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# Decision making

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### Transcript of "Decision making"

1. 1. The secrets of powerfuldecision makingKeep the secretMatthijs HammerSenior Lecturer EntrepreneurshipSchool of Business Engineering & EntrepreneurshipCenter for Knowledge Innovative Entrepreneurship
2. 2. ExcersiceIndividual exercise1. Take a piece of paper.2. Write down:what made you to register for this workshop.It must be totally silence in the room: NO discussions!
3. 3. Agenda• Introduction on Decision Making• Exercise 1• Introduction on Decision Making Models• Exercise 2• There is more
4. 4. Definitions• Webster’s 9thDictionary: A decision is a choice between two or morealternatives. If you only have one alternative, you do not have a decision.• Latin: decidere "to decide, determine," literally "to cut off”.• Decision making can be regarded as the mental processes (cognitiveprocess) resulting in the selection of a course of action among severalalternative scenarios.• Every decision making process produces a final choice (James Reason,1990). The output can be an action or an opinion of choice.• Decision theory in economics, psychology, philosophy, mathematics,and statistics is concerned with identifying the values, uncertainties andother issues relevant in a given decision, its rationality, and the resultingoptimal decision.
5. 5. Which perspective?• From a psychological perspective, it is necessary to examine individualdecisions in the context of a set of needs, preferences an individual has andvalues they seek.• From a cognitive perspective, the decision making process must beregarded as a continuous process integrated in the interaction with theenvironment.• From a normative perspective, the analysis of individual decisions isconcerned with the logic of decision making and rationality and the invariantchoice it leads to.
6. 6. Exercise 1• Make groups of 4-5 people• Read the problem• Discuss the answers• Agree on one answer• After 5 minutes, one students present what happened and tell us theiranswer.
7. 7. Decision making Structures
8. 8. The Rational Model
9. 9. Rational Model:Assumptions• Clear and unambiguous problem• Single, well-defined goal• All alternatives are known• Clear preferences (ranking criteria)• Constant/stable preferences• No time or cost constraints• Decision will maximize payoff
10. 10. Rational Model:Criticism• Not all decisions made on rational basis• Most problems, goals and preferences are not clear or welldefined• Not practical to know all possible alternatives• Time and cost constraints exist in all practical problems• Result not maximized in most cases
11. 11. Intuition• An unconscious process of making decisions on the basis ofexperience and judgment.• Involves good feeling• May also have rational basis• The “feeling” arises from past experience and knowledge• Involves quicker response• Does not involve systematic analysis
12. 12. Exercise 2• Make groups of 2 people.• Choose a leader (one of the two)• Imagine that this tomorrow there is no program for the International week.• Target: plan a nice together a program for tomorrow.• Constrains:•You have 10 minutes to plan•No budget from Saxion•Be back on Thursday 9:00 hour• Task: the leader write down shortly what your plan is an prepare to presentshortly.
13. 13. Exercise 2Task of the other person then the leader:• Write down where you made decisions about.• Write down what method you used for those decisions,
14. 14. Decision TypesEffective managers make various kinds of decisions. In general, thesedecisions are either:• Programmed decisions• Non-programmed decisions
15. 15. Programmed Decisions• A decision that is repetitive and routine.• A definite method for its solution can be established.• Does not have to be treated a new each time it occurs.• Procedures are often already laid out.• Examples: pricing standard customer orders, determining billing dates,recording office supplies etc.
16. 16. Non-programmed Decisions• A decision that is novel (new or unique) or Ill structured.• No established methods exist, because it has never occurred before orbecause.• It is too complex.
17. 17. Non-programmed Decisions• Are “tough” decisions that involve risk and uncertainty and,• call for entrepreneurial abilities.• Such decisions draw heavily on the analytical abilities of the manager• Examples: Moving into a new market, investing in a new unproventechnology, changing strategic direction.
18. 18. FigureOrganizationalLevelsNature ofProblemsNature ofDecision-making
19. 19. The YOU partSomeone in a good mood describe themselves as:• feeling light• walking tall• walking with their head held high• they have a glide in their stride• moving gracefullyHave you ever considered where these phrases come from?They are actually descriptions of the awareness people have of their physicalbodies at different times.
20. 20. Phrases such as:• Shake it off• Sleep on it• Lets step away from it for a moment• Have a breatherare used when we want to distance ourselves, or think differently about,some issue. We inherently know that moving our body in different waysgives us different ways of thinking.This also explains why its often when someone leaves their desk to get acoffee that they are suddenly inspired in that they realize the answer to aproblem or understand which choice to make.The YOU part
21. 21. The YOU partgeneral guideline:Remarks:• bad mood includes times of pressure, stress and time constraints. Thismeans not that all decisions made in such circumstances are bad decisions.Instead, its more likely that we will make poorer decisions or decisions thatare wrong when we are in a bad mood.• And, of course, some people prefer to make decisions under pressure, theyclaim that they are more effective this way!!Good mood = good decisions,Bad mood = bad decisions.Good mood = good decisions,Bad mood = bad decisions.
22. 22. What is it you (realy) like?Write down for yourself what you really like to do, spending yourtime.Choose from:1.Homework2.Reading study books3.Gaming4.Listening to my teacher5.Discuss with expertsWrite down from the aspects above: where are you good at?
23. 23. Definitions• Game theory is a study of strategic decision making. More formally, it is"the study of mathematical models of conflict and cooperation betweenintelligent rational decision-makers."(Roger B. Myerson,1991)
24. 24. Why play games?• Games are an obvious way to practice your Decision Making skills in a safeenvironment. It is possible to develop a wide range of experience by usingsimulated scenarios so that when you come to do the real thing you hit theground running, so to speak.• Major organizations appreciate the fact that teach the decision-makingprocess games are very effective. The military and the fire service aretwo such groups. Of interest here is that these groups are moving awayfrom rational models. Much more emphasis is being placed on intuitive andrecognition primed decision models.
25. 25. Conclusion 1Playing games improve your decision makingskills;play more (strategic) gamesPlaying games improve your decision makingskills;play more (strategic) games
26. 26. Other techniques• Toss• Consult the bible• Consult an expert• Marmot tray• Dice
27. 27. Dice manThe Dice Man:novel from 1971 by George Cockcroft (LukeRhinehart). A psychiatrist who begins making lifedecisions based on the casting of dice. Theadventure goes along with controversial issuessuch as rape, murder and sexual experimentation.Therefore it was banned in several countries.In later time, television programs used tis format aswell: Clip: http://diceman.co.uk/clips/the-diceman-explained/
28. 28. Exercise 3• Make groups of 2 persons.• Choose one of the un-common techniques.• Make a decision for the problem below:Marta Malasobras has been coming to work late for the several weeks now. She works in asmall group and the other members have come to you to complain that her tardinessreduces the effectiveness of the entire group. When you confront her with this problem, shebreaks down and cries: she has to drop her son off to school but the school gates do notopen soon enough for her to get to work on time. She has been unable to find anyone totake her son to school. What should you do?a.Fire her. Chronic lateness to work is a serious offense and cannot be tolerated in anyway.b.Discuss her problem with the rest of her work team. See if any temporary arrangementcan be made to give her time to find someone to take her son to school.c.Delegate the problem to the work team. After all, empowering them with decision-makingauthority also makes them more accountable. It’s their problem, not yours.d.Your solution…Marta Malasobras has been coming to work late for the several weeks now. She works in asmall group and the other members have come to you to complain that her tardinessreduces the effectiveness of the entire group. When you confront her with this problem, shebreaks down and cries: she has to drop her son off to school but the school gates do notopen soon enough for her to get to work on time. She has been unable to find anyone totake her son to school. What should you do?a.Fire her. Chronic lateness to work is a serious offense and cannot be tolerated in anyway.b.Discuss her problem with the rest of her work team. See if any temporary arrangementcan be made to give her time to find someone to take her son to school.c.Delegate the problem to the work team. After all, empowering them with decision-makingauthority also makes them more accountable. It’s their problem, not yours.d.Your solution…
29. 29. Exercise 3• Choose 2 other techniques, maybe add more / other answers.Marta Malasobras has been coming to work late for the several weeks now. She works in asmall group and the other members have come to you to complain that her tardinessreduces the effectiveness of the entire group. When you confront her with this problem, shebreaks down and cries: she has to drop her son off to school but the school gates do notopen soon enough for her to get to work on time. She has been unable to find anyone totake her son to school. What should you do?a.Fire her. Chronic lateness to work is a serious offense and cannot be tolerated in anyway.b.Discuss her problem with the rest of her work team. See if any temporary arrangementcan be made to give her time to find someone to take her son to school.c.Delegate the problem to the work team. After all, empowering them with decision-makingauthority also makes them more accountable. It’s their problem, not yours.d.Your solution…Marta Malasobras has been coming to work late for the several weeks now. She works in asmall group and the other members have come to you to complain that her tardinessreduces the effectiveness of the entire group. When you confront her with this problem, shebreaks down and cries: she has to drop her son off to school but the school gates do notopen soon enough for her to get to work on time. She has been unable to find anyone totake her son to school. What should you do?a.Fire her. Chronic lateness to work is a serious offense and cannot be tolerated in anyway.b.Discuss her problem with the rest of her work team. See if any temporary arrangementcan be made to give her time to find someone to take her son to school.c.Delegate the problem to the work team. After all, empowering them with decision-makingauthority also makes them more accountable. It’s their problem, not yours.d.Your solution…
30. 30. Final conclusions• Playing games improves your decision making skills.• Approach programmed and non-programmed problems in a different way.• For good decisions make sure you are in a good mood.• Intuition is (unconscious) the most used technique.• There is no one method for all decisions (no golden rule).• Everyone prefer his/her own methods.• Use uncommon techniques for uncommon (innovative) results.• Use common techniques to find a arguments for a decision made earlier.