Decision making


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Decision making

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Decision making

  1. 1. The Principle Of Management Decision Making The selection of a course of action from among alternatives, it is the core of planning. A plan can not be said until the decision is made. Until that point, there are only planning studies & analyses. [1]R Decision making is a primary task of a manager - comment The manager’s duty is to communicate the overall vision of the organizationand make sure the right people are in place to get it done, the job of the manager is to make sure it gets done; Decision making is a very small component of getting things done, so decision making is not a primary task. [2]R Explanation The word manager means, "One who handles, controls, or directs". During the course of work problems arise. Many of these problems are easily handled byindividual team members. But when they cant solve them the manager must be able to step in and solve the problem.Sometimes there are multiple solutions. A good manager possesses an analytical mind capable of troubleshooting a situation and coming up with the bestsolution available. If that manager is creative they will be able to develop more solutions than those obviously apparent. This does not discount the ability to foresee potential problems and head them off. Sometimes there are NO good solutions. A good manager confidently does whats necessary to keep his team a float. They make difficult decisions that they may not like but will ultimately be for the best. [3]R 1
  2. 2. The Principle Of Management Differentiate between Program & non- Programmed Decisions Programmed decisionsProgrammed decisions are made in routine, repetitive, well-structured situationswith predetermined decision rules. These may be based on habit, or established policies, rules and procedures and stem from prior experience or technical knowledge about what works or does not work in a given situation. Example Organizations often have standardized routines for handling customercomplaints or employee discipline. Decisions are programmed to the extent thatthey are repetitive and routine and that a definite approach has been worked out for handling them. Because the problem is well-structured, the manager does not have to go to the trouble and expense of working through an involved decision making process. Non-programmed decisions Non-programmed decisions are unique decisions that require a custom made solution. This is when a manager is confronted with an ill-structured or novel problem and there is no cut and dried solution. The creation of a marketingstrategy for a new service represents an example of a non-programmed decision. Example IBM Australias introduction of a personal computer in the 1980s was unlike any other decision the company had previously made. [4]R 2
  3. 3. The Principle Of Management How do you understand the difference between Decision made under condition of a Certainty, Uncertainty & Risk ?Virtually all decisions are made in an environment of at lest some uncertainty.However, the degree will vary from relative certainty to great uncertainty, there are certain risks involved in making decisions. [5]R CertaintyComplete and accurate knowledge of outcome of each alternative. There is only one outcome for each alternative. Uncertainty Multiple outcomes for each alternative can be identified but there is no knowledge of the probability to be attached to each. Risk Multiple possible outcomes of each alternative can be identified and a probability of occurrence can be attached to each. [6]R 3
  4. 4. The Principle Of Management Taking Decisions Taking Decisions under CertaintyIf the outcomes are known and the values of the outcomes are certain, thetask of the decision maker is to compute the optimal alternative oroutcome with some optimization criterion in mind.As an example: if the optimization criterion is least cost and you areconsidering two different brands of a product, which appear to be equal invalue to you, one costing 20% less than the other, then, all other thingsbeing equal, you will choose the less expensive brand.However, decision making under certainty is rare because all other thingsare rarely equal.Linear programming is one of the techniques for finding an optimalsolution under certainty. Linear programming problems normally needcomputations with the help of a computer. Taking Decisions under UncertaintyDecisions under uncertainty (outcomes known but not the probabilities)must be handled differently because, without probabilities, theoptimization criteria cannot be applied.Some estimated probabilities are assigned to the outcomes and thedecision making is done as if it is decision making under risk. Taking Decisions under RiskThe making of decisions under risk, when only the probabilities ofvarious outcomes are known, is similar to certainty.Instead of optimizing the outcomes, the general rule is to optimize theexpected outcome.As an example: if you are faced with a choice between two actions oneoffering a 1% probability of a gain of $10000 and the other a 50%probability of a gain of $400, you as a rational decision maker willchoose the second alternative because it has the higher expected value of$200 as against $100 from the first alternative. [7]R 4
  5. 5. The Principle Of Management References1. Management (A global and entrepreneurial perspective) 13th edition, part 2 & page # 1382. pcc3. hEK4. programmed_decisions5. Management (A global and entrepreneurial perspective) 13th edition, part 2 & page # 1466. certainty-risk-and.html7. certainty-risk-and.html 5