything
– Decisions are limited by people’s cognitive abilities
• Incomplete information: Most managers do not see all
alternatives and therefore make decisions based on
incomplete information
 Bounded Rationality Model
• Developed by Herbert Simon
– Management scholar in the 1950’s
– Simon won the 1978 Nobel Prize in economics for his
research into the decision-making process
• Refers to
– an individual’s tendencies to select less than the best
goal or best alternative solution
• Satisficing
– Factors that result in a satisficing decision
• a limited search
• inadequate information
• information processing bias
 Factors Influencing a Satisfying
Decision
Information Processing
Biases

Limited
Perceived
search satisfying
Triggers Leads to
problem decision
Limited
information
Why Information is Incomplete
Uncertainty Ambiguous
& risk Information

Incomplete
Information

Time constraints &

information costs
3. Stakeholder Model (Political)
• Stakeholders have power (ability to control
or influence) decisions and goals
Stakeholders, Alternatives, and Goals

Demands

Choice among
Power of organizational
create influence
Stakeholders alternatives
and goals

Constraints
Stakeholder Model (Political) (cont.)
• Power (of stakeholders) to influence
– The definition of the problem
– The choice of goals
– Consideration of alternative solutions
– Selection of alternative to be implemented
– Actions and success of the organization
• Problem definition
– External and internal stakeholders try to define
problems to their own advantage
– Stakeholders may use scapegoating to cast blame
on another party for problems, hoping to preserve
a position of power or a positive image
 Stakeholder Model (Political)
(cont.)
• Choice of Goals
– Reflect the agendas of the organization’s
most powerful stakeholders
– Coalitions (alliances)
• Formed when no one person or group has
sufficient power to select or implement the
preferred goal
• Search for Alternative Solutions
– Constrained or expanded
• Depending upon whether more or less
information is conducive to stakeholders’ agendas
Stakeholder Model (Political)
(cont.)
– Co-optation
• Bringing in a new stakeholder representative to
increase the number of alternative solutions