Decision making

Decision Making:The Essence of Managers’

Job

by Muhammad Iqbal Malik

Key Topics

Introduction

The Decision-making process

Decision-making models

Decision Styles

A discussion on Group Decisions

Part I

Introduction

Organizations

Organizations are systems

Involve people, structure and a common purpose

Have limited resources

Need to perform a series of functions to meet its objectives

Managers

Managers are responsible for effective and efficient execution of these organizational functions.

A typical manager performs a number of functions that are categorized as:

• Interpersonal

• Informational

• Decisional

Managers

One of the key traits that distinguish managers from operatives is the ability to make independent decisions.

Part II

Decision-making

What is decision-making?

The word decision is defined as:

“A choice between two or more alternatives”.

Thus decision-making can be defined as:

“the selection of a course of action from among alternatives ”.

Decision-making Process

Identifying a problem

Identifying decision criteria

Allocating weights to criteria

Developing alternatives

Analyzing alternatives

Selecting an alternative

Implementing the alternative

Evaluation (of decision effectiveness)

Problem Definition

Problem is a discrepancy (difference) between an existing and a desired state.

Example:

“The manager has resigned, and we need another manager”

Here the phrase “manager has resigned” reflects the current state while “need another manager” represents a desired state.

Identifying Decision Criteria

The word criteria, is defined as “a standard by which something can be judged”.

A decision criteria therefore, is the basis of a decision, which outlines the relevant and important factors for a decision. And implicitly, it also defines what is not important.

Decision Criteria: Example

In the above-cited scenario, the decision criteria may include the following factors:

Relevant qualifications

Leadership skills

Communication skills

Planning and analytical skills

Professional experience

Allocating Weights to Criteria

The next step in the decision making process is prioritization.

Prioritization is achieved by assigning quantitative weights to each criteria element.

The weightage defines the relative significance of each element.

Allocating Weights: Example

Criterion Weight

Relevant qualifications 3

Leadership skills 5

Communication skills 3

Analytical skills 4

Professional experience 1

Developing Alternatives

Involves defining the possible alternatives (or choices) that would resolve the problem.

In our case, the alternatives would be a list of candidates or job applicants.

Analyzing Alternatives

Alternatives are rated and analyzed on the basis of the criteria

The rating can be based on a specified scale, say 1 – 5 etc.

Rating may be subjective in nature and thus,may depend on the judgment of the individual(s)

Criteria Rating: Example

C A N D I D A T E S R A T I N G A N D A S S E S S M E N T

Candidate Qualif- ication

Leader- ship

Commun- ication

Analysis Exper- ience

Kamran Ashraf 3 3 3 1 1

Rahila Mushtaq 2 1 4 2 2

Tasaduq Hussain 4 2 3 2 3

Zubair Ahmed 2 5 2 4 1

Maliha J aved 4 5 4 3 2

Analyzing & Assessment: Example

E V A L U A T I O N O F C A N D I D A T E S

Candidate Qualif-ication

Leader- ship

Commun- ication

Analysis Exper- ience

Total

Kamran Ashraf 9 15 9 4 1 38

Rahila Mushtaq 6 5 12 8 2 33

Tasaduq Hussain 12 10 9 8 3 42

Zubair Ahmed 6 25 6 16 1 54

Maliha J aved 12 25 12 12 2 63

Selecting an alternative

Involves choosing the best alternative, based on the above rating and analysis

Generally implies selecting the alternative with the highest score.

Implementing the Alternative

Putting the decision into action

Involves clear communication of the decision to all concerned and obtaining their commitment

Evaluation

Evaluation forms an integral part of any process

Involves evaluation of the outcome based on the desired goal and criteria

Involves assessing the effectiveness and efficiency of the outcome (or the entire process)

In case of any undesired results, each step of the process is carefully reviewed to trace the root causes

Decision-making Models

Model

“A simplified representation or description of a system or complex entity”

Examples

A model of a building

A globe (Earth model)

Rational/Bounded Rational

So Rational and Bounded Rational Models are cognitive models that describe how managers make rational decisions

The Rational Model

External and internal Environ. forces

1. Define and diagnose the

problem2. Set goals

3. Search for alternative solutions

4. Compare and evaluate

solution

5. Choose among

alternative solutions

6. Implement the solution

selected

7. Follow up and control

Rational Model: Assumptions

Clear and unambiguous problem

Single, well-defined goal

All alternatives are known

Clear preferences (ranking criteria)

Constant/stable preferences

No time or cost constraints

Decision will maximize payoff

Rational Model: Criticism

Not all decisions made on rational basis

Most problems, goals and preferences are not clear or well defined

Not practical to know all possible alternatives

Time and cost constraints exist in all practical problems

Result not maximized in most cases

Bounded Rational: Assumptions

Limited set of criteria

Self-interest influences ratings

Limited no. of alternatives

Alternatives are assessed one at a time till a satisficing (or good enough) alternative is found

Politics influences acceptance and commitment of decision

Intuition

An unconscious process of making decisions on the basis of experience and judgment

Intuition

Involves gut feeling

May also have rational basis

The “feeling” arises from past experience and knowledge

Involves quicker response

Does not involve systematic analysis

Decision Types

Effective managers make various kinds of decisions. In general, these decisions are either

Programmed decisions

Non-programmed decisions

Programmed Decisions

A decision that is repetitive and routine

A definite method for its solution can be established

Does not have to be treated a new each time it occurs

Procedures are often already laid out

Examples: pricing standard customer orders, determining billing dates, recording office supplies etc.

Non-programmed Decisions

A decision that is novel (new or unique) or Ill structured

No established methods exist, because it has never occurred before or because

It is too complex

Non-programmed Decisions

Organizational Levels

Nature ofProblems

Nature ofDecision-making

Non-programmed Decisions

Are “tough” decisions that involve risk and uncertainty and

call for entrepreneurial abilities

Such decisions draw heavily on the analytical abilities of the manager

Examples: Moving into a new market, investing in a new unproven technology, changing strategic direction

Decision Styles

Decision-making, though a rational process does include some subjective elements

Thus in real organizational settings, the quality of decision does depend on the ability, style and approach of the manager

Decision Styles: Directive

Directive

Represents low tolerance for ambiguity and uncertainty

Reflects rational thinking of the manager

Such decision styles are more suitable for routine procedural tasks

Decision Styles: Analytic

Analytic

Analytical style is also a rational style of thinking

Involves a very high tolerance for ambiguity and uncertainty

Such managers generally seek detailed information before making a decision

Decision Styles: Behavioural

Behavioural

Represents a creative way of thinking

Involves a low tolerance for ambiguity or uncertainty

Managers with a behavioural style introduce “new” ways of doing things

Decision Styles: Conceptual

Conceptual

Conceptual style also reflects a creative and intuitive way of thinking

Conceptual style managers have a very broad vision and generally look at numerous alternatives for decision-making

Focused on the long run and often result in creative outcomes or alternatives

Vroom and Yetton Model

Vroom and Yetton have identified five decision styles for managers, and are classified as follows:

Autocratic

AI

The decision is made individually, using the information available to the individual only

Vroom and Yetton Model

AII

The manager obtains information from subordinates and himself makes the decision

May or may not share with subordinates, the purpose of questions or the nature of problem

Subordinates do not play any role in problem definition or selection of alternatives

Vroom and Yetton Model

Consultative

CI

The manager shares the problem with relevant subordinates individually

Getting their input individually and not as a group. The manager then makes the decision independently, and may or may not be influenced by the subordinates’ suggestions

Vroom and Yetton Model

CII

The problem is shared to subordinates in a group

Their ideas and suggestions are sought in a group meeting

The decision is then made by the manager which

May or may not reflect the subordinates’ influence

Vroom and Yetton Model

Group Consensus

GI

The problem is shared to subordinates as a group

Alternatives are generated and evaluated collectively

Effort is made to reach a consensus

Vroom and Yetton Model

GI (Contd.)

The decision is made collectively and the manager functions as a coordinator

Does not “press” the group in adopting the manager’s “solution”

The manager is willing to accept and implement the decision of the group

Group Decision-making

The factors requiring group decisions include:

Involving sensitive issues

High cost alternatives

Involving very high risk factor

Strategic impact

Group Decisions: Advantages

Acceptance of group members

Coordination is easier

Communication is easier

Existence of large alternatives

More information can be processed

Diversity of experience and perspectives

Group Decisions: Disadvantages

Take longer time

Group can be indecisive

Groups can compromise

Groups can be dominated

Groups can “play games”

Victim to Groupthink

Situational Factors for Individual Decision-making

Short time

Unimportant to group

Manager can take decision

Dominate the decision

Destructive conflict

Members hesitant

Situational Factors for Individual Decision-making

Confidential data

Incapability of members

Manager’s dominance

Indirect effect on group members

Situational Factors for Group Decision-making

Need for innovation and creativity

Data collection

Importance of acceptance

Importance of solution

Complex problem

Democratic process

Situational Factors for Group Decision-making

Risk taking solution needed

Better understanding

Whole responsibility

Feedback required

Improving Group Decision-making

Brainstorming

Nominal group techniques

Electronic meeting