3. Course Outcomes
T o understand the role and scope of Decision making and Risk
management in organisations.
To understand the importance of Decision making tools and models in
business.
To understand the role of leadership and its allied aspects while making
decisions.
To understand the role and importance of organizational values in
Decision making and Risk Management.
4. Course
Objectives:
Course Objectives:
1. To learn the key topics in decision making and risk management
so that they can improve decision making and reduce risk in their
management activities and organizations.
2. Find the best alternative in a decision with multiple objectives and
uncertainty.
3. Describe the process of making a decision.
4. Analyze an organization's decision making system.
5. Develop a risk management process.
Presenter-Dr.Ms Kirti Bhatia
5. SYLLABUS
1 Introduction to Decision making
and Risk Management
Decision Making and Risk Management – Introduction, Concept, Problem
definition and framing.
Rational Models of decision making, Other models - Myers Briggs,
Bounded Rationality model, Retrospective decision model, OODA Loop
Model, Ladder of Inference etc. Types of Decisions, Steps in Decision
making process, Creative decision
making process.
Why rational models fail ?, Traps and cognitive barriers that lead to sub-
optimal decisions
6. SYLLABUS
UNIT-2 Decision making Tools and Models
Decision Making - Groupthink versus the wisdom of crowds, Avoiding
decision-making traps.
Intuition: pros and cons, Decisions making for corporate management,
execution, and operation of projects, Role of technology in decision
making and data analysis.
EQ (Emotional Intelligence) versus IQ as essential decision making traits
to manage risks
Dealing with conflict and Risk - Resistance to change, Key elements of
EQ: personal and social competencies, Dissonant decision making
leadership and brain chemistry
Qualitative and Quantitative risk analysis tools /methods – Introduction,
Concept.
Decision Models in strategic management, Decision making systems.
7. SYLLABUS
Unit-3-Definitions of leadership and followership, Motivational
theory; common motives of leaders and followers.
Identifying resources that affect your power and influence;
use and misuse
of power, Role of competition and conflict in leadership roles.
Charisma, heroes, bullies and jerks – aspects to be
considered in decision
making and leadership.
Decision making and Leadership - Values as underpinnings
of leadership.
8. MOTIVATION
WHAT DO EMPLOYEES WANT
WHY DO SOME PEOPLE PERFORM
BETTER THAN THE OTHERS
WHY DO SAME EMPLOYEES BEHAVE
DIFFERENTLY IN DIFFERENT
SITUATIONS.
8
9. 9
WHAT IS MOTIVATION?
MOTIVATION
“THE TERM MOTIVATION HAS DERIVED FROM
THE LATIN WORD MOVERE THAT MEANS TO
MOVE”
“MOTIVATION IS A PROCESS OF STIMULATING
PEOPLE TOWARDS ACTION TO ACCOMPLISH
DESIRED GOALS”
10. MOTIVATION AND INDIVIDUAL
NEEDS
MOTIVATION
– The process by which a manager induces other
to work to achieve organizational objectives
NEED
– An internal state that makes certain outcomes
appear attractive
11. 11
MOTIVATION
MOTIVE:
“ IT IS ANYTHING THAT INITIATES OR SUSTAINS AN
ACTIVITY”
“IT IS A PSYCHOLOGICAL FORCE WITH AN
INDIVIDUAL THAT SETS HIM IN MOTION”
14. 14
IMPORTANCE OF MOTIVATION
EFFECTIVE USE OF RESOURCES
HIGHER EFFICIENCY
ACCOMPLISHMENT OF ORGANISATIONAL
GOALS
REDUCED LABOUR TURN OVER AND
ABSENTEEISM
HEALTHY INDUSTRIAL RELATIONS
IMPROVED CORPORATE IMAGE
15. 15
CONTENT/NEEDS THEORIES
OF MOTIVATION
BASIC IDEA:
Individuals have needs that, when unsatisfied,
will result in motivation
• MASLOW’S HIERARCHY OF NEEDS
• HERZBERG’S TWO FACTOR THEORY
(MOTIVATION-HYGIENE THEORY)
• ALDERFER’S ERG THEORY
• MCCLELLAND’S THEORY OF NEEDS
16. 16
MASLOW – HIERARCHY OF
NEEDS
DEVELOPED IN 1940 BY ABRAHAM
MASLOW
BASED ON 4 MAJOR ASSUMPTIONS:
1. ONLY UNMET NEEDS MOTIVATE
2. PEOPLE’S NEEDS ARE ARRANGED IN
ORDER OF IMPORTANCE (BASIC –
COMPLEX)
3. LOWER-LEVEL NEEDS MUST BE MET
FIRST
4. THERE ARE 5 CLASSIFICATIONS
OF NEED
19. – PHYSIOLOGICAL: Basic & Primary Needs: food, drink,
shelter
– SAFETY: Desire to preserve already achieved & to protect
oneself from dangers: physical safety: Job Security,
Seniority Systems, Safe Working conditions, Insurance &
Retirement benefits
– SOCIAL: Affiliation with others, affection, friendship:
Formal & Informal work groups
– ESTEEM: Internal (self-respect, self-confidence, and
achievement); external (status, recognition, and prestige)
– SELF-ACTUALIZATION: Personal growth and fulfillment
HIERARCHY OF NEEDS THEORY
(MASLOW)
20. 20
HERZBERG TWO-FACTOR
DEVELOPED IN THE 1960S
TWO LEVELS OF NEED
– LOWER-LEVEL: HYGIENE OR
MAINTENANCE
– HIGHER-LEVEL: MOTIVATORS
PEOPLE ARE MOTIVATED BY
MOTIVATORS RATHER THAN BY
MAINTENANCE FACTORS
21. 21
HERZBERG’S MOTIVATION-
HYGIENE THEORY
HYGIENE FACTORS - NECESSARY,
BUT NOT SUFFICIENT, FOR HEALTHY
ADJUSTMENT
– EXTRINSIC FACTORS; CONTEXT OF WORK
MOTIVATORS - THE SOURCES OF
SATISFACTION
– INTRINSIC FACTORS; CONTENT OF WORK
23. 23
THE MODEL
Satisfied (with job motivator factors) Not Satisfied
(Motivated) (Not Motivated)
(intrinsic motivators – esteem and self-actualization needs – growth needs)
Work itself, recognition, achievement, increased responsibility, growth
Not Dissatisfied (with the maintenance factors) Dissatisfied
Motivator Factors
(extrinsic motivators – physiological, safety, and social needs – existence and
Relatedness needs)
Pay, benefits, job security, working conditions, company policies
High Maintenance Factors Low
24. Motivation–Hygiene
Theory of Motivation
Hygiene factors avoid
job dissatisfaction
• Company policy &
administration
• Supervision
• Interpersonal relations
• Working conditions
• Salary
• Status
• Security
SOURCE: Adapted from Frederick Herzberg, The Managerial Choice: To be Efficient or to Be Human. (Salt Lake City: Olympus, 1982). Reprinted by permission.
• Achievement
• Achievement recognition
• Work itself
• Responsibility
• Advancement
• Growth
• Salary?
Motivation factors
increase job satisfaction
27. 27
MCCLELLAND’S THEORY OF
NEEDS ACHIVEMENT
MOTIVATION MODEL
DEVELOPED IN THE 1940S
NEEDS ARE BASED ON PERSONALITY TRAITS
ALL PEOPLE HAVE THE NEED FOR
ACHIEVEMENT, POWER AND AFFILIATIONS
29. MCCLELLAND’S THEORY OF
NEEDS
THE NEEDS FOR ACHIEVEMENT, POWER, AND
AFFILIATION ARE MAJOR MOTIVES IN WORK
• NEED FOR ACHIEVEMENT (nAch):
The drive to excel, to achieve in relation to a set of
standards, to strive to succeed.
• NEED FOR POWER (nPow):
The need to make others behave in a way that they would
not have behaved otherwise OR HAVE A CONTROL
OVER OTHERS..
• NEED FOR AFFILIATION (nAff):
The desire for friendly and close interpersonal relationships.
30. 30
SUMMARIZING THE
VARIOUS NEEDS THEORIES
Hygiene
Factors
Need for Achievement
Need for Power
Need for Affiliation
Self-Actualization
Esteem
Affiliation
Security
Physiological
Motivators
Relatedness
Existence
Growth
Maslow Alderfer Herzberg McClelland
31. Self-actualization
3 Motivational Need Theories
Maslow Alderfer McClelland
Higher
Order
Needs
Lower
Order
Needs
Esteem
self
interpersonal
Safety & Security
interpersonal
physical
Need for
Achievement
Need for
Power
Relatedness Need for
Affiliation
Existence
Growth
Belongingness
(social & love)
Physiological
33. EQUITY THEORY
– FORMULATED BY J.ADAMS OF U.S.A IN 1965
– EMPLOYEES PERCEIVE WHAT THEY GET
FROM A JOB SITUATION (OUTCOMES) IN
RELATION TO WHAT THEY PUT INTO IT
(INPUTS) AND THEN COMPARE THEIR INPUT-
OUTCOME RATIO WITH THE INPUT-OUTCOME
RATIOS OF RELEVANT OTHERS.
35. STEPS OF EQUITY THEORY
1.COMPARISION OF INPUTS AND OUTCOMES.
2.DISCOVERY OF INEQUITY
3.PRESSURE TO RESTORE EQUITY.
4.BALANCE RESTORE BY MANAGER.
35
37. EXPECTANCY THEORY
(VROOM)
A comprehensive theory of motivation that an
individual tends to act in a certain way, in the
expectation that the act will be followed by
given outcome, and according to the
attractiveness of that outcome to the
individual.
– The extent to which individuals are motivated to
perform to get a reward of value to them is based
on their belief that their performance will result in
the reward they want.
38. 38
VROOM’S EXPECTANCY
THEORY
VALENCE: VALENCE, ACCORDING TO VROOM, MEANS THE
VALUE OR STRENGTH ONE PLACES ON PARTICULAR OUTCOME
OR REWARD.
EXPECTANCY: IT RELATES EFFORTS TO
PERFORMANCE.
INSTRUMENTALITY: BY INSTRUMENTALITY , VROOM
MEANS, THE BELIEF THAT PERFORMANCE IS RELATED TO
REWARD.DEGREE TO WHICH FIRST LEVEL OUTCOME WILL
LEAD TO SECOND LEVEL OUTCOME.
MOTIVATION=VALENCE*EXPECTANCY*INSTRUMENTALITY
39. EXPECTANCY RELATIONSHIPS
(LINKAGES)
EFFORT–PERFORMANCE
– The perceived probability that exerting a given amount
of effort will lead to performance
PERFORMANCE–REWARD
– The belief that performing at a particular level will lead
to the attainment of a desired outcome
ATTRACTIVENESS
– The importance placed on the potential outcome or
reward that can be achieved on the job.
40. 40
VROOM’S EXPECTANCY THEORY OF
MOTIVATION
Efforts Reward
Performance
Will my effort
improve my
performance?
Will reward
satisfy individual
goals ?
Will perfor-
mance lead to
reward?
41. 41
HOW DOES EXPECTANCY
THEORY WORK?
Expectancy
Effort Performance Link
E=0
No matter how much effort
I put in, probably not possible
to memorize the text in 24 hours
Instrumentality
Performance Rewards Link
I=0
My professor does not look
like someone who has $1 million
Valence
Rewards Personal Goals Link
V=1
There are a lot of wonderful things
I could do with $1 million
My professor offers me $1 million if I memorize the textbook by tomorrow morning.
Conclusion: Though I value the reward, I will not be motivated to do this task.
42. 42
PORTER AND LAWLER’S EXPECTANCY
THEORY
Efforts Performance
Perceived
effort reward
probability
Value of
reward
Role
perception
Abilities
and Traits
Perceived
Equitable
Reward
Intrinsic
rewards
Extrinsic
rewards
Satisfaction
THE PORTER AND LAWLER’S MOTIVATION MODEL
43. 43
PORTER AND LAWLER’S EXPECTANCY
THEORY
EFFORT : REFERS TO AMOUNT OF ENERGY AN
EMPLOYEE EXERTS ON A GIVEN TASK
• VALUE OF THE AWARD
• PERCEIVED EFFORT AWARD PROBABILITY
PERFORMANCE : EFFORTS LEAD TO
PERFORMANCE
• ABILITIES AND TRAIT
• ROLE PERCEPTION
SATISFACTION : PERFORMANCE LEADS TO
SATISFACTION. LEVEL OF SATISFACTION DEPENDS UPON
AMOUNT OF AWARDS ACHIEVED
44. EARLY THEORIES OF
MOTIVATION
THEORY X (MCGREGOR)
– The assumption that employees dislike work,
are lazy, seek to avoid responsibility, and must
be coerced to perform
THEORY Y
– The assumption that employees are creative,
seek responsibility, and can exercise self-
direction
45. 45
A MANAGER WHO VIEWS EMPLOYEES FROM
THEORY X (NEGATIVE) PERSPECTIVE BELIEVES
BELIEVE THAT WORKERS NATURALLY DISLIKE
WORK AND WOULD AVOID IT IF POSSIBLE
BELIEVE THAT WORKERS NEED TO BE
CONTROLLED OR THREATENED TO GET THE
WORK DONE
BELIEVE THAT WORKERS PREFER TO BE
DIRECTED AND DON’T WANT THE
RESPONSIBILITY TO MAKE DECISIONS
BELIEVE THAT WORKERS LACK AMBITION
BELIEVE THAT WORKERS PREFER SECURITY
THEORY X PREMISES
46. THEORY Y PREMISES
A MANAGER WHO VIEWS EMPLOYEES FROM
THEORYY (POSITIVE) PERSPECTIVE BELIEVES
BELIEVE THAT WORK IS NATURAL
BELIEVE THAT WORKERS EXERCISE SELF
CONTROL TO REACH THEIR OBJECTIVES
BELIEVE THAT WORKERS SEEK RESPONSIBILITY
BELIEVE THAT WORKERS EXERCISE
IMAGINATION, INGENUITY, AND CREATIVITY
TOWARDS SOLVING PROBLEMS
47. 47
Management
activities
Theory X Theory Y
1. Planning Superior sets objectives Superior and subordinate
for subordinates, sets objectives jointly,
Little participation in Great deal of participation
objective setting and in objective setting and
plan formulation, plan formulation,
Few alternatives are Many alternatives are
explored, explored,
Low commitment to High commitment to
objectives and plan objectives and plan
2. Directing Autocratic leadership Participation and team
based on authority, work leadership based on
competence,
Top-down communication Two-ways communication
with little feedback, with plenty of feedback,
Limited information flow. Free information flow.
3. Appraising Low trust in appraisal, High trust in appraisal, internal
and controlling Control is extreme and control based on self control,
rigid, Focus on past Based on past but forward
and fault finding looking and problem solving
Management processes with theories X and Y
48. 48
THEORY Z
William Ouchi developed Theory
Z after making a comparative
study of Japanese and American
management practices.
49. 49
FEATURES OF THEORY Z
TRUST
STRONG BOND BETWEEN
ORGANIZATION AND EMPLOYEES
EMPLOYEE INVOLVEMENT
COORDINATION
INFORMAL CONTROL SYSTEM
INEGRATED ORGANIZATION.
51. CARROT AND STICK
APPROACH
CARROT- REWARD-BONUS,PAY
RAISE,PROMOTION
STICK - PUNISHMENT-
DEMOTION,TERMINATION,TRANSFE
R.
REWARD AND PUNISHMENT SYSTEM
BASED ON INTERNAL
ENVIRONMENT.
51
52. REWARD AND PUNISHMENT
1.REWARD MORE EFFECTIVE WHEN DIRECTLY
LINKED WITH PERFORMANCE.
2.PUNISHMENT MORE EFFECTIVE WHEN APPLIED
WHEN UNDESIRABLE BEHAVIOUR ACTUALLY
OCCURS.
3.PUNISHMENT SHOULD BE ADMINSTERED WITH
GREAT CARE.
4.PUNISHMENT SHOULD BE USED TO MODIFY THE
BEHAVIOUR.
5.THE MIXTURE SHOULD BE USED TO REINFORCE
DESIRABLE BEHAVIOUR PATTERNS.
52
53. 53
JOB ENRICHMENT
“JOB ENRICHMENT IS CONCERNED WITH DESIGNING
THE JOB IN SUCH A MANNER THAT IT BECOMES MORE
INTERESTING, CHALLENGING TO THE JOB
PERFORMER, PROVIDES HIM OPPORTUNITIES FOR
ACHIEVEMENT, RESPONSIBILITY, ADVANCEMENT AND
GROWTH.”
