DECISION

MAKING the
Essences of Job’s
Manager

UNIT-3 1

Ganesh Ter
2 Decision making

 A decision is an act of choice where in an executive forms a

conclusion about what must done in a given situation. A decision
represents behavior chosen from several possible alternatives.

Ganesh Ter
3 Decision making

Decision making is the process of selecting best

course of action out of many alternatives.

It is the process of solving organizational

problems by choosing a specific course of action.

It is necessary to operate an organization

smoothly and effectively to achieve defined
objectives.

Ganesh Ter
4 Features of decision making

Selective process: It is a process of selecting a course of action among

many alternatives. Various factors need to be considered before selection.

Human and rational process: It is a mental or human process requiring

personal skills, experiences, knowledge and capability to study course of
action from many angles.

Dynamic process: It changes as per time and situation.

Ganesh Ter
5

Goal oriented process: It focuses on the goals of

an organization.

Continuous process: It is a continuous process

which exists till the existence of organization.

Freedom to decision maker: Manager have

freedom to take any kind of decisions.

Ganesh Ter
 Identification of problems

Analysis of problems

Development of alternatives

Evaluation of alternatives
6 Decision
making Selection of best alternatives
process
Implementation of alternatives

Review of implementation.

Ganesh Ter
7 Identification of problem

This is the first step in decision making process.

In this step the main problem is identified which generally occurs

from the deviation between planned and actual performance.

If the problem is correctly identified and understood, it helps in better

solution of it.

Managers has to use his skill and experience in identifying the

problem.

Ganesh Ter
8 Analysis of problem

The second step is to analyze the identified

problem.

For this, decision maker has to accumulate all the

facts, data and information related o the problem.

In this step, the reasons behind the problem and

its impact on organizational goals is identified.

Ganesh Ter
9 Developing alternatives

In this step all the possible solutions of problems

are identified.

It may be done with the help of brainstorming or

gathering the expert ideas on the topic.

Managers need to consider all aspect of problem

while developing alternatives.
Ganesh Ter
 Evaluation of alternatives
 In this step, each and every alternative
is evaluated in terms of cost and
benefit analysis.
 Alternatives should be studied
10 considering the efforts involved and
outcome generated.
 The consequences of the alternative
and feasibility are also identified and
evaluated.
Ganesh Ter
11 Selection of best alternative

 In this step, one best alternative is selected to solve the problem.

 Following approaches may be used while selecting a course of
action :
- experience
- experimentation
- research and analysis
- personal value and aspirations.
Management should also consider the short term and long term
impact of selecting an alternative.

Ganesh Ter
 This is the operational part of decision
making process.

In this step, the selected alternative is

implemented.

Implementation
12 For the proper implementation, proper
and review of
alternative communication and delegation of authority is
also needed.

Once it is implemented, it needs to be

monitored and evaluated to know about the
feedback of performance.

Ganesh Ter
 Rational Decision Making

 Rational decision making is a multi-step

process for making choices between
alternatives. The process of rational decision
making favors logic, objectivity, and analysis
over subjectivity and insight. The word
“rational” in this context does not mean sane
or clear-headed as it does in the
colloquial(conversation) sense.
 Rational Model /Stepes

 Define the problem.

 Identify the decision criteria.
 Allocate weights to the criteria.
 Develop the alternatives.
 Evaluate the alternatives.
 Select the best alternatives
Define the Problem

 Violet first needs to define the problem. This

step is relatively easy for Violet, as upper
management has already identified the issue. Her
store profits have not increased month to month,
so she needs to find the best solution to increase
profits. The next step facing Violet is to
determine what criteria she will use to make her
decision.
 Identify the decision criteria.

 The next step in the rational decision-making process is

to identify the decision criteria. This step deals with
choosing variables that will determine the decision
outcome. In Violet's case, she needs to determine the
criteria or information that is relevant and will help her
increase her profits. The criteria are usually dependent
upon the individual's values and beliefs. Violet will make
her decision based on her belief that she should not
eliminate any employees to save money. She will only cut
costs in other ways, such as finding cheaper vendors,
shortening store hours, changing menu options, etc. Her
criteria will be:
 How will employees be affected?
 How will changes affect customers?
 How will changes affect quality?
Allocate Weights to Criteria

 Violet's next step is to allocate weights to

the criteria. This means ranking which
criteria is the most important to the decision-
making process. Violet feels that the biggest
weight should be given to how the change
will affect employees. The other weights are
then distributed equally. The next step starts
to consider solutions.
Develop the Alternatives

 The next step is to develop alternatives, which is

where the potential solutions need to be considered.
There will not be any consideration in this step, just a
generated list of alternatives. Violet has brainstormed a
short list of alternative solutions:
 Select a new distributor of food and supplies that will
cost less money.
 Shorten store hours, which will limit overall overhead
costs.
 Lay off some employees who are making larger
salaries.
 Increase promotions to lure new customers and sales.
 Evaluate Alternates

 Evaluate alternatives by examining the

benefits and drawbacks of each
alternative. During the evaluation of
alternatives, careful consideration is given
to social, economic, and ecological factors
that influence the predicted outcome.
Encourage discussion and use visual aids
to help explain alternatives.
Select the best alternatives

 Experience, experimentation, and

research and analysis are the three
common tools or approaches for
choosing the best alternative in
decision making.
Group Decision Making

 Group decision making is the process of taking

decisions collectively by a group of members.
 It involves pooling of knowledge, abilities, skills,
information and judgement which contributes to
improve the quality of the decision.
Advantages of Group Decision
Making

Provide complete information

Generate more alternatives

Increased acceptance of a solution

Increased legitimacy
Disadvantages of Group Decision
Making

Time consuming

Minority domination

Pressures to conform

Ambiguous responsibility
 Techniques of Group Decision
Making

Delphi Nominal Group

Brainstorming
Technique Technique
Brainstorming
 •Brainstorming is a group
technique by which efforts
are made to find a
conclusion for a specific
problem by gathering a list
of ideas spontaneously
contributed by its member.
 •Generate as many ideas as
possible, suspending
evaluation until all the ideas
have been suggested.
Guidelines of Brainstorming

 Criticism of ideas is not allowed.

 Participants are encouraged to build on the suggestions of others.
 Ridiculous or unreasonable ideas should be avoided.
 Each idea presented should belong to the group and not to
person.
Delphi Technique

 It involves obtaining the opinions of experts physically separated

from each other and unknown to each other.
 This insulates group members from the undue influence of others.
The steps in the Delphi technique
are:
1. The problem is identified, and a sample of experts is
selected. These experts are asked to provide potential
solutions through a series of carefully designed
questionnaires.
2. Each expert completes and returns the initial questionnaire.
3. The results of the questionnaire are compiled at a central
location and the central coordinator prepares a second
questionnaire based on the previous answers.
4. Each member receives a copy of the results along
with the second questionnaire.
5. Members are asked to review the results and
respond to the second questionnaire. The results
typically trigger new solutions or cause changes
in the original position.
6. The process is repeated until a consensus is
reached.
Nominal Group Technique

 This technique is a
structured technique
used to generate creative
and innovative ideas.
 Members form the group in name only and operate
independently, generating ideas for solving the
problem on their own, in silence and in writing.
 Members do not interact with each other so that
strong personality domination is avoided. It
encourages individual creativity.
 The group coordinator either collects these written
ideas or writes then on a large black board for
everyone to see or he asks each member to speak
out and then he writes it on the black board as he
receives it.
 Decision Making Styles
 Directive style :
The directive decision-making style
uses quick, decisive thinking to come to a
solution. A directive decision-maker has a low
tolerance for unclear or ambiguous ideas. They
are focused on the task and will use their own
knowledge and judgment to come to a conclusion
with selective input from other individuals.
 Analytical Styles
 Analytic decision-makers examine much
information before taking action. ... These
decision-makers have a high tolerance for
ambiguity and are very adaptable, but they
like to control most aspects of the decision
process. This style is a well-rounded
approach to decision-making but can be time-
consuming.
 Conceptual Styles
 Conceptual style decision making
describes people who enjoy the ambiguity of
open-ended options and are motivated to
make an impact on the world. If you are a
conceptual style decision maker, you likely
day-dream often and quickly come up with
creative ideas when needed.
 Behavioral Style
 A behavioral style of decision-
making focuses on relationships more
than the task. It evaluates the feelings
of others as part of their decision-
making process. Behavior decision-
makers have a low tolerance for
ambiguity (inexactness) and a social
focus as they evaluate solutions.
 Decision-Making under Certainty, Risk and Uncertainty.

 Decision-making under Certainty:

A condition of
certainty exists when the decision-maker knows with
reasonable certainty what the alternatives are, what
conditions are associated with each alternative, and
the outcome of each alternative. Under conditions of
certainty, accurate, measurable, and reliable
information on which to base decisions is available.
 Decision-making under Risk:
 When a manager lacks perfect information or
whenever an information asymmetry (lack of
quality)exists, risk arises. Under a state of risk, the
decision maker has incomplete information about
available alternatives but has a good idea of the
probability of outcomes for each alternative.
 While making decisions under a state of risk,
managers must determine the probability associated
with each alternative on the basis of the available
information and his experience.
 Decision-making under
Uncertainty:
 Most significant decisions made in today’s
complex environment are formulated under a state
of uncertainty. Conditions of uncertainty exist
when the future environment is unpredictable and
everything is in a state of flux. The decision-
maker is not aware of all available alternatives,
the risks associated with each, and the
consequences of each alternative or their
probabilities.
 Contd..
 The manager does not possess complete
information about the alternatives and
whatever information is available, may not be
completely reliable. In the face of such
uncertainty, managers need to make certain
assumptions about the situation in order to
provide a reasonable framework for decision-
making. They have to depend upon their
judgment and experience for making
decisions.
 Analyzing Decision Making

 The process of analyzing and evaluating

alternatives applies evaluation criteria to
alternatives or options in a way that
facilitates decision making. ... Effective
use of criteria in the evaluation and
selection of alternatives applies the
criteria at appropriate levels of the
decision-making process.