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Strategic Analysis and

Choice
Decision Making
Dec. 3, 2007 Haitham Hassan
Decision Making
A simple definition of a decision is
that it is the, ‘selection of a
proposed course of action’.
 Decisions involve choices.
 Decision making is about choosing
between alternatives.
 individuals make decisions that
will make them feel better off.
Dec. 3, 2007 Haitham Hassan
Decision Making

 Decisions are purposeful.
 Decisions are also constrained
(technical infeasibility, resources
infeasible & legal and ethical
considerations)
 Good decisions are those which
efficiently and effectively achieve
the decision maker’s
Dec. 3, 2007 Haitham Hassan objectives.
Decision Making
 Efficient organisations require
compatibility between these
different levels of objectives and
goals (corporate, SBU and
divisional, departments and
functions & operational goals).
 The quality of decisions also
depends upon the quality of data
(numbers), information and
Dec. 3, 2007 Haitham Hassan
knowledge
Types of decision

Decisions can be divided into two
broad classes:
 Programmed

-are those that are made
routinely or frequently
-relevant factors can be Known
-Organisational procedures are
well defined and guide Decisions
Dec. 3, 2007 Haitham Hassan
Types of decision

 Non-programmed
-are made infrequently.
- These tend to be the strategic
or policy decisions of an
organisation which tend to be
made occasionally with a large
gap of time between them

Dec. 3, 2007 Haitham Hassan
Types of decision

 as we move from the top to the
bottom of an organisation
decisions flow from non-
programmable at the top to
increasingly programmable
decisions at the bottom.
 This reflects senior manager’s
desire to control
organisational/bureaucratic
uncertainties.
Dec. 3, 2007 Haitham Hassan
 Programmable decisions can be
Decision models
classification

 Rational
 Bounded Rational
 Evolutionary
 Political
 Garbage Can

Dec. 3, 2007 Haitham Hassan
Decision models
classification
Rational
 Problem recognition
-constantly scan SWOT
-This activity is the intelligence gathering necessary
for strategic decision making.
 Defining the objectives
-Rational decision making requires clearly-defined
objectives
-even at the simplest level (maximise profits)
objectives can be ambiguous
-Different ‘stakeholders’ are likely to define the
objectives of an organisation in different ways
Dec. 3, 2007 Haitham Hassan
-The art of management is an attempt to reconcile
Rational Model
 Search for alternatives
-search for best solutions provide objective
achievement.
-choose alternative achieve objective
efficiently (minimum cost) and effectively
(best outcome).
-information about the relative comparisons
between alternatives is required.
 Evaluation
 Choice
 Implementation
 Review
Dec. 3, 2007 Haitham Hassan
Dec. 3, 2007 Haitham Hassan
Rational Model
‘The overall picture presented by the
rational model is of active, highly alert
decision makers, clear about their
objectives, who search until they are in
command of a great deal of information
and who are knowledgeable about
possible solutions, who are then in a
position to choose the best course of
action which then proceeds to be
authorised and implemented. Decision
making is a sequence of steps which, if
followed, shouldHaitham
Dec. 3, 2007
lead to the best solution:
Hassan
that is, to action which optimises the
Rational Model
Limitations
 The rational model’s main
limitation is that it assumes too
much brain power (or decision
making capacity) on the part of
the decision maker.
 It also assumes that decision
makers have available complete
and reliable information
Dec. 3, 2007 Haitham Hassan
Decision Models
Classification
Bounded Rational
 To cope with the reality of decision
makers situation in practice they
‘bound’ their rationality.
 They only consider a limited number of
options Because they do not have the
time or the resources to do otherwise.
 They do not maximise. Instead, they
‘satisfies’ (They accept that solution
which is good enough, rather than the
Dec. 3, 2007 Haitham Hassan
best).
Bounded Rational
Bounded rationality takes into
consideration the real decision making
constraints which confront managers.
These are:
 Time constraints,
 Costs of acquiring information,
 Ambiguity of objectives,
 Conflict of objectives between
stakeholders.
Within the boundaries of these
constraints decision
Dec. 3, 2007 makers will do
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Bounded Rational
Limitations
 Decision makers are more likely to
respond to problems that are
presented to them rather than
actively going out and searching
for problems.

Many problems will be ignored,
often for years, until they become
critical and require
Dec. 3, 2007 Haitham Hassan
action.
Disjointed Incrementalism

Lindblom
 Rather than thinking about decision
making as a process of continuous and
smooth logical steps, as in the rational
model, the decision process is
disjointed.
 Decision makers don’t always have the
necessary information or knowledge or
the time to make a decision now. They
will return to that part of the problem
later.
 Decisions are, therefore, made in
stages – a bit here and a bit there. The
process, therefore,
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appears
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discontinuous with stops and starts.
Decision models
classification
Evolutionary
 Henry Mintzberg concluded that there
are many feedback loops within the
rational decision making process.
 This means that a number of the
different stages in the rational model
might be revisited and reassessed as
new information becomes available
before a final decision is taken.
H. Mintzberg, D. Raisinghani, and A. Therot (1976), ‘The Structure of ‘unstructured’ decision processes’, Administrative
Science Quarterly, 21(2),June, pp.246/75.
Dec. 3, 2007 Haitham Hassan
Logical Incrementalism

Lindblom and
Quinn
 Is a slight marginal variation. founded
within the bounded rationality model.
 Decision makers follow the logic of
making choices and changes a small
step (increment) at a time. This reduces
the risks that would be involved in a
radical change, i.e. a major departure
from what is currently being done. The
decision path for logical incrementalism
evolves through small marginal
changes.
Dec. 3, 2007 Haitham Hassan
Decision models
classification
Political

 Organisations are pluralistic rather than
unitary systems. There is not ‘single corporate
mind’ which makes decisions.
 Organizations is made up of many different
interest groups. Coalitions and alliances
between different interests are a common
feature of organisational life.
 The political model, therefore, views decisions
as the outcome of a process which resolves
the conflicting interests of coalitions of
different groups within the organisation.
R. M. Cyert and J. G. March (1963), A Behavioural Theory of the Firm (Prentice Hall).
Dec. 3, 2007 Haitham Hassan
Decision models
classification
Garbage Can
 The elements of the garbage can model are:
 problems, i.e. areas of dissatisfaction or performance gaps,
 potential solutions, i.e. solutions which exist independently
of problems,
 participants, i.e. those who make decisions – those who
bring problems and solutions together.
 choice opportunities, i.e. occasions when an organisation
normally makes a decision, e.g. contract signing (to be
effective an organisation requires the correct mix of
participants, problems and solutions),
 independent streams, i.e. streams of problems and streams
of solutions flow through the organisation. At the same time
participants pass through the organisation. Each participant
has a different perception of the problems and they have
different potential solutions.
Dec. 3, 2007 Haitham Hassan
 Individuals within an organisation are different
therefore, offer a variety of different solutions.
 Not all individuals participate in problem
solving activities. For some, specific problem
solving is their job description. Many others,
however, participate on a voluntary basis. The
amount of time and effort that they allocate to
problem solving depends upon competing
claims on their time and whether or not there
is an incentive for them to become involved.
 Decision makers muddle their way to some
kind of a conclusion without going through the
logical steps of the rational model.
 Also, they might never understand the
process that they are
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going through. This
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means that they could not retrace their steps
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Dec. 3, 2007 Haitham Hassan
Dec. 3, 2007 Haitham Hassan
Dec. 3, 2007 Haitham Hassan