The document discusses various aspects of decision making including defining it as a cognitive process involving choice among alternatives, outlining different types of decisions based on their frequency and the information available, and describing factors that influence decision making like levels of management, personality traits, tolerance for risk, and availability of resources. Decision making is presented as a fundamental managerial process that can be programmed for recurring situations or require non-programmed problem solving.
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The document discusses various aspects of decision making including defining it as a cognitive process involving choice among alternatives, outlining different types of decisions based on their frequency and the information available, and describing factors that influence decision making like levels of management, personality traits, tolerance for risk, and availability of resources. Decision making is presented as a fundamental managerial process that can be programmed for recurring situations or require non-programmed problem solving.
The document discusses various aspects of decision making including defining it as a cognitive process involving choice among alternatives, outlining different types of decisions based on their frequency and the information available, and describing factors that influence decision making like levels of management, personality traits, tolerance for risk, and availability of resources. Decision making is presented as a fundamental managerial process that can be programmed for recurring situations or require non-programmed problem solving.
Copyright:
Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPT, PDF, TXT or read online from Scribd
The document discusses various aspects of decision making including defining it as a cognitive process involving choice among alternatives, outlining different types of decisions based on their frequency and the information available, and describing factors that influence decision making like levels of management, personality traits, tolerance for risk, and availability of resources. Decision making is presented as a fundamental managerial process that can be programmed for recurring situations or require non-programmed problem solving.
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Process of choosing from among
alternatives Process of identifying problems and opportunities then resolving them According to Drucker
Decision making is a judgement. It is a
choice between right and wrong. It is at best a choice between ‘almost right’ and ‘probably wrong’. 1. GOAL DIRECTED ACTIVITY 2. INTEGRAL PART OF MANAGEMENT 3. INTELLECTUAL ACTIVITY 4. INVOLVES CHOICE Decision Making Cognitive process leading to the selection of a course of action among alternative
Every decision making process produces a
final choice. It can be an action or an opinion
Fundamental process in organisation
Decision maker chooses based on evaluation of information Problems faced by manager
◦ Choice and allocation of resources
TYPES OF DECISIONS Based on frequency ◦ Programmed decision ◦ Non-programmed decision
Based on information conditions
◦ Complete certainty ◦ Risk ◦ Complete uncertainty Based on frequency PROGRAMMED DECISION A decision that recurs often enough for a decision rule to be developed
DECISION RULE – Statement that tells decision
maker which alternative to choose once they have the information about the decision situation Highly structured
Clear and well known goals
Decision making procedure already
established
Sources and channels of information
clearly defined
Minimum of uncertainty
Recurs frequently Based on frequency NONPROGRAMMED DECISION A decision that recurs infrequently and for which there is no previously established decision rule.
Requires problem solving
Problem solving is a form of decision making in which the issue is unique and alternatives must be developed and evaluated without the aid of a programmed decision rule. Poorly structured
Information not available
No clear procedure for making decision
Goals are vague
Non recurring type or non routine
Programmed Nonprogrammed decisions Characteristics decision Certainty Outcome of each alternative is known Risk
Outcome is uncertain but has information to
estimate probabilities of outcomes Uncertainty
Lacks enough information to estimate probability
of outcomes TYPES OF BUSINESS DECISION Location decision Decision regarding location of plant or factory Location determine profitability Site selection depends on nature of business
Operating decision Decision regarding day to day operation of the business Types of business decision Growth decision Decision regarding future expansion or diversification Determines future of the business
Finance decision Decision regarding required optimum finance Excess – pay dividend to unutilised portion Deficit – affect day to day operation Personal and Organisational decision Personal decision is an attempt to achieve personal goals. It cannot be delegated. It can affect an organisation.
Organisational decision is taken to achieve
organisational objective. It can often be delegated Basic and routine decisions Basic decisions are on time decisions involving long term commitments of relative permanence involving large investments. eg: Top management policy
Routine decisions are everyday, highly
repetitive having little impact on overall organisation. eg: accountants decision on new entry TYPES OF DECISION BASED ON LEVELS OF MANAGEMENT Strategic Decisions Tactical Decisions Operational Decisions
Decisions are taken Decisions are not Decisions are taken
where future planning frequently taken. daily. is concerned. So less frequent
Long-term decisions Medium -term Short-term decisions
decisions
Decisions are taken in Decisions are taken in Decisions are taken
accordance with accordance with according to tactical organizational mission strategic decision. decisions. and vision.
Related to overall Related to production
Related to working of counter planning of employees Organization. Related to production Deal with welfare of Deal with organizational and factory growth. employees working in Growth. an organization. Manager arrives one firm conclusion with minimum amount of information Do not consider many alternatives Concerned action, results, speed and
efficiency Long, detailed report will be sent back,
ignored or given to someone else to
summarise Prefer simple and clear solution Manager who prefers concise report consisting of wide variety of briefly stated alternatives from which he have to choose
Rather than planning highly structured
solutions manager prefers that solutions evolve as he gains acceptance from others Carefully analyses large amount of information to arrive at one best solution.
Values perfection, precision and
thoroughness
Solve problems creatively
Manager uses mass amount of information to generate many possible solutions simultaneously Carefully analyse alternatives Manager constantly alters and improve his
plans Willing to use innovative models Autocratic or Directive styles ◦ Prefer simple and clear solution ◦ Make decision rapidly ◦ Do not consider many alternatives ◦ Rely on existing technology
Analytical ◦ Prefer complex problems ◦ Carefully analyse alternatives ◦ Enjoys solving problems ◦ Willing to use innovative models Conceptual ◦ Socially oriented ◦ Humanistic and artistic approach ◦ Solve problems creatively ◦ Enjoy new ideas
Behavioural ◦ Concern for their organisation ◦ Interest in helping others ◦ Open to suggestions ◦ Rely on meetings 1.Escalating commitment Tendency to persist in an ineffective course of action when evidence reveals that the project cannot succeed Managers tend to misrepresent negative information Society values perspectives and consistency
2. Risk-certainty-uncertainty Range of information available from complete certainty to complete uncertainty 3. Muddling through - incrementalism Muddling through occurs when goals are in broad terms, managers proceed to make intuitive decisions that seem to be most advantageous at the time.
Rapid changing environment leads to insufficient
time and information to take formal analysis of possible alternatives. Events are dealt with an incremental fashion. Bits and pieces of strategies are formed 4. Optimising and sub optimising Alternative which achieves desired goal have positive or negative impact on another goal Two objectives cannot be fully achieved one is optimised and other is sub optimised
5. Values Values are beliefs that guide actions and judgements across a variety of situations 6. Personality Set of distinct traits and characters that can be used to compare and contrast individuals
7. Propensity for risk
Risk on probability of obtaining a desired outcome. Probabilities are developed from information. Research indicates that decision makers vary greatly in their propensity for taking risk 8. Availability of Finance Certain decisions will be rejected because they cost too much
9. Existing Business Policy
It is not always practical to re-write business policy to accommodate one decision.
