Function of Management- Decision making

1. Functions of
Management – II
Decision Making
TYPES OF DECISION, DECISION MAKING PROCESSES, EFFECTIVE DECISION ,
PROBLEM SOLVING APPROACH, SCIENTIFIC APPROACH, QUANTITATIVE
APPROACH, CREATIVE APPROACH

2. Decision
•A decision can be defined as: “a course of action purposely chosen
from a set of alternatives
to achieve organizational or managerial objectives or goals”.
•Decision making is an integral part of modern management, it is
considered as one of managers
primary functions.
•Decisions are made to achieve organization goals and objectives.
– Decision making process is continuous and ongoing.
– Decisions are strictly important, they determine both organizational
and managerial activities.
The process of examining your possibilities options, comparing them, and choosing a course of action.

3. Decision Making
“The process of deciding about something important, especially in a group of
people or in an organization”
Oxford Advanced Learner’s Dictionary
“Decision making involves the selection of a course of action from among two or
more possible alternatives in order to arrive at a solution for a given problem”
Trewatha & Newport
When one problem is solved another arises and so on, such that decision making
process is a
continuous and dynamic.
During decision making process, intellectual minds are involved and this requires
solid scientific knowledge coupled with skills and experience in addition to mental
maturity.

4. Types of Decisions
1. Basic decision or Strategic decision
2. Administrative decisions
3. Organizational or Personal decisions
4. Policy of decisions
5. Individual and Group decisions
6. Routine decisions
7. Adaptive decisions

5. Basic Decision or Strategic Decisions
• All basic decision is strategic decisions involving large range commitments and large
investments.
• Slight or small mistakes in these decisions would seriously injure the entire
organizations.
Administrative Decisions
• Herbert Simon had classified all decisions in two classes;
• Programmed decision:
It involves organizations which an develop specific process for handling these
decision. E.g. standing operating procedures and policies.
• Non – Programmed Decisions: They relate to general problem solving process. They
involve judgment, intuition and creativity.

6. Organisational or Personal Decisions
• Organizational decisions reflect company policy. They can be
delegated of transferred to others.
• While personal decisions refer to those made by a manager as an
individual and these can’t be
delegated.
Policy of Decisions
• Policy decisions are taken by the top, management. e.g. the
declaration of bonus in a company is a policy matter which is to be
decided by the top ,management, while calculation and distribution
of bonus is an operating decision which is taken as the lower levels.

7. Individual & Group Decisions
• The decisions taken by the an individual in the organization is known as
individual decisions
• Group decisions refer it the decisions which are taken by a group of
organizational members (board of directors, committer of experts)
Routine Decisions
• The type of decisions made when problems are relatively well defined and
common & when established rules, policies and procedures can be used to
solve them.
Adaptive Decisions
• The type of decisions made when problems and alternative solutions are
somewhat unusual and only partially understood.

8. Steps in decision making process
•A lot of time is consumed while decisions are taken.
•In a management setting, decision cannot be taken abruptly, it
should follow the steps such as;
1. Defining the problem
2. Gathering information and collecting data
3. Developing and weighing the options
4. Choosing best possible option
5. Plan and execute
6. Take follow up action

13. Problem Solving Approach

14. Scientific decision approach video

16. Quantitative approach
The quantitative approach is to make an optimal decision by
using mathematical and statistical models in a situation when
the probability of all outcomes is uncertain. So decision-
making helps managers solve complex problems.
Quantitative techniques for decision making
Linear Programming
Probability decision theory
Game theory
Queuing theory
Simulation
Network techniques

17. Quantitative techniques
Linear Programming: This technique basically helps in maximizing an
objective under limited resources. Tt helps in utilizing a resource or
constraint to its maximum potential. Managers generally use this technique
only under conditions involving certainty.
Probability decision theory: Managers use this approach to first
determine the probabilities of an outcome using available information. Often
‘decision trees’ or pay-off matrices is used for this purpose.
Game theory: This technique basically simulates rivalries or conflicts
between businesses as a game. The aim of managers under this technique is
to find ways of gaining at the expense of their rivals. In order to do this, they
can use 2-person, 3-person or n-person games.

18. Quantitative techniques
Queuing theory: Every business often suffers waiting for periods or queues pertaining to
personnel, equipment, resources or services. For example, departmental stores often have to
find a balance between unsold stock and purchasing fresh goods. Managers in such examples
can employ the queuing theory to minimize their expenses.
Simulation: The simulation technique observes various outcomes under hypothetical or
artificial settings. Managers try to understand how their decisions will work out under diverse
circumstances.
Network techniques: Complex activities often require concentrated efforts by personnel
in order to avoid wastage of time, energy and money. This technique aims to solve this by
creating strong network structures for work.
There are two very important quantitative techniques under this approach. These include the
Critical Path Method and the Programme Evaluation & Review Technique. These techniques are
effective because they segregate work efficiently under networks. They even drastically reduce
time and money.

19. Creative approach
Creativity is the ability to link or
combine ideas in novel ways, and
their unique alternatives have to
be considered useful to
others. Creativity is also known as
divergent or lateral thinking.
Lateral thinking moves away from
the linear approach that's
advocated in rational decision
making.