Decision Making Process Identification of a problem Decision – A choice from Identification of Decision Criteria two or more alternatives Allocation of weights to criteria Decision Making Process – A set of eight steps that Development of alternatives include identifying a problem, selecting an alternative and evaluating Analysis of Alternatives the decision’s effectiveness. Selection of an Alternative Problem – A discrepancy between an existing and aImplementation of the Alternative desired state of affairs.Evaluation of Decision Effectiveness
Making DecisionsRational Decision Making – Decision-making behaviour where choices are consistent and value-maximizing within specified constraints.Intuitive decision making – Making decisions on the basis of experience, feelings and accumulated judgment.Programmed Decision – A repetitive decision that can be handled by a routing approach.
Decide?Structured Problems – Straightforward, familiar, and easily defined problems.Procedure – A series of interrelated sequential steps that can be used to respond to a well-structured problem.Rule – An explicit statement that tells managers what they can or cannot do.Policy – A guideline for making decisions.
Decision Making ConditionsCertainty – A situation in which a manager can make accurate decisions because all outcomes are known.Risk – A situation in which the decision maker is able to estimate the likelihood of certain outcomes.Uncertainty –A situation in which a decision maker has neither certainty nor reasonable probability estimates available.
Common Decision-Making ErrorsAnchoring Effect – Describes when decision makers fixate on initial information as a starting point and then, once set, fail to adequately adjust for subsequent information.Selective Perception Bias – Decision makers selectively organize and interpret events based on their biased perceptions.Availability Bias – Decision makers tend to remember events that are the most recent and vivid in their memory.
PlansStrategic Plans – Plans that apply to the entire organization, establish the organization’s overall goals and seek to position the organization in terms of its environment.Operational Plans – Plans that specify the details of how the overall goals are to be achieved.=============================================Long-term – Plans with a time frame beyond 3 years.Short-term – Plans covering 1 year or less.
What is Planning?Defining organization’s goals, establishing overall strategy and developing plans.Reasons: 1. Provides Direction 2. Reduces Uncertainty 3. Minimizes waste and redundancy 4. Establishes goals and objectives 5. Is associated with positive financial results.