Notes on decisions making


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Notes on decisions making

  1. 1. What are the 3 approaches managers can use to make decisions: 1. RATIONAL - We assume that the manager’s decision making will be rational… - It means that manager will make logical and consistent choices to maximize value. After all managers have all sorts of tools and techniques to help them be rational decision makers. - The rational assumptions are as follows : - A rational decision maker would be fully objective and logical. - Problem faced would be clear, unambiguous ( clear ) - Decision maker would have a clear and specific goal to be achieved - Know all possible alternatives and consequences - Final choice are made in the best interests of the organization. 2. BOUNDED RATIONALITY - Managers make rational decisions but are bounded ( limitated ) by their ability to process information. - Managers satisfice in which decision makers accept solutions that are good enough.Meaning of satisfice… I know you tak tau.. it means…decide on and pursue a course of action satisfyingthe minimum requirements to achieve a goal.How to pronounce…. altered from satisfy. 3. INTUITIVE DECISION MAKING - Making decisions based on experience, feelings and accumulated judgementWhat is intuition… please see the diagram of exhibit 3-7 of your text book… 1. Experienced based decisions – managers make decisions based on their experience Affect initiated decisions – managers make decisions based on feelings or emotions 2. Cognitive based decisions – managers make decisions based on skills, knowledge 3. Subconscious mental processing- use data from subconscious mind 4. Values or Ethics based decision – make decisions based on ethical values or cultures.PROBLEMS CAN BE DIVIDED INTO 2 CATEGORIES : 1. Structured Problems - Problems which are straight forward - The goal of the decision maker is clear - The problem and information about the problem easily defined and complete.2. Unstructured Problems/ Ill structured problems (poorly structured) - New problems in which information is ambiguous or incomplete. - They are new or unusual problemsDECISIONS CAN BE DIVIDED INTO 2 DECISIONS :
  2. 2. 1. PROGRAMMED DECISIONS  A repetitive decision that can be handled by a routine approach  The most effective way to handle structured problems  Relatively simple and rely heavily on previous solutions.  Managers simply do what they and others have done previously in the same situation.2. UNPROGRAMMED DECISIONS Decisions that must be custom-made to solve unique and nonrecurring problems Example – deciding to acquire another organizations or which global market offers the most potential. Such problems as mentioned in the example are unique and nonrecurring problems This decision is different from previous organizational decisions because the issue is new. Programmed Decision-Making Aids ( apa yang boleh membantu anda dalam membuat keputusan ?) 1. PROCEDURE- Series of interrelated sequential of steps that a manager can use when responding to a well- structured problems.- The difficulty is identifying the problem, once problem has been identified then so is the procedure. 2. RULES- Statement that tells managers what they ought or ought not to do (limits on procedural actions. 3. POLICY- A general guide that establishes parameters for making decisions about recurring problems.- Example –
  3. 3. Exhibits for all the subtopics discussed :Explanation on the diagram:The four organizational levels are : top, middle, and first-line managers and operative employees.At which of these levels should decisions be made? - Recurring or routine decisions, programmed decisions : made by lower levels of management. - Middle-level managers make coordinating decisions with short-term implications and first-line managers make localized decisions about what needs to be done. - Nonrecurring or unique decisions, nonprogrammed decisions: Made by top management. Operative employees make job-related decisions to determine how a job should be done. - Decisions are seldom fully programmed or fully non programmed. Few programmed decisions can eliminate individual judgment completely; unusual decision-making situations can be helped by considering programmed routines. - If possible, management decisions should be programmed. - At the top of the organization, the programmed approach is not realistic. Most problems that top management confronted are nonrecurring. - There are strong economic incentives for top management to create policies, standard operating procedures, and rules to cut costs by minimizing the need for managers to exercise discretion guide other managers, - The more nonprogrammed the decision, the greater the judgment required to make it.
  4. 4. DECISION MAKING STYLES1. Directive style - A person has this style if they have a low tolerance for ambiguity and are efficient, rational, and logical in their way of thinking. - They focus on the short term and are quick to make decisions, usually resulting in a decision that has been made with minimal information and not carefully analysing other alternatives. - Dislike ambiguity and prefer rationality.2. Analytic style - A person with an analytic decision-making style has greater tolerance to ambiguity. - They are careful decision makers that like to be well informed and thoroughly assess their options. - They usually have the ability to adapt or cope with unique and challenging situations - Those using the analytic style confront ambiguity by demanding more alternatives. - Prefer full information before making a decision.3. Conceptual Style - Generally very broad in their approach and consider all available alternatives. - They are long-term oriented and are usually capable of formulating creative solutions to problems. - Individuals who tend to be very broad in outlook, to look at many alternatives, and to focus on the long run and often look for creative solutions. 4. Behavioral styles - Work well with others, are open to suggestions, and are concerned about the achievements of their team. - They generally try to avoid conflict and place importance on their acceptance by others. - Work well with others and are receptive to suggestions.( willing to consider new ideas) **NOTE - A good understanding of the various styles of decision-making each will allow you to recognise your own style and adapt accordingly to each situation.
  5. 5. GROUP DECISION MAKINGThere are several advantages to group decision making: - Group decisions provide more complete information than do individual ones. - A group will bring a diversity of experience and perspectives to the decision process that an individual, acting alone, cannot. - Groups also generate more alternatives, because of a greater quantity and diversity of information. - Group decision making increases acceptance of a solution. If those who will be affected by a solution and who must implement it can participate in making it, they will be more likely to accept the solution. - Since group decision-making is consistent with democratic ideals, decisions made by groups are perceived as being more legitimate than decisions made by a single person.There are several disadvantages to group decision making : - Group decisions are time consuming, and groups almost always take more time to make a decision than an individual would take. - There may also be minority group domination, because group members will differ in many ways: for example, status in the organization, experience, verbal skills, or assertiveness. - A minority group that dominates the group decision-making process will have an undue influence on the final decision. Another problem focuses on the pressures to conform in groups. - This pressure can result in groupthink—group members withhold deviant, minority, or unpopular views in order to give the appearance of agreement . - Finally, there is ambiguous responsibility. Since group members share responsibility, who is actually responsible for the final outcome?
  6. 6. SWOT ANALYSIS • Strengths (strategic) - Internal resources such as capital, skills of workers, or patents that are available or things that an organization does well. • Weaknesses - Resources that an organization lacks or activities that it does not do well. - Or resources that are lacking in the organization. • Opportunities (strategic) - Positive external environmental factors. • Threats - Negative external environmental factors