This document discusses decision making in organizations. It outlines that managers at all levels must make decisions, from goals and facilities for top managers to production schedules and employee issues for middle and lower managers. The steps of decision making are identified as: identifying the problem, considering factors, adding weights, identifying alternatives, analyzing alternatives, choosing, implementing, and evaluating. Decision making can involve both structured problems with programmed solutions, and unstructured problems requiring non-programmed decisions. Common decision making errors that can occur include overconfidence bias, anchoring effect, confirmation bias, and hindsight bias.

1. DECISION MAKING STEPS
AND PROCESS
R.ArunKumar,AP/Mech,RIT

2. Decision Making:
 Managers at all levels and in all areas of organizations make
decisions.
 Top level managers – Goals, Location of manufacturing facility,
new markets etc.
 Middle level and lower level – production schedules, product
quality problems, pay rises and employee discipline etc.
R.ArunKumar,AP/Mech,RIT

3. Decision Making:
 Making a choice from two or more alternatives.
 For every action, decision making helps us to choose the best
solution.
R.ArunKumar,AP/Mech,RIT

4. Decision making steps:
R.ArunKumar,AP/Mech,RIT

5. Decision making steps:
Step1: Identifying the problem or fixing to the requirement.
Step2: Consider the factors to resolve problem (e.g. costs, features).
Step3: Adding importance / weights to each criteria.
Step4: Identify viable alternatives.
Step5: Analyze the alternatives.
Step6: Choosing all the alternates.
Step7: Implementation of alternatives.
Step8: Evaluation.
R.ArunKumar,AP/Mech,RIT

6. Decision in management functions:
 We believe that the decisions taken by managers are rational.
R.ArunKumar,AP/Mech,RIT

7. Decision making:
Bounded rationality:
 Managers make decisions rationally, but are limited (bounded) by
their ability to process information.
 Managers satisfies rather than maximize.
Escalation of commitment:
 Increased commitment to a previous decision despite evidence that
it may go wrong.
R.ArunKumar,AP/Mech,RIT

8. Decision making:
Role of intuition:
 Taking a decision on the basis of experience, feelings and
accumulated judgment.
R.ArunKumar,AP/Mech,RIT

9. Types of problems and decisions:
1. Structured problems and programmed decisions.
 e.g. for programmed decisions: Policy, procedure, rule.
2. Unstructured problems and non – programmed decisions.
 e.g. for non – programmed decisions: expel / change the employee.
R.ArunKumar,AP/Mech,RIT

10. Programmed vs Non – programmed decisions:
R.ArunKumar,AP/Mech,RIT

11. Types of decision makers:
R.ArunKumar,AP/Mech,RIT

12. Common decision making errors:
R.ArunKumar,AP/Mech,RIT

13. Common decision making errors:
1. Overconfidence Bias
 Holding unrealistically positive views of one’s self and one’s
performance.
2. Immediate Gratification Bias
 Choosing alternatives that offer immediate rewards.
3. Anchoring Effect
 Fixating on initial information and ignoring subsequent
information.
4. Selective observation Bias
 Selecting, organizing and interpreting events based on the
decision maker’s biased perceptions.
R.ArunKumar,AP/Mech,RIT

14. Common decision making errors:
5. Confirmation Bias
 Seeking out information that reaffirms past choices and
discounting contradictory information.
6. Framing Bias
 Selecting and highlighting certain aspects of a situation
while ignoring other aspects.
7. Availability Bias
 Losing decision-making objectivity by focusing on the most
recent events.
8. Representation Bias
 Drawing likeness and seeing identical situations when none
exist.
R.ArunKumar,AP/Mech,RIT

15. Common decision making errors:
9. Randomness Bias
 Creating unfounded meaning out of random events.
10.Sunk Costs Errors
 Forgetting that current actions cannot influence past events
and relate only to future consequences.
11. Self-Serving Bias
 Taking quick credit for successes and blaming outside
factors for failures.
12. Hindsight Bias
 Mistakenly believing that an event could have been predicted
once the actual outcome is known (after-the-fact)
R.ArunKumar,AP/Mech,RIT