Decision making

DECISION MAKING

Decision Making

Perceptions of the

decision maker

Perceptions of the

decision maker

Outcomes

Decision Making Decision making is the process of choosing a

course of action for dealing with a problem or opportunity.

Steps in systematic decision making.Recognize and define the problem or opportunity.Identify and analyze alternative courses of action, and estimate their effects on the problem or opportunity.Choose a preferred course of action.Implement the preferred course of action.Evaluate the results and follow up as necessary.

Phases of Decision making Process

Intelligence activity Design activity Choice activity

Stages of decision making Process

The identification phase The development phase The selection phase

Decision making Process Certain decision environments.

Exist when information is sufficient to predict the results of each alternative in advance of implementation.

Risk decision environments.Exist when decision makers lack complete certainty regarding the outcomes of various courses of action, but they are aware of the probabilities associated with their occurrence.

Decision making Process Uncertain decision environments.

Exist when managers have so little information on hand that they cannot even assign probabilities to various alternatives and their possible outcomes.

Described as a rapidly changing setting in terms of:

External conditions.

The information technology requirements needed for analyzing and making decisions.

The people who influence problem and choice

definitions.

Types of decisions.Programmed decisions.

Involve routine problems that arise regularly and can be addressed through standard responses.

Nonprogrammed decisions.Involve nonroutine problems that require solutions specifically tailored to the situation at hand.

Decision-making model

Classical decision theoryClassical decision theory assumes the

manager faces a clearly defined problem, knows all possible action alternatives and their consequences, and then chooses the optimum solution.

Behavioral decision theoryBehavioral decision theory accepts the

notion of bounded rationality. It assumes the manager acts only in terms of what is perceived about a given situation, and then chooses a satisficing solution.

Assumptions of the Rational Decision-Making Model

Assumptions of the Rational Decision-Making Model

1. Problem clarity

2. Known options

3. Clear preferences

4. Constant preferences

5. No time or cost constraints

6. Maximum payoff

1. Problem clarity

2. Known options

3. Clear preferences

4. Constant preferences

5. No time or cost constraints

6. Maximum payoff

Steps in the Rational Decision-Making ModelSteps in the Rational

Decision-Making Model

E X H I B I T 5-3

Social Model Social model is drawn from psychology, which explain as human behavior being guided largely by their unconscious desires. Social pressures and influence may cause the manager to make irrational decision.

Making ChoicesMaking Choices

Four reason for escalation of commitment

Project characteristics Psychological determinants Social forces Organizational determinants

Intuition.The ability to know or recognize quickly

and readily the possibilities of a given

situation.

A key element of decision making under

risk and uncertainty.

Escalation of Commitment11-9

Figure 11-4

Psychological and Social Determinants* Ego defense* Individual motivators* Peer pressure* Saving face

Organizational Determinants* Breakdown in communication* Politics* Organizational inertia

Project Characteristics* A delayed return on the investment* Setbacks attributed to temporary causes

Contextual Determinants* External political pressure

Escalationof

commitment

Poor resultsor

outcomes

Simon’s Normative Model of Decision Making

Based on premise that decision making is Based on premise that decision making is not rationalnot rational

Decision making is characterized byDecision making is characterized by * limited information processing * limited information processing * use of judgmental heuristics * use of judgmental heuristics * sacrificing * sacrificing

Making ChoicesMaking Choices

Judgmental HeuristicsAvailability HeuristicAvailability Heuristic: A decision maker’s tendency : A decision maker’s tendency to base decisions on information that is readily to base decisions on information that is readily available in memory.available in memory.Representativeness HeuristicRepresentativeness Heuristic: The tendency to : The tendency to assess the likelihood of an event occurring based on assess the likelihood of an event occurring based on one’s impressions about similar occurrences.one’s impressions about similar occurrences.

The Adjustment Heuristic: The Adjustment Heuristic: In this heuristic, the In this heuristic, the decision maker makes a judgment by starting from an decision maker makes a judgment by starting from an initial value and the adjust to make the final decision.initial value and the adjust to make the final decision.

Decision-Style ModelDecision-Style Model

E X H I B I T 5-5

Participative Decision Making Techniques

The Three Components of Creativity

The Three Components of Creativity

E X H I B I T 5-4

A Model of Organizational Creativity and Innovation

11-15

Figure 11-7

Individual CharacteristicsIntellectual abilitiesTacit (implied) and explicit knowledge Styles of thinkingPersonality traitsIntrinsic task motivation

Group Characteristics- Norms - Diversity- Cohesiveness - Roles- Size - Problem-solving approaches

Organizational Characteristics- Culture - Strategy- Resources - Structure- Rewards - Technology

Individual creativebehavior/performance

Group creativebehavior/performance

Organizational creativity andinnovation

A Model of Participative Management11-11

Participation inGoal Setting

Participation inDecision Making

Participation inProblem SolvingParticipation in

Change

Contingency Factors* Design of work* Trust* Readiness to Participate

AutonomyIncreased

control over workbehavior

Completion ofMeaningful

Tasks

Acceptanceand Commitment

Security

Challenge

Satisfaction

Performanceand Innovation

Management Decision Styles You solve the problem or make the decision yourself, usingYou solve the problem or make the decision yourself, using

information available to you at that time. information available to you at that time. You obtain the necessary information from your subordinate(s),You obtain the necessary information from your subordinate(s),

then decide on the solution to the problem yourself. then decide on the solution to the problem yourself. You share the problem with relevant subordinates individually,You share the problem with relevant subordinates individually,

getting their ideas and suggestions without bringing them together getting their ideas and suggestions without bringing them together as a group. Then you make the decision that may or may not reflect as a group. Then you make the decision that may or may not reflect your subordinates’ influence. your subordinates’ influence.

You share the problem with your subordinates as a group,You share the problem with your subordinates as a group, collectively obtaining their ideas and suggestions. Then you make collectively obtaining their ideas and suggestions. Then you make the decision that may or may not reflect your subordinates’ influence. the decision that may or may not reflect your subordinates’ influence.

You share a problem with your subordinates as a group. Together youYou share a problem with your subordinates as a group. Together you generate and evaluate alternatives and attempt to reach agreement generate and evaluate alternatives and attempt to reach agreement (consensus) on a solution. (consensus) on a solution.

11-12

Advantages and Disadvantages of Group-Aided Decision Making

Advantages Disadvantages1. Greater pool of knowledge

1. Social pressure2. Different perspectives 2. Minority domination3. Greater comprehension 3. Logrolling4. Increased acceptance 4. Goal displacement5. Training ground 5. “Groupthink”

11-10a

Table 11-3a

Group Problem-Solving Techniques (continued)

Nominal Group Technique: Process to generate ideas and evaluate solutions

This technique reduces roadblocks to group decision making by* separating brainstorming from evaluation* promoting balanced participation* incorporating mathematical voting techniques

11-14b

Group Problem-Solving Techniques (continued)

The Delphi Technique: Process to generate ideas from physically dispersed experts

Computer-Aided Decision Making: Computers are used to reduce consensus roadblocks while collecting more information faster

11-14c

Organizational Constraints on Decision Makers

Organizational Constraints on Decision Makers

Performance EvaluationEvaluation criteria influence the choice of actions.

Reward SystemsDecision makers make action choices that are favored by the organization.

Formal RegulationsOrganizational rules and policies limit the alternative choices of decision makers.

System-imposed Time ConstraintsOrganizations require decisions by specific deadlines.

Historical PrecedentsPast decisions influence current decisions.

Choosing problems In choosing problems to address, ask and

answer the following questions:Is the problem easy to deal with?

Might the problem resolve itself?

Is this my decision to make?

Is this a solvable problem within the context of the organization?

Reasons for decision making failure.

Managers too often copy others’ choices and try to sell them to subordinates.Subordinates may believe the manager is imposing his or her will rather than working for everyone’s interests.Managers may focus on the problems they see rather than the outcomes they want.Managers use participation too infrequently.

Decision making frameworkManager or team leader uses information that he or she possesses and decides what to do without involving others.Variant 1 manager solves the problem or makes the decision alone.Variant 2 manager obtains the necessary information from others and then decidesManager or team leader consults with others and allows them to help make the final choice

Ethics into decision making Ways to infuse ethics into decision making.

Develop a code of ethics and follow it.Establish procedures for reporting violations.Involve employees in identifying ethical issues.Monitor ethical performance.Reward ethical behavior.Publicize ethical efforts.

Ethics into decision making Morality is involved in:

Choosing problems.Deciding who should be involved in making decisions.Estimating the impacts of decision alternatives.Selecting an alternative for implementation.

An effective decision needs to solve a problem as well as match moral values and help others