Decision Making


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Decision Making, Types of Decision Making, Decision Tree

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Decision Making

  2. 2. OBJECTIVEDecision Making and its ImportanceSteps in Decision MakingTraditional Approach and Conditions for DMTypes of Decision MakingDecision TreeTechniques used for decision making
  3. 3. DECISION MAKINGDecision =A choice made between alternative courses of action in a situation of uncertainty.Making= The process of applying the objectives in proper way.Simply ,Decision Making “Is a course of action among the various alternatives.”The thought process of selecting a logical choice fromthe available options.
  4. 4. Importance of Decision MakingAnalyse the situationThink and ReflectDecide your answersNow...Go Head
  5. 5. Step In Decision MakingDefining the Problem: The first step towards a decision-making procedure is to define the problem. Obviously, there wouldbe no need to make a decision without having a problem. So, thefirst thing one has to do is to state the underlying problem that hasto be solved. You have to clearly state the outcome that you desireafter you have made the decision. This is a good way to start,because stating your goals would help you in clarifying yourthoughts.
  6. 6. continued…..Develop Alternatives: The next step afterdefining the main problem would be to state out thealternatives available for that particular situation. Here,you do not have to restrict yourself to think about thevery obvious options, rather you can use your creativeskills and come out with alternatives that may look a littleirrelevant. This is important because sometimes solutionscan come out from these out-of-the-box ideas.Evaluate the Alternatives: This can be said tobe one of the most important stages of the decision-makingprocedure. This is the stage where you have to analyzeeach alternative you have come up with. You have to findout the advantages and disadvantages of each option.
  7. 7. Continued…. Make the Decision: This is the stage where the hard work you have put in analyzing would lead to a proper decision. The evaluation process would help you with clearly looking at the available options and you have to pick whichever you think is the most applicable. You can also club some of the alternatives to come out with a better solution instead of just picking out any one of them.Implement the Solution: The next obvious step afterchoosing an option would be implementing the solution. Justmaking the decision would not give the result one wants. Rather,you have to carry out on the decision you have made.
  8. 8. Traditional Approach•The managerial decisions must be rational.•Argued that managerial decisions maker is guided by economic considerations in choosing solution to the problem. Assumptions•Decision maker intend to maximize economicgains.•Objective and rational.•Identify the problem clearly•Full information about various alternatives.•Complete freedom to choose the bestalternatives.
  9. 9. Conditions for makingdecisions Decision making under certainty  Also called Programmed decision making.  When a manager knows exactly which state of nature will occur, a circumstances of certainty occur which means that the manager will be able to make perfectly accurate decisions.  Deterministic model is used , wherein all factors are assumed to be exact with chance playing no role.
  10. 10. Decision making under uncertainty Also known as Nonprogrammed decision making. When there are many unknowns and no possibility of knowing what could occur in the future alter the outcome of a decision.
  11. 11. Types of decision making Routine and strategic Policy and operating Organizational and Personal Programmed and Non-programmed Individual and group decisions Irreversible and Reversible Experimental Trial and Error Made in strategic Cautious Conditional Delayed
  12. 12. • Decisions are made repetitivelyRoutine and following certain established rules, procedures and policies. strategic • They neither require collection of new data nor conferring with people. • Policy decisions-making is the making of policies and the Policy and decisions are made by the Top level operating managers. • Operating decisions are taken by lower management in order to put into action the policy decisions.
  13. 13. • It allows time for contingencies andProgrammed problems that may crop of later at the time of implementation. and Non- • It helps to limit the risks that areprogrammed inherent to decision making, although this may also limit the final gains. • Decision taken by an individual in an organization is known as IndividualIndividual and Decision. Group • Decisions taken by group of organizational members is known as Group Decision.
  14. 14. • Decisions that once made cannot beIrreversible unmade is Irreversible Decision. and • Decisions that can be changed completely before, during or after Reversible agreed decisions begins is Reversible Decision.Experimental • Decisions is not final until the first results appear and prove themselves to be Decisions satisfactory. • It requires positive feedback before one can decide on a course of action.
  15. 15. • In this type of decisions, knowledge is derived out of past mistakes.Trial and • A certain course of action is selected and is Error tried out, if the results are positive, the action is carried further, if the resultsDecisions appear negative, another course is adopted and so on and so forth a trial is made and an error is occurred. Made in • Decisions are made in steps until the whole action is completed. Stages • It allows close monitoring of risks as one accumulates the evidence of outcomesDecisions and obstacles at every stage.
  16. 16. • It allows time for contingencies and problems that may crop of later at theCautious time of implementation. • It helps to limit the risks that areDecisions inherent to decision making, although this may also limit the final gains. • Such type of decisions can be altered if certain foreseenConditional circumstances arises. Decisions • It prepares one to react if the competition makes a new move or if the game plan changes radically.
  17. 17. • Decisions are put on hold till the decision makers feel that the timeDelayed is right. • Prevents one from making aDecisions decision at the wrong time or before all the facts is known.
  18. 18. Decision Tree What?Decision support tool.Options are laid and possible outcome is investigated.Helps to form a balanced picture of the risks and rewards associated with each possible course of action.Helps to choose between several courses of action.
  19. 19. Decision Tree How ? Uses a tree-like graph or model of decisions and their possible consequences. From this box draw out lines towards the right for each possible solution, and write that solution along the line. Keep the lines apart as far as possible so that you can expand your thoughts Draw a small square to represent this towards the left of a large piece of paper. At the end of each line, consider the results. If the result of taking that decision is uncertain, draw a small circle.
  20. 20. Decision Tree How ? If the result is another decision that you need to make, draw another square. Write the decision or factor above the square or circle. If you have completed the solution at the end of the line, just leave it blank. Keep on doing this until you have drawn out as many of the possible outcomes and decisions as you can see leading on from the original decisions. Challenge each square and circle to see if there are any solutions or outcomes you have not considered. If there are, draw them in.
  21. 21. Group Aided Decision When all the members or group of members collectively take the decision, it is known as a Group Decision. Features  Used when problem is complicated.  Time-consuming.  Leads to higher quality
  22. 22. Techniques used for Group Aided Decisions Delphi Technique Nominal Group Technique Scenario Analysis Consensus making and Brainstorming
  23. 23. Delphi Technique:In this technique ,members dont have face to faceinteraction for decision making.Decisions are arrived at through written communication inthe form of questionnaires and mails.Nominal Group Technique:It is structured group meeting which restricts the verbalcommunication among members.Developed to foster creativity and to overcome the tendencyto criticize ideas when they are presented.
  24. 24. Scenario Analysis:Analysis of possible future conditions.Done by evaluating major environmental variables and by assessing the likely strategies of other significant factors such as formulating alternative scenarios.Consensus making and Brainstorming:Consensus making tries to pool the ideas generated by several task subgroups to arrive at a decision.Brainstorming is a creative technique of generating ideas to solve a problem.