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Lecture 29
DECISION MAKING
Decision Making and Decision Making Process:
A decision is a choice made from two or more alternatives. The decision-making process is
recognizing and defining the nature of a decision situation, identifying alternatives, choosing the best
alternative, and putting it into practice. An effective decision is one that optimizes some set of factors
such as profits, sales, employee welfare, and market share. Managers make decisions about both
problems and opportunities.
Problem Solving Vs Decision Making
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Categories of Decisions
Technical
Emotional
Communication
Budget
Ethical
Personnel
Career
Relative Importance
Types of Decisions:
Programmed Decisions: A decision that is a fairly structured decision or recurs with some frequency
or both. Example: Starting your car in the morning.
Non-programmed decisions: A decision that is relatively unstructured and occurs much less often than
a programmed decision. Example: Choosing a vacation destination.
Intuitive decision making: Managers also regularly use their intuition. Intuitive decision making is a
subconscious process of making decisions on the basis of experience and accumulated Judgment.
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Making decisions on the basis of gut feeling doesnt necessarily happen independently of rational
analysis; the two complement each other.
Although intuitive decision making will not replace the rational decision-making process, it does
play an important role in managerial decision making
Decision-Making Conditions
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A condition in which the decision maker does not know all the alternatives, the risks
associated with each, or the consequences of each alternative. Uncertainty is a situation in
which the decision maker is not certain and cannot even make reasonable probability
estimates concerning outcomes of alternatives.
The choice of alternative is influenced by the limited amount of information
available to the decision maker.
Its also influenced by the psychological orientation of the decision maker
The Decision-Making Process:
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Step 1: Identifying a problem. A problem is a discrepancy between an existing and a desired state of
affairs. In order to identify a problem, you as a manager/leader should recognize and understand the
three characteristics of problems:
o You must be aware of the problem. Be sure to identify the actual problem rather than a symptom of
the problem.
o You must be under pressure to act. A true problem puts pressure on the manager to take action; a
problem without pressure to act is a problem that can be postponed.
o You must have the authority or resources to act. When managers recognize a problem and are under
pressure to take action but do not have necessary resources, they usually feel that unrealistic
demands are being put upon them.
Step 2: Identifying decision criteria. Decision criteria are criteria that define what is relevant in a
decision.
Step 3: Allocating weights to the criteria. The criteria identified in Step 2 of the decision-making
process do not have equal importance, so the decision maker must assign a weight to each of the items
in order to give each item accurate priority in the decision.
Step 4: Developing alternatives. The decision maker must now identify viable
alternatives that
could resolve the problem.
Step 5: Analyzing alternatives. Each of the alternatives must now be critically analyzed by evaluating
it against the criteria established in Steps 2 and 3.
Step 6: Selecting an alternative. This step to select the best alternative from among those identified
and assessed is critical. If criteria weights have been used, the decision maker simply selects the
alternative that received the highest score in Step 5.
Step 7: Implementing the alternative. The selected alternative must be implemented by effectively
communicating the decision to the individuals who will be affected by it and winning their commitment
to the decision.
Step 8: Evaluating Results. This last step in the decision-making process assesses the result of the
decision to determine whether or not the problem has been resolved.
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Dont
Make assumptions
Delay
Jump to conclusions
Make uninformed decisions
Favour one decision prior to gathering
the facts and evaluating the alternatives
Allow only technical people to make
the decisions
Attempt to make a decision in isolation
of the context
Let emotion override objectivity
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Do
Clearly identify the decision to be
made
Involve people qualified to help in the
decision making
Identify the context of the decision (the
bigger picture)
Identify all alternatives
Assess each alternative
Assess the risks
Consider your gut feel
Make the decision and stick to it
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Disadvantages
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More information & knowledge are
Available
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More alternatives are likely to be
generated.
More acceptance of the final decision is o
likely
Enhanced communication of the decision
may result better decisions
Cons
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Pros
Easy to use
Works when everyone has the same
information and already understands others
Implementation can be handled by majority
Helps in managing large groups
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Cons
Breeds winners v. losers climate
Lessens creativity and flexibility since
difficult to consider many options.
Sometimes it artificially limits choices.
Consensus means everyone supports a decision. It does not mean unanimity or that everyone gets
what they want.
Pros
Cons
Cons
Consensus presenting opinions and gaining agreement to support a decision. A proposal that is
acceptable enough that all members are willing to support it. How can you reach a true consensus?
o Identify all options and views
o Build on common ideas
o Discuss the differences
o Propose alternatives or compromises to settle differences
o Test consensus when you seem to have a conclusion by doing a check. Go around room
and have everyone given their current opinion.
o If consensus is not reached, repeat steps 1 5.
Brainstorming process to generate a quantity of ideas. In this technique the goal is. Goal - to
examine as broad a range of options as possible
o Rules - Encourage free-wheeling - No discussion - No judgment - Write visibly all ideas
o Sequence
o Review the topic (as a question)
o Minute or two of silence to think
o Call out and write down ideas
Stepladder Technique
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Quality circles (QC): a small group of employees who work voluntarily on company time,
typically one hour per week, to address work-related problems
Quality team: a team that is part of an organizations structure & is empowered to act on
its decisions regarding product & quality service
Concept of QC
The philosophy behind the concept of QC is that responsibility of generating quality is
vested in the minds of all job related people instead of a few supervisor or inspectors. They
o Identify problems
o Collect and analyze data
o Make cause-effect relationships,
o Generate best solutions
o Computer-Aided Decision Making
o Expert Systems: a programmed decision tool set up using decision rules
o Decision Support Systems: computer and communication systems that process in coming
data and synthesize pertinent information for managers to use
o Group Decision Support Systems: systems that use computer software and
communication facilities to support group decision-making processes in either face-to-face
meetings or dispersed meetings
Computer-mediated decision making. It is done through the electronic brainstorming through the use of
special software and personal computers. The nominal group and Delphi techniques lend themselves to
computer mediation
Potential Advantages of Group/Team Decision Making:
o More knowledge and expertise is applied to solve the problem.
o A greater number of alternatives are examined.
o The final decision is better understood and accepted by all group/team members.
o More commitment among all group/team members to make the final decision work.
Potential Disadvantages of Group/ Teams Decision Making:
o Individuals may feel compelled to conform to the apparent wishes of the group/team.
o The groups/teams decision may be dominated by one individual or a small coalition.
o Group/team decisions usually take longer to make.
Improving Team Decision Making
o Assign the devils advocate role
o Be open to dissenting points of view
o Seek outside opinions
o Break up into smaller groups
o Rethink issues before making final decision
o Use brainstorming
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