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    Unit 5: Decision Making: DR Juhi Garg

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    HEMANT RAJ
    This document discusses decision making and the decision making process. It describes decision making as responding to opportunities and threats by analyzing options and determining goals and actions. It outlines programmed and non-programmed decisions and discusses intuition and reasoned judgment in decision making. The classical and administrative models of decision making are introduced. The six steps of decision making are outlined as recognizing a need, generating alternatives, evaluating alternatives, choosing, implementing, and learning from feedback. Group decision making and improving decision making are also summarized.

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    Unit 5: Decision Making: DR Juhi Garg

    Uploaded by

    HEMANT RAJ
    43 views30 pages
    This document discusses decision making and the decision making process. It describes decision making as responding to opportunities and threats by analyzing options and determining goals and actions. It outlines programmed and non-programmed decisions and discusses intuition and reasoned judgment in decision making. The classical and administrative models of decision making are introduced. The six steps of decision making are outlined as recognizing a need, generating alternatives, evaluating alternatives, choosing, implementing, and learning from feedback. Group decision making and improving decision making are also summarized.

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    Decision making

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    Unit 5-Decision Making

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    This document discusses decision making and the decision making process. It describes decision making as responding to opportunities and threats by analyzing options and determining goals and actions. It outlines programmed and non-programmed decisions and discusses intuition and reasoned judgment in decision making. The classical and administrative models of decision making are introduced. The six steps of decision making are outlined as recognizing a need, generating alternatives, evaluating alternatives, choosing, implementing, and learning from feedback. Group decision making and improving decision making are also summarized.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    43 views30 pages

    Unit 5: Decision Making: DR Juhi Garg

    Uploaded by

    HEMANT RAJ
    This document discusses decision making and the decision making process. It describes decision making as responding to opportunities and threats by analyzing options and determining goals and actions. It outlines programmed and non-programmed decisions and discusses intuition and reasoned judgment in decision making. The classical and administrative models of decision making are introduced. The six steps of decision making are outlined as recognizing a need, generating alternatives, evaluating alternatives, choosing, implementing, and learning from feedback. Group decision making and improving decision making are also summarized.

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    Download as pptx, pdf, or txt
    of 30

    Unit 5: Decision Making

    Dr Juhi Garg
    Nature of Decision Making
    The process by which managers respond to opportunities and
    threats that confront them by analyzing options and making
    determinations about specific organizational goals and courses of
    action.
    Decisions in response to opportunities occurs when managers
    respond to ways to improve organizational performance to benefit
    customers, employees, and other stakeholder groups

    Decisions in response to threats events inside or outside the


    organization are adversely affecting organizational performance
    Decision Making

    Programmed Decision
    • Routine, virtually automatic decision making that
    follows established rules or guidelines.
    • Managers have made the same decision many times before
    • Little ambiguity involved
    Decision Making

    Non-Programmed Decisions
    • Nonroutine decision made in response to unusual or
    novel opportunities and threats.
    • The are no rules to follow since the decision is new.
    • Decisions are made based on information, and a manager’s
    intuition, and judgment.
    Decision Making
    • Intuition
    • feelings, beliefs, and hunches that come readily to mind, require little
    effort and information gathering and result in on-the-spot decisions.

    • Reasoned judgment
    • decisions that take time and effort to make and result from careful
    information gathering, generation of alternatives, and evaluation of
    alternatives
    The Classical Model

    Classical Model of Decision Making


    • A prescriptive model of decision making that assumes the
    decision maker can identify and evaluate all possible
    alternatives and their consequences and rationally choose the
    most appropriate course of action.
    • Optimum decision
    • The most appropriate decision in light of what managers
    believe to be the most desirable future consequences for
    their organization.
    The Classical Model of Decision Making

    Figure 7.1
    The Administrative Model

    Administrative Model of Decision Making


    • An approach to decision making that explains why decision making is
    inherently uncertain and risky and why managers can rarely make decisions
    in the manner prescribed by the classical model
    Administrative Model of Decision Making
    • Bounded rationality
    • There is a large number of alternatives and available information can be so
    extensive that managers cannot consider it all.
    • Decisions are limited by people’s cognitive limitations.
    • Incomplete information
    • Because of risk and uncertainty, ambiguity, and time constraints
    Why Information Is Incomplete

    Figure 7.2
    Causes of Incomplete Information
    • Risk
    • Present when managers know the possible outcomes of a particular course
    of action and can assign probabilities to them.
    • Uncertainty
    • Probabilities cannot be given for outcomes and the future is unknown.
    Ambiguous Information
    • Information whose meaning is not clear allowing it to be interpreted in
    multiple or conflicting ways.
    Causes of Incomplete Information

    • Time constraints and information costs


    • managers have neither the time nor money to search for all possible alternatives and
    evaluate potential consequences
    • Satisficing
    • Searching for and choosing an acceptable, or satisfactory response to problems and
    opportunities, rather than trying to make the best decision.
    • Managers explore a limited number of options and choose an acceptable
    decision rather than the optimum decision.
    • This is the typical response of managers when dealing with incomplete
    information.
    Six Steps in Decision Making

    Figure 7.4
    Decision Making Steps

    Step 1. Recognize Need for a Decision


    • Sparked by an event such as environment changes.
    • Managers must first realize that a decision must be
    made.
    Step 2. Generate Alternatives
    • Managers must develop feasible alternative courses of
    action.
    • If good alternatives are missed, the resulting
    decision is poor.
    • It is hard to develop creative alternatives, so
    managers need to look for new ideas.
    Decision Making Steps

    Step 3. Evaluate Alternatives


    • What are the advantages and disadvantages of each
    alternative?
    • Managers should specify criteria, then evaluate.
    Decision Making Steps

    Step 3. Evaluate alternatives


    Criteria

    Legality Is the alternative legal and will not violate any


    domestic and international laws or
    government regulations?

    Ethicalness Is the alternative ethical and will not bring


    harm stakeholders unnecessarily?

    Economic Feasibility Can organization’s performance goals sustain


    this alternative?
    Practicality Does the management have the capabilities
    and resources required to implement the
    alternative?
    General Criteria for Evaluating Possible
    Courses of Action
    Decision Making Steps

    Step 4. Choose Among Alternatives


    • Rank the various alternatives and make a decision
    • Managers must be sure all the information available is brought to bear on
    the problem or issue at hand
    Decision Making Steps

    Step 5. Implement Chosen Alternative


    • Managers must now carry out the alternative.
    • Often a decision is made and not implemented.
    Step 6. Learn From Feedback
    • Managers should consider what went right and wrong with the decision
    and learn for the future.
    • Without feedback, managers do not learn from experience and will
    repeat the same mistake over.
    Feedback Procedure

    1. Compare what actually happened to what was expected to


    happen as a result of the decision
    2. Explore why any expectations for the decision were not met
    3. Derive guidelines that will help in future decision making
    Cognitive Biases and Decision Making

    Heuristics
    • Rules of thumb that simplify the process of making decisions.
    • Decision makers use heuristics to deal with bounded rationality.
    • If the heuristic is wrong, however, then poor decisions result from
    its use.
    • Systematic errors – errors that people make over and over and that
    result in poor decision making
    Types of Cognitive Biases

    • Prior Hypothesis Bias


    • Allowing strong prior beliefs about a relationship between
    variables to influence decisions based on these beliefs even
    when evidence shows they are wrong.
    • Representativeness
    • The decision maker incorrectly generalizes a decision from a
    small sample or a single incident.
    Types of Cognitive Biases

    • Illusion of Control
    • The tendency to overestimates one’s own ability to control
    activities and events.
    • Escalating Commitment
    • Committing considerable resources to project and then
    committing more even if evidence shows the project is
    failing.
    Group Decision Making

    • Superior to individual making


    • Choices less likely to fall victim to bias
    • Able to draw on combined skills of group members
    • Improve ability to generate feasible alternatives
    Group Decision Making

    • Allows managers to process more information


    • Managers affected by decisions agree to cooperate
    Group Decision Making

    • Potential Disadvantages
    • Can take much longer than individuals to make decisions
    • Can be difficult to get two or more managers to agree because of different
    interests and preferences
    • Can be undermined by biases
    Group Decision Making

    Groupthink
    • Pattern of faulty and biased decision making that occurs in
    groups whose members strive for agreement among
    themselves at the expense of accurately assessing
    information relevant to a decision
    Improved Group Decision Making
    • Devil’s Advocacy
    • Critical analysis of a preferred alternative to ascertain its
    strengths and weaknesses before it is implemented
    • One member of the group who acts as the devil’s advocate
    by critiquing the way the group identified alternatives and
    pointing out problems with the alternative selection.
    Improved Group Decision Making

    • Dialectical Inquiry
    • Two different groups are assigned to the problem
    and each group is responsible for evaluating
    alternatives and selecting one of them
    • Top managers then hear each group present their
    alternatives and each group can critique the other.
    • Promote Diversity
    • Increasing the diversity in a group may result in
    consideration of a wider set of alternatives.
    Devil’s Advocacy and Dialectical Inquiry

    Figure 7.7
    Organizational Learning and Creativity
    Creativity
    • The ability of the decision maker to discover novel ideas
    leading to a feasible course of action.
    • A creative management
    staff and employees are
    the key to the learning
    organization.

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