PERSPECTIVE MANAGEMENT

Lecture 2. Decision Making

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 We try to you understand

1.That decision making as a rational process.

2. The development of alternative courses of action
3. The selection from among alternatives.
4. The differences between programmed and
nonprogrammed decisions.
5. Decisions made under conditions of certainty,
uncertainty, and risk.
6. The importance of creativity and innovation in
managing.
7. The major principles, or guides, for planning

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 Decision

• Managers at all levels make decisions at all

times
• All decisions will have some influence-large
or small on performance
• Quality of decisions,number of decisions etc
may affect manager’s individual performance
• Hence it important to develop decision
making skills

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 Decision Making
• Decision making is defined as the selection
of a course of action from among alternatives
followed by action to implement decision
• Decisions are a result of process-Decision
making PROCESS can be equally or more
important
• All managers must internalise decision
process

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 Decision Making Process
1. Stimulus (Trigger) Event
2. Problem definition
3. Gathering Information
4. Identifying alternatives,
5. Evaluating alternatives in terms of the goal
sought, and
6. Choosing an alternative, that is, making a
decision while keeping second option alive
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 Stimulus/Trigger
• Any activity end point,event,information
etc may serve as a stimulus to a
decision making process.
• For example, Ratan Tata may come
across information that Maruti-Suzuki is
contemplating introducing a new model
• Another example:A news item stating
that a new MBAschool is starting
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 Stimulus
• What does MET do?

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 Gap

• Stimulus event may reveal a GAP

• Either an opportunity gap

• Or a performance gap

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 Problem
Definition/identification
• Is not as easy as it may seem
• If the problem is incorrectly identified/defined,
any decisions made may be directed toward
solving the wrong problem
• Identifying exact problem is difficult:
1.Perceptual Problems:Negative information
may be selectively perceived to distort true
meaning

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 Problem Identification
2 Defining problem by solutions :is a form
of jumping to conclusions eg loss in
profit is due to poor quality
3 Identifying symptom as problems: eg
our problem is a 32%decline
Usually problems are of three types:
Routine,crisis,oppotrunities

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 Getting information
• Many sources of information exist
• Secondary information—magazines,
business journals etc
• Primary information

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Limited, or "Bounded," Rationality

• Limitations of information, time, and

certainty limit rationality, even though a
manager tries earnestly to be
completely rational
• Satisficing is picking a course of action
that is satisfactory or good enough
under the circumstances

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 Developing alternatives
• Feasible alternatives (actual,potential
solutions )to the problem should be
developed
• Sufficient effort should be made to
develop a wide range of alternatives
• Not generating enough detailed and
varied alternatives can actually wind up
costing both time, resources
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 Development of Alternatives and the
Limiting Factor

• A limiting factor is something that

stands in the way of accomplishing a
desired objective
• The principle of the limiting factor:
By recognizing and overcoming those
factors that stand critically in the way of
a goal, the best alternative course of
action can be selected
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 Evaluation of Alternatives
Once alternatives have been developed
they need to be evaluated to select the
one which produces the most
favourable outcome and avoids the
least favourable outcome.
Various aspects of this process are:

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Quantitative and Qualitative Factors

• Quantitative factors are factors that

can be measured in numerical terms
• Qualitative, or intangible, factors are
those that are difficult to measure
numerically

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 Marginal Analysis
• Marginal analysis is to compare
additional revenues and the additional
cost arising from increasing output

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 Cost Effectiveness Analysis
• Cost effectiveness analysis seeks the
best ratio of benefit and cost

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 Selecting an Alternative: Three
Approaches
When selecting from among alternatives,
managers can use:
1. Experience,
2. Experimentation, and
3. Research and analysis.

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 Decision process
1. Under Certainty
• All information available and is reliable
• Cause-Effect relationship known
2 Under Certainty
• Data Meagre
• Data reliability not known
• Evaluation of relationship among variables
unknown
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 Decision Making-Uncertainty
APPROACHES
a) Risk Analysis: Make a best
Estimate.Data itself could be
estimates.Estimate size of risk
b)Decision Tree:Probabilities of events
ocurring in each alternative is
estimated.Best estimate is accepted
c)Preference/utility theory
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 Decsion Making-Under Risk
Factual Information available, but could
be incomplete
Approaches
• Complex mathematical methods
• Subjective probability-
experience/judgement
Other factors in decision making:Personal
Values,personality ,Organisation culture
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 Decision Making
While taking decision make sure that
• The IMPORTANCE of decision is realised and
taken care of.
• The Impact on PEOPLEis carefully considered
• Whether decision leads to a desired course of
action is accounted
• Don’t decide unconsciously first and then
search for alternatives

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 Ideal Decision
• Should be correct
• As needed
• Economical
ALWAYS EXAMINE AND REEXAMINE
ALTERNATE COURSE OF ACTION

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 Programmed And Nonprogrammed
Decisions

• Programmed decisions are used for

structured or routine work
• Nonprogrammed decisions are used
for unstructured, novel, and ill‑defined
situations of a nonrecurring nature

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 Decision Making
• Type of Problem:Structured or Non structured
• Strategy Used: RATIONAL: Manager
examines a large number of options; weighs
pros and cons of all e.g whether to introduce
a new product
• OR Strategy used could be
INCREMENTAL :alternatives are almost
indistinguishable from one another

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What Type of Manager are You?

• Managers use two methods for

COLLECTING information: Sensing(S)
and Intuition(N)
• Managers use two methods of
EVALUATING information: Thinking(T)
and Feeling(F)

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 PROCASTINATORS
• DECISIONS are impeded by
procastinators
• We should see how to proceed if you
have to deal with a procastinator
• Also, try to understand how to deal with
yourself, if you are a procastinator
yourself

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TYPES OF PROCASTINATORS

• Perfectionists
• Dreamers
• Worriers
• Crisis Makers
• Defiers
• Overdoers

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 How to deal with procastinators
• Prioritise and stick
• Make &review ‘To do’ list/diary
• Set specific time goals/dates
• Reward self to get boring tasks done
• Delegate where possible
• Use the concept of ‘sunk time’
• Evaluate alternatives-positives/negatives
• Identify costs to you and others
• What I must do VS what I like
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 Criteria for Thoroughness
• Canvass wide range of alternatives
• Survey full range of objectives and values
implicated by choice
• Weigh cost/risk of consequences
• Recognise limiting factor
• Search new information
• Assimilate new information,expert opinions
• Re examine ALL alternatives
• Make provision for implementation

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 GROUP DECISION MAKING
ADVANTAGES
• Knowledge/information pool
• More alternatives
• Participation,hence acceptance
DISADVANTAGES
• Longer decision time
• May evaluate fewer options
• Domination by few
• Members may expect participation in implementation
• NO DECISION!
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 GROUP DECISION MAKING
TECHNIQUES
• Brainstorming
• Nominal Group Tachnique(NGT)
• Brainstorming Pool
• Collective note book
• Quality Circles

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 Creativity and Innovation

• Creativity refers to the ability and

power to develop new ideas
• Innovation means the use of new ideas

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 The Creative Process
• The creative process is seldom simple and
linear
• It generally consists of four overlapping and
interacting phases:
1. Unconscious scanning
2. Intuition
3. Insight
4. Logical formulation or verification

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 Rules for Brainstorming
1. No ideas are criticized
2. The more radical the ideas are, the
better
3. The quantity of idea production is
stressed
4. The improvement of ideas by others is
encouraged

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