Decision making:

An act of making choice.

Decision making can be regarded as the mental

processes (cognitive process) resulting in the selection
of a course of action among several alternative
scenarios to achieve goals.
Managerial Decision making
Decision making is an essential leadership skill. If
manager learn how to make timely, well-considered
decisions, then you can lead your team to well-
deserved success.

Managerial decision making is the process of

sufficiently reducing uncertainty and doubt about
alternatives to allow a reasonable choice to be made
from among them.
Rational Decision making:
Rational decision making brings a structured or
reasonable thought process to the act of deciding.

A rational decision making model provides a structured

and sequenced approach to decision making.

In a rational decision making process,

a business manager will often employ a series of
analytical steps to review relevant facts, observations
and possible outcomes before choosing a
particular course of action.
Decision making process:

Identifying and diagnosing the problem:

Generating alternative solutions:
Evaluating alternatives:
Making the choice:
Implementing the decision:
Evaluating the decisions:
Steps in Rational Decision-Making Model

Define the problem:

Identify the decision criteria:
Allocate weights to the criteria:
Develop the alternatives
Evaluate the alternatives
Select the best alternative
 Assumptions in the Rational Decision-Making Model
Problem Clarity-The problem is clear and unambiguous. The decision maker is assumed to
have complete information regarding the decision situation.

Known Options-The decision-maker can identify all relevant criteria and viable
alternatives. Furthermore, the decision maker and can list all the viable alternatives.
Furthermore, the decision maker is aware of all the possible consequences of each
alternative.

Clear Preferences-Rationality assumes that the criteria and alternatives can be ranked and
weighted.

Constant Preferences-Specific decision criteria are constant and that the weights assigned
to them are stable over time.

No Time or Cost Constraints-Full information is available because there is no time or cost
constraints.

Maximum Payoff-The choice alternative will yield the highest perceived value.
Every decision making process produces a final choice.
The output can be an action or an opinion of choice.
 Types of decision
Type by frequency: On the basis of frequency of
occurrence, they are:
Programmed: Is Decision making on the issues related to the day to day
running of organization. It is structured and repetitive type, and more
common to lower level.
Non-programmed: Is decision making on the issues which are non-
routine and new to the organization. It is more common to higher
level.

Type by nature: on the basis of different aspect of focus.

Operating: decision for day to day issues
Strategic: decision on new issues
Administrative: decision on issues arising for the balance between
operating and strategic decisions.
Types of decision
Type by decision making style:
Autocratic decision making style:
Style 1: manger makes decision on the basis of the
information available about the current environmental
situation.
Style 2: manager makes decision on the basis of the
information collected from the subordinates.
Type by decision making style:
Consultative:
Style 3: Managers consults about the problem with the
individual subordinate and get information, idea and
suggestion.
Style 4: Manager consults about the problem with the
group of subordinates collectively for information, ideas,
and suggestion.
(Note: Manager Decision in both the style of
consultative may or may not reflect subordinates
influences)
Type by decision making style:
Group process:
Style 5: Manager shares problem with the subordinates
in groups. Collects information, ideas and suggestion
with the joint effort from all the group members. The
alternative with more number of votes and which is
more likely to solve the problem is selected.
(Note: which style to choose depends upon the
decision maker , the group and the situation)
Conditions of Decision Making
Condition of certainty: When the outcome of each
alternative can be clearly determined.
Condition of risk: probability of action resulting to
unsuccessful in achieving goal.
Condition of uncertainty : predicting future with very
little information about the environment.
Group decision making
A collection of individuals who have regular contact and
frequent interaction, mutual influence, common feeling
of camaraderie (a spirit of friendly good-fellowship),
and who work together to achieve a common set of
goals.

Group decision making is a type of participatory process

in which multiple individuals acting collectively, analyze
problems or situations, consider and evaluate alternative
courses of action, and select from among the
alternatives a solution or solutions.
Group decision making:
Advantage:
Builds team feeling.
More information, ideas, and concrete solutions.
Better communication, and share responsibility.
Builds interpersonal and leadership skill.
Generate more alternatives
Increase legitimacy
Create positive conflict.

Disadvantage:
Making decision takes time.
Group think occurs.
 Ambiguous responsibility
Techniques of group decision making:

Brainstorming: It’s a method of idea generation to solve

problem which are new to the organization in the form
of free discussion and understanding.

Nominal group technique: it consist of two stages, firstly

the individual work separately, and secondly, they work
as an interacting group to evaluate and choose
alternatives.
Delphi technique: use of expert opinion while making
group decisions.
 Tools for decision making
Quantitative technique:
Probabilities and pay-offs: It is statistical measure of the chance a
certain event will occur. Payoffs are the outcomes of each
alternative. The alternative with highest payoff is selected.

Linear programming: it is a mathematical technique for deciding

among competing demands of limited resources. It is use to find
the exact solution which minimize cost and maximize gains.

Queuing theory: It is used to manage the waiting lines by use of

calculated probability, of flow in the line. It focuses to deal with
the queuing problems of strategies.
Tools for decision making
Quantitative technique:
Simulation: It is descriptive model, which is concerned with modeling
terms of the business problem rather than the solution to problem. It
reduces the risk and expense of decision making by using hypothetical
and historical data instead of the live data.

Game theory: it focuses on formulation of a strategy against the

competition, which will provide maximum countering action. The
outcome of the game is preparedness of manger to respond to the action
of the competitors. It helps in determining the competitive behavior.

Decision tree: it is based in probability factors, which will graphically

represent form of numbers of possible future events that may affect
decision. The outcome that has highest desirable end value is the course
to be followed.
Tools for decision making
Non- quantitative technique
Factual information: Information is basis for rational
decision making. The decision are more scientific an
unbiased.
Intuition and experience: The decisions are made on
hunches, instinct, inner feelings, or previous experience.
Expert opinion: Also called Delphi technique, where the
decision is made from the opinion of the experts and
experienced persons.
End…