ABA 429 PLANNING AND ADMIN DECISION MAKING

Topic 1
Define manageria !eci"ion ma#ing
This is the process when managers make decisions after weighing the positive and
negatives of each alternative and determining which is alternative is best for the situation
of the company and making the right choice. Decision making is defined as the process of
making choices among possible alternatives.
De"cri$e %&e na%'re of !eci"ion ma#ing
Different problems usually require different types of decision making. Some might be
minor and some major, some might be routine or strategic ,some may require individual
or group involvement, some may require more time than the others e.t.c but the important
thing is whether big or small all decisions involve future events and so the manager must
learn to analyze the certainty and uncertainty risk of each associated with alternative
courses of action. There are different types of decision making
!. Programme! an! non programme! !eci"ion"( "rogrammed decisions are those
which are normally repetitive in nature and are taken as a routine job and
responsibilities. These types of decisions are usually made by middle level
management in accordance with some policies, rules and procedures. They have
short term impact. #.g. granting a leave to an employee, purchasing office
materials etc. non programmed decisions are non repetitively taken by top
e$ecutives. They need to collect data and analyze then and forecast the strategic
plans
%. Ma)or an! minor !eci"ion"( some decisions are considerably more important
than others and are prioritized. They are called major decisions. #.g.
diversification of a product and some of the decisions are considerably less
important than others and are not so prioritized. They are minor decisions e.g.
store of raw materials etc.
&. *o'%ine an! "%ra%egic !eci"ion"( 'outine decisions are those decisions which are
taken frequently to achieve high degree of efficiency in the organizational
activities. #.g. parking facilities, lighting and canteen etc. strategic decisions are
those which are related to lowering the prices of products, changing the product
etc. they take more funds
(. Organi+a%iona an! per"ona !eci"ion( )rganizational decision is taken by top
e$ecutives, they are always for official purpose and they affect the organizational
activities directly. *uthority is also delegated. "ersonal decisions are concerned to
an employee. #ven when e$ecutives take the decisions personally that is known
as personal decisions
+. In!i,i!'a an! gro'p !eci"ion"( ,hen a single employee is involved in decision
making it is called individual decision. They are made solo, when the decision is
of routine nature. )n the other hand when the decision is of group taken in a large
organization where important and strategic decisions are taken the it is a group
decision
-. Poic- an! opera%ing !eci"ion"( "olicy decisions are taken by top level
management to change the rules, procedures, organizational structure etc and they
have a long tern effect. )perational decisions are taken by low level management
which have short term effect and which affect the day to day operation of the
organization.
E.pain %&e proce"" of !eci"ion ma#ing
S%ep 1 Identifying/clarifying the decision to be made.
The decision to be made has to be identified and clarified first before presenting it.
S%ep 2 Identifying possible decision options.
The decision maker has to spell out as clearly as possible, just what the decision
alternatives really are.
S%ep / Gathering/processing information.
The decision maker collects or processes information that can help guide the decision.
This information collected need to be well studied and understood by the decision maker.
Then later the information should be processed. The more significant the decision, the
more rigorous the information.gathering process.
S%ep 4 Making/implementing the decision.
*fter the information has been considered according to its relevance and significance, a
decision based on that information should be made and, thereafter, implemented.
S%ep 0 Evaluating the decision.
*fter the decision making process, its important is to determine whether the decision was
appropriate by ascertaining the decision/s consequences.
Topic 2
11 I!en%if- !eci"ion ma#ing mo!e"
The rational model proposes that people follow a rational, four step sequence when
making decisions. The four steps are0
1dentifying the problem
2enerating solutions
Selecting a solution
1mplementing and evaluating the solution
3imitations here are
. 4ot having enough information relevant to the problem.
The normative model suggests that decision making is characterised by

3imited information processing . there is a limit to how much information a

person can manage.

5udgemental heuristics . shortcuts are used to simplify decision making.

Satisficing . choosing solutions that meet minimum requirements and are 6good
enough.6
21 De"cri$e %&e %ra!i%iona !eci"ion ma#ing mo!e
1t suggests that people followed a seven step process
!. Define or carif- %&e pro$em1 Somehow this whole process sounds negative to
me. There is nothing positive about problems or estimating consequences. 7lawed
assumptions can derail the process and a misstep at this stage can lead to a bad
decision or possible solution to the wrong problem.
%. S%a%ing a goa or o$)ec%i,e1 Sometimes this is presented as finding the causes of
the problem. )ther times it is presented as a premise, with information gathered to
support the premise.
/1 Genera%e op%ion" or a%erna%i,e"1
(. E,a'a%e a%erna%i,e" an! %ra!eoff"1 #valuating tradeoffs is a trap that signifies
settling for something less than the optimum.
+. E"%ima%e ri"#, by comparing predicted outcomes of each alternative with the
objective. *ttempts are usually made to recognize uncertainty as well. #stimating
risk tolerance does not sound very positive either.
-. Deci!ing on %&e a%erna%i,e %&a% $e"% ma%c&e" %&e o$)ec%i,e1 2iven that we are
always faced with imperfect knowledge and the risk of unintended consequences
in any decision, choosing the best option seems like a pretty risky proposition.
8. Impemen% %&e !eci"ion1 This is the basic 9how to make a decision: approach
that we have used since ;en 7ranklin introduced the old 9compare the pros and
cons: approach a few hundred years ago.
Defec%" of Tra!i%iona Mo!e
!. Per"pec%i,e( 7requently decisions are made by a relatively small number of
people with limited perspective.
%. Da%a( 1t is very critical to gather and evaluate all information, not just the
information that supports the premise.
&. In%erper"ona *ea%ion"&ip"( *s information is gathered, it is critical to listen to
all stakeholders involved in the process ignoring one will cause other
stakeholders to only give a token effort.
(. Impemen%a%ion( This is usually the result of allowing ine$perience,
convenience, or haste to make the choice for them.
+. T&e 2n#no3n( *nother problem that frequently arises at this stage is not
knowing what you don/t know.