This document discusses decision making as the core function of managers. It defines decision making as selecting a course of action from alternatives. The decision making process involves identifying problems, criteria, alternatives, analyzing alternatives, selecting an alternative, implementing it, and evaluating the outcome. Common decision making models like rational, bounded rational, and intuition are described. The document also discusses different decision styles, group versus individual decisions, and factors to consider for each. Overall it provides an overview of key concepts in managerial decision making.
4. Organizations
Organizations are systems
Involve people, structure and a
common purpose
Have limited resources
Need to perform a series of functions to
meet its objectives
5. Managers
Managers are responsible for effective
and efficient execution of these
organizational functions.
A typical manager performs a number
of functions that are categorized as:
• Interpersonal
• Informational
• Decisional
6. Managers
One of the key traits that distinguish
managers from operatives is the ability to
make independent decisions.
8. What is decision-making?
The word decision is defined as:
“A choice between two or more
alternatives”.
Thus decision-making can be defined as:
“the selection of a course of action from
among alternatives ”.
9. Decision-making Process
Identifying a problem
Identifying decision criteria
Allocating weights to criteria
Developing alternatives
Analyzing alternatives
Selecting an alternative
Implementing the alternative
Evaluation (of decision effectiveness)
10. Problem Definition
Problem is a discrepancy (difference)
between an existing and a desired state.
Example:
“The manager has resigned, and we need
another manager”
Here the phrase “manager has resigned”
reflects the current state while “need
another manager” represents a desired
state.
11. Identifying Decision Criteria
The word criteria, is defined as “a
standard by which something can be
judged”.
A decision criteria therefore, is the basis
of a decision, which outlines the relevant
and important factors for a decision. And
implicitly, it also defines what is not
important.
12. Decision Criteria: Example
In the above-cited scenario, the decision
criteria may include the following factors:
Relevant qualifications
Leadership skills
Communication skills
Planning and analytical skills
Professional experience
13. Allocating Weights to Criteria
The next step in the decision making
process is prioritization.
Prioritization is achieved by assigning
quantitative weights to each criteria
element.
The weightage defines the relative
significance of each element.
14. Allocating Weights: Example
Criterion Weight
Relevant qualifications 3
Leadership skills 5
Communication skills 3
Analytical skills 4
Professional experience 1
15. Developing Alternatives
Involves defining the possible
alternatives (or choices) that would
resolve the problem.
In our case, the alternatives would be a
list of candidates or job applicants.
16. Analyzing Alternatives
Alternatives are rated and analyzed
on the basis of the criteria
The rating can be based on a specified
scale, say 1 – 5 etc.
Rating may be subjective in nature
and thus,may depend on the judgment
of the individual(s)
17. Criteria Rating: Example
C A N D I D A T E S R A T I N G A N D A S S E S S M E N T
Candidate Qualif-
ication
Leader-
ship
Commun-
ication
Analysis Exper-
ience
Kamran Ashraf 3 3 3 1 1
Rahila Mushtaq 2 1 4 2 2
Tasaduq Hussain 4 2 3 2 3
Zubair Ahmed 2 5 2 4 1
Maliha Javed 4 5 4 3 2
18. Analyzing & Assessment:
Example
E V A L U A T I O N O F C A N D I D A T E S
Candidate Qualif-
ication
Leader-
ship
Commun-
ication
Analysis Exper-
ience
Total
Kamran Ashraf 9 15 9 4 1 38
Rahila Mushtaq 6 5 12 8 2 33
Tasaduq Hussain 12 10 9 8 3 42
Zubair Ahmed 6 25 6 16 1 54
Maliha Javed 12 25 12 12 2 63
19. Selecting an alternative
Involves choosing the best alternative,
based on the above rating and analysis
Generally implies selecting the
alternative with the highest score.
20. Implementing the Alternative
Putting the decision into action
Involves clear communication of the
decision to all concerned and obtaining
their commitment
21. Evaluation
Evaluation forms an integral part of any
process
Involves evaluation of the outcome
based on the desired goal and criteria
Involves assessing the effectiveness
and efficiency of the outcome (or the
entire process)
In case of any undesired results, each
step of the process is carefully
reviewed to trace the root causes
24. The Rational Model
External and
internal
Environ. forces
1. Define and
diagnose the
problem
2. Set goals
3. Search for
alternative
solutions
4. Compare
and evaluate
solution
5. Choose
among
alternative
solutions
6. Implement
the solution
selected
7. Follow up
and control
25. 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
26. Rational Model: Criticism
Not all decisions made on rational
basis
Most problems, goals and preferences
are not clear or well defined
Not practical to know all possible
alternatives
Time and cost constraints exist in all
practical problems
Result not maximized in most cases
27. Bounded Rational: Assumptions
Limited set of criteria
Self-interest influences ratings
Limited no. of alternatives
Alternatives are assessed one at a
time till a satisficing (or good
enough) alternative is found
Politics influences acceptance and
commitment of decision
29. Intuition
Involves gut feeling
May also have rational basis
The “feeling” arises from past
experience and knowledge
Involves quicker response
Does not involve systematic analysis
30. Decision Types
Effective managers make various kinds of
decisions. In general, these decisions are
either
Programmed decisions
Non-programmed decisions
31. 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.
32. Non-programmed Decisions
A decision that is novel (new or unique)
or Ill structured
No established methods exist, because
it has never occurred before or because
It is too complex
34. 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 unproven
technology, changing strategic direction
35. Decision Styles
Decision-making, though a rational
process does include some subjective
elements
Thus in real organizational settings, the
quality of decision does depend on the
ability, style and approach of the
manager
36. Decision Styles: Directive
Directive
Represents low tolerance for
ambiguity and uncertainty
Reflects rational thinking of the
manager
Such decision styles are more suitable
for routine procedural tasks
37. Decision Styles: Analytic
Analytic
Analytical style is also a rational style
of thinking
Involves a very high tolerance for
ambiguity and uncertainty
Such managers generally seek detailed
information before making a decision
38. Decision Styles: Behavioural
Behavioural
Represents a creative way of thinking
Involves a low tolerance for
ambiguity or uncertainty
Managers with a behavioural style
introduce “new” ways of doing things
39. Decision Styles: Conceptual
Conceptual
Conceptual style also reflects a
creative and intuitive way of thinking
Conceptual style managers have a very
broad vision and generally look at
numerous alternatives for decision-
making
Focused on the long run and often
result in creative outcomes or
alternatives
40. Vroom and Yetton Model
Vroom and Yetton have identified five
decision styles for managers, and are
classified as follows:
Autocratic
AI
The decision is made individually, using
the information available to the individual
only
41. Vroom and Yetton Model
AII
The manager obtains information from
subordinates and himself makes the
decision
May or may not share with
subordinates, the purpose of questions
or the nature of problem
Subordinates do not play any role in
problem definition or selection of
alternatives
42. Vroom and Yetton Model
Consultative
CI
The manager shares the problem with
relevant subordinates individually
Getting their input individually and
not as a group. The manager then
makes the decision independently,
and may or may not be influenced by
the subordinates’ suggestions
43. Vroom and Yetton Model
CII
The problem is shared to subordinates
in a group
Their ideas and suggestions are sought
in a group meeting
The decision is then made by the
manager which
May or may not reflect the
subordinates’ influence
44. Vroom and Yetton Model
Group Consensus
GI
The problem is shared to subordinates
as a group
Alternatives are generated and
evaluated collectively
Effort is made to reach a consensus
45. Vroom and Yetton Model
GI (Contd.)
The decision is made collectively and
the manager functions as a coordinator
Does not “press” the group in adopting
the manager’s “solution”
The manager is willing to accept and
implement the decision of the group
46. Group Decision-making
The factors requiring group decisions
include:
Involving sensitive issues
High cost alternatives
Involving very high risk factor
Strategic impact
47. Group Decisions: Advantages
Acceptance of group members
Coordination is easier
Communication is easier
Existence of large alternatives
More information can be processed
Diversity of experience and
perspectives
48. Group Decisions: Disadvantages
Take longer time
Group can be indecisive
Groups can compromise
Groups can be dominated
Groups can “play games”
Victim to Groupthink
49. Situational Factors for
Individual Decision-making
Short time
Unimportant to group
Manager can take decision
Dominate the decision
Destructive conflict
Members hesitant
50. Situational Factors for
Individual Decision-making
Confidential data
Incapability of members
Manager’s dominance
Indirect effect on group members
51. Situational Factors for
Group Decision-making
Need for innovation and creativity
Data collection
Importance of acceptance
Importance of solution
Complex problem
Democratic process
52. Situational Factors for
Group Decision-making
Risk taking solution needed
Better understanding
Whole responsibility
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