Decision Making in Management

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Decision Making in anagement

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Managerial Decision Making
 Decision Making
The Process in which managers respond to the opportunities and
threats by analyzing options and making decisions about
organization goals and course of action.
 Decisions can be made during two fundamental situations
 Opportunities – Managers respond to the ways in improving
performance
 Threats – Occurs when Managers are impacted by adverse events
or consequences due to their decision making.

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Types of Decision Making
1. Programmed Decisions ( Routine, Predictable, Automated)
 Managers had made the same decision many times before
 There are certain rules and guidelines to follow as usual
 Factories /Retailers placing standing orders to their vendors
2. Non Programmed Decisions ( Unusual situations)
 Decision is first of its kind (No past experience)
 Decision made based on partial information
 Either Judgment or intuition

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Decision Making Styles
1. Directive – Use minimal information and consider few alternatives
2. Analytic – Make careful decision in unique situations
3. Conceptual – Maintain a broad outlook and consider many
alternatives in making long term decisions
4. Behavioral – Avoid conflict situations by working well with others and
being receptive to suggestions

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Quantitative Techniques on
Decision Making
1. Gantt Chart – A chart that depicts the planned and actual progress of
work during the project tenure
2. Program Evaluation Review Technique (PERT) – A network model used
to track the planning activities required to complete a large scale or non
repetitive project
3. Critical Path Method – The path through the PERT network that includes
the time consuming sequence of events and activities
4. Breakeven Analysis – A method of determining relationship between total
costs and total revenues at various levels of production.
5. Decision Trees – A decision tree provides a quantitative estimate of best
alternative. It is a tool for estimating the outcome of a series of decisions

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Individual Decision Making
1. Classical Model
2. Administrative Model

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1. Classical Model
List Alternative & • Assumes all information is available
Consequences to the Manager
Rank each
• Assumes Manager can process the
alternative from information
low to high
Select the Best • Assumes Manager knows the best
Alternative future course of the Company.

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2. Administrative Model
Administrative • Challenges the classical
assumptions that managers have
Model and process the information
Bounded • Multiple alternatives & Vast
information which mangers can’t
Rationality consider all of them
Incomplete • Most Mangers can’t see all
alternatives and decide if the
Informaiton required information is incomplete

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Why incomplete information ?
Uncertainty
& Risk
Information Incomplete Ambiguous
cost Information Information
Time
constraints

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Decision Making Steps
Recognize need
for a decision
Learn from Frame the
Feedback Problem
Implement
Generate
chosen
Alternatives
Alternative
Choose best
Alternative

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Evaluating Alternatives
Legal ?
Ethical ?
Economical?
Practical ?

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Group Decision Making
Advantages
 Reduce the biases and can call for combined skills & abilities
Disadvantages
 Biased Decision - It can be biased if the group agree to one or few
person in the group. (Like CEO or MD forcing a decision to the group)
 Devil’s Advocacy – One member of the group acts as critique and
disagree to the group’s decision
 Dialectical Inquiry – Two different groups are assigned and each group
evaluate other group’s decision/alternatives
 Promote Diversity – By increasing diversity in group wider alternatives
can occur which will make the decision making harder.

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Group Decision Making Types
1. Brainstorming
 Managers meet face to face to generate alternatives
 Group members are not allowed to evaluate alternatives until all alternatives are
listed
 Pros & Cons of each alternative will be discussed at the end
2. Nominal Group Technique
 Provides more structure way to generate alternatives
 Each group member given time to write down all alternatives
 One by one alternatives are read aloud without any discussion
 Then discussion occurs and alternatives are ranked
3. Delphi Technique
 Provides written format without having Mangers Face to Face meeting
 Problems distributed to in writing to Mangers for generating alternatives
 Response are received and summarized by Top Management
 The results are send back to the participants for feedback and ranking.
 The process continues until consensus is reached

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Characteristics of an Effective
Decision Making
 It focus on what is important
 It is logical and consistent
 It acknowledges both the subjective and objective thinking and
blends analytical with intuitive thinking
 It requires only as much information and analysis as is
necessary to resolve a particular situation
 It encourages and guides the gathering of relevant information
and informed openion
 It is straight forward, reliable, easy to use and flexible

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Thank You