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Decision making

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  • 1. Decision MakingAn essence to problem solving Page 1
  • 2. Decision Making• ― the process of responding to a problem by searching and selecting a solution or course of action‖.• There are basically two kinds of decision that are called upon to make: Programmed and non-programmed Page 2
  • 3. Types of Problems and Decisions• Structured problems * Involve clear goals. *Are familiar (have occurred before) *Are easily and completely defined- information about the problem is available and complete.• Programmed decision *A repetitive decision the can be handled by a routine approach. Page 3
  • 4. • Unstructured problems * Problems that are new or unusual and for which information is ambiguous or incomplete. * Problems that will require custom-made solutions.• Non-programmed decisions * Decision that are unique and non-recurring. * Decision that generate unique responses. Page 4
  • 5. Vitals of Decision making process• Policy• a general guideline for making a decision about a problem.• Procedure * A series of interrelated steps that decision maker can use to respond ( applying a policy) to a problem.• Rule * an explicit statement that limits what can or cannot be done. Page 5
  • 6. The Decision- Making Process Define the Evaluate Implement the Problem Alternatives chosen AlternativeGather facts and Select the best Follow up and develop alternative. evaluate the chosen alternatives. alternative. Page 6
  • 7. Decision Making Process• Identifying Problem• Identifying Decision Criteria• Allocating Weights to the Criteria• Developing Alternatives• Analyzing Alternatives• Select Alternatives.• Implement Alternatives.• Evaluating decision’s effectiveness. Page 7
  • 8. Step 1: Identifying the Problem* A problem becomes a problem whensomeone becomes aware of it.* there is always a pressure to solve theproblem.* the person must have theauthority, information, or resourcesneeded to solve the problem. Page 8
  • 9. Step 2: Identify the Decision Criteria • Decision criteria are factors that are important ( relevant) to resolving the problem. * Costs that will be incurred (investment required). * Risks likely to be encountered ( chance of failure). * Outcomes that are desired ( growth of the firm). Page 9
  • 10. Step 3: Allocating Weights to the Criteria• Decision criteria is of equal importance: * Assigning a weight to each item. * Places the items in the correct priority order of their importance in the decision making process. Page 10
  • 11. Step 4: Developing Alternatives• Identifying viable alternatives. * Alternatives are listed ( without evaluation) that can resolve the problem. Page 11
  • 12. Step 5 :Analyzing alternatives• Appraising each alternative’s strengths and weaknesses * An alternative’s appraisal is based on its ability to resolve the issues identified Page 12
  • 13. Step 6: Selecting the alternative • Choosing the best alternative * The alternative with the highest total weight is chosen. Page 13
  • 14. Step 7: Implementing the Alternative• Putting the decision to and gaining comment from those whose will carry out the decision. Page 14
  • 15. Step 8: Evaluating the decision’s effectiveness• The soundness of the decision is judged by its outcomes. * How effectively was the problem resolved by outcomes resulting from the chosen alternatives? * if the problem was not resolve, what went wrong? Page 15
  • 16. Intuition* It is making decisions on thebasis of experience, feelings, andaccumulated judgment. Page 16
  • 17. Decision Making Conditions• Certainty * A situation in which someone can make an accurate decision because the outcome of every alternative choice is known.• Risk * A situation in which the someone is able to estimate the likelihood (probability) of outcomes that result from the choice of particular alternatives. Page 17
  • 18. • Uncertainty * limited information prevents estimation of outcome probabilities for alternatives associated with the problem and may force to rely on intuition, hunches, and ―gut feelings‖. # Maximax: The optimistic person’s choice to maximize the maximum outcome. # Maximin: The pessimistic person’s choice to maximize the minimum outcome. # Minimax: The choice to minimize maximum regret. Page 18
  • 19. Types of Decision Makers* Directive # Use minimal information and consider fewalternatives.* Analytic # Make careful decisions in unique situations.* Conceptual # Maintain a broad outlook and consider manyalternatives in making decisions.* Behavioral # Avoid conflict by working well with others andbeing receptive to suggestions. Page 19
  • 20. Rational (Logical) Decision ModelStepsScanning the situation—identifying a signal that a decision should be made.Classify the decision as routine, apply the appropriate decision rule; as non- programmed, begin comprehensive problem solving.Monitor and follow-up as necessary. Page 20
  • 21. Trends in Decision Making– The pace of decision making is accelerating: more decisions to make and have less time to make them. • Complex streams of decisions • Sources of decision complexity • Perceptual and behavioral decision traps Page 21
  • 22. Dealing with Complex Streams of Decisions– Multiple criteria to be satisfied by a decision.– Intangibles that often determine decision alternatives.– Risk and uncertainty about decision alternatives.– Long-term implications of the effects of the choice of a particular alternative.– Interdisciplinary input increases the number of persons to be consulted before a decision is made. Page 22
  • 23. – Pooled decision making increases the number of persons playing a part in the decision process.– Value judgments by differing participants in the process create disagreement over whether a decision is right or wrong, good or bad, and ethical or unethical.– Unintended consequences occur because the results of purposeful actions cannot always be predicted. Page 23
  • 24. Guidelines for effective decision making Categorical interpretation- the problem should be defined properly. Application of limiting factor- limiting factor should be taken into account in order to analyze Adequate information- more quantity of reliable information leads to effective decision making. Considering other views- various views at the same point are taken into account for quality decision. Timeliness- decision should be ,made at proper time to meet the competitive advantages. Page 24
  • 25. Techniques improving decision making Brainstorming – idea generation for decision making. Nominal group technique (NGT)- problem outlined, presentation of solution in written form, discussion over written solutions, and final decision. Delphi technique- decision made on the basis of questionnaire filled by the respondents. Consensus mapping- decision made on the basis of the report presented by the representative of each group after Page 25
  • 26. Page 26