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Presentation on
By : Fareed Virk
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A decision is a choice made fromavailable alternatives.
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Decision Making Process
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Recognition ofdecision
requirements
Diagnosis andAnalysis of
Causes
Developmentof Alternatives
Selection ofDesiredAlternative
Implementationof Chosen
Alternative
Evaluation andfeedback
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How are decisions made
in organizations?
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Decision environments include:
Certain environments.
A situation in which a manager can make an accurate
decision because the outcome of every alternative choice
is known.
Risk environments.
A situation in which the manager is able to estimate thelikelihood (probability) of outcomes that result from the
choice of particular alternatives.
Uncertain environments.
Limited information prevents estimation of outcome
probabilities for alternatives associated with the problem
and may force managers to rely on intuition, hunches, and
“gut feelings”.
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Types of Decisions
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8
PROGRAMMED
DECISIONS.
Involve routine problems
that arise regularly and can
be addressed through
standard responses.
NONPROGRAMMED
DECISIONS.
Involve non-routine
problems that require
solutions specifically
tailored to the situation at
hand
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Organizational Level Nature of Problems Nature ofDecision-Making
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Classical Decision
Theory
The classical decisionmaker:
Faces a clearly definedproblem.
Knows all possibleaction alternatives andtheir consequences.
Full information aboutalternatives and theiroutcomes.
Chooses the optimumalternative.
Is often used as a modelof how managers shouldmake decisions.
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BehavioralDecision Theory
Recognizes that human
beings operate with: Cognitive limitations.
Bounded rationality.
The behavioral decisionmaker: Faces a problem that is
not clearly defined.
Has limited knowledgeof possible actionalternatives and their
consequences. Chooses a satisfactory
alternative.
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Garbage Can
Model
Views decision-making as ahighly unstructured process
A model of decision makingthat views problems,solutions, participants, andchoice situations as mixed
together in the “garbagecan” of the organization.
Instead of identifying aproblem,the model proposesthat decisions begin with the
solution. When solutionsemerge, problems arise.
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Decision Making Approach
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Rationality
Bounded Rationality
Intuition
Involves gut feeling
May also have rational basis
The “feeling” arises from past experience and knowledge
Involves quicker response
Some believe it is a personality trait with which very few
people are born with
It doesn’t necessarily operate independently of rational
analysis; rather the two complement
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Heuristics
Availability A decision maker’stendency to basedecisions on informationthat is readily availablein memory.
Anchoring andadjustment
Bases a decision onincremental adjustmentsto an initial valuedetermined by historicalprecedent or somereference point.
RepresentativenessThe tendency to assessthe likelihood of anevent occurring basedon one’s impressionsabout similaroccurrences.
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Decision Making
Styles
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Directive
•Use minimalinformation andconsider fewalternatives
•Seek rationality
Analytic
•Need moreinformation andalternatives
•Make carefuldecisions in
uniquesituations
Conceptual
•Good at findingcreativesolutions.
•Maintain abroad outlook
and considermanyalternatives inmakingdecisions
Behavioral
•Strong concernfor people in theorganizationand theirdevelopment
•Avoid conflictby working wellwith others andbeing receptiveto suggestions
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Decision Making Tools
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Qualitative
SWOT PEST
Stakeholder Analysis
HRM
Quantitative
Break-even Analysis
PERT
CPM
Decision Trees
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Characteristics of an EffectiveDecision-Making Process
It focuses on what is important.
It is logical and consistent.
It acknowledges both subjective and objective thinkingand blends analytical with intuitive thinking.
It requires only as much information and analysis as isnecessary to resolve a particular dilemma.
It encourages and guides the gathering of relevantinformation and informed opinion.
It is straightforward, reliable, easy to use, and flexible.
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