Concept of decision

A decision represents a judgment ;a final resolution of a conflict of needs, means or goals; and a commitment to action made in face of uncertainty ,complexity and even irrationally.

What is Decision Making?

Decision making is known as a human process involving both individual and social phenomenon based upon factual and value premises which concludes with a choice of one behavioral activity from among one or more alternatives with the intention of moving towards some desired state of affairs. Decision making is the process through which managers identify organizational problems & attempts to resolve them.

Discussion Topic
FEATURES OF DECISION MAKING DECISION MAKING & PLANNING CREATIVITY & DECISION MAKING
Neeru Vasisth_page no 207-208; 2232-26

Nature of decision making

Problem solving:
Solve the critical problems himself/ herself. Allow the problem of routine nature to be solved by subordinates Leaves some problems to be solves on their own.

Problem finding:
Economic values Theoretical values Political values
Neeru Vasusth_ page no208-210

 Alarming situation for decision making

Deviation from past Deviation from plans Deviation noticed by others Perception about competitors.

Problems that require decision making:

Crisis Non- crisis Opportunity

Types of decisions
Programmed decision: It is routine and repetitive and are made within the frame work of organizational policies and rules. Example:Mr.Y has a problem of promotion, which solved by the promotion criteria under the company policy. Types of programmed decisions: Organizational decision; operational decision; research decision; opportunity decisions

 Non programmed decision: It is relevant for solving unique/unusual problem in which various alternative can not be decided in advance. In that ready made decision you can not find. Example:Organization wants to take action for growth. Types of Non programmed decisions: Personal decisions; strategic decision; crisis intuitive decisions; problem solving decisions

Programmed decisions Nature of problem Recurrence of the problem Structured/ routine/ well defined Repetitive

Non programmed decisions Unstructured/ novel/ ill defined Non repetitive

Method of solving
Judgment Probability of outcome Level of management

Policies/ standards/ rules

Objectives Some degree of certainty involved Middle / lower level

Managerial initiative
Subjective Uncertain Top level

Types

Organizational / operational/ research/ opportunity

Personal/ strategic/ crisis intuitive/ problem solving

 Strategic decision: It is a major choice of action concerning allocation of resources and contribution to the achievement of organization objective. Tactical decision: It also denote as operational decision which derived out of the strategic decesion.It relates with the day to day working of the organization and is made in the context of well set policies & procedure.

Decision making process

Specific objective. Problem identification. 1. Diagnosis. 2. Analysis Established objectives Collect information Generate alternative. 1. Do not criticize ideas while generating possible solution. 2. Freewheel 3. Offer as many idea as possible 4. Combine and improve on ideas that have been offered.

Neeru Vasisth_ page no 210-213

 Evaluate alternatives: 1. Cost 2. Resources 3. Acceptable 4. Reversible Select alternatives

1. Experience. 2. Experimentation. 3. Research & analysis

Implement the alternatives Monitor the implementation

Neeru Vasisth_ page no 210-213

Effective decision
Action orientation Goal direction. Efficiency in implementation.

Approaches to Decision Making

1. Authoritarian. The manager makes the decision based on the knowledge he can gather. He then must explain the decision to the group and gain their acceptance of it. In some studies, the time breakdown for a typical operating decision is something like this: make decision, 5 min.; explain decision, 30 min.; gain acceptance, 30 min. 2. Group. The group shares ideas and analyses, and agrees upon a decision to implement. Studies show that the group often has values, feelings, and reactions quite different from those the manager supposes they have. No one knows the group and its tastes and preferences as well as the group itself. And, interestingly, the time breakdown is something like this: group makes decision, 30 min.; explain decision, 0 min.; gain acceptance, 0 min.

 Centralization & decentralization approach Group & individual approach Participative & Non participative approach Democratic & consensus approach

Neeru Vasisth_ page no214-215

Decision making environment

Certainty, risk, uncertainty
Features Availability of information about the future Certainty Complete information is available Risk Enough information is available Moderate uncertainty No information is available

Degree of reliability High of information

Low

Degree of High predictability about the future

Knowledge about outcome of decisions Known

Moderate

Low

Fairly known

Not known

Decision Making Strategies

Optimizing. This is the strategy of choosing the best possible solution to the problem, discovering as many alternatives as possible and choosing the very best. How thoroughly optimizing can be done is dependent on A. importance of the problem B. time available for solving it C. cost involved with alternative solutions D. availability of resources, knowledge E. personal psychology, values

 Satisfying. In this strategy, the first satisfactory alternative is chosen rather than the best alternative. If you are very hungry, you might choose to stop at the first decent looking restaurant in the next town rather than attempting to choose the best restaurant from among all (the optimizing strategy). The word satisfying was coined by combining satisfactory and sufficient. For many small decisions, such as where to park, what to drink, which pen to use, which tie to wear, and so on, the satisfying strategy is perfect.

 Maximax. This stands for "maximize the maximums." This strategy focuses on evaluating and then choosing the alternatives based on their maximum possible payoff. This is sometimes described as the strategy of the optimist, because favorable outcomes and high potentials are the areas of concern. It is a good strategy for use when risk taking is most acceptable, when the go-for-broke philosophy is reigning freely.

 Maximin. This stands for "maximize the minimums." In this strategy, that of the pessimist, the worst possible outcome of each decision is considered and the decision with the highest minimum is chosen. The Maximin orientation is good when the consequences of a failed decision are particularly harmful or undesirable. Maximin concentrates on the salvage value of a decision, or of the guaranteed return of the decision. It's the philosophy behind the saying, "A bird in the hand is worth two in the bush."

Positive aspect of group decision making

Pooling of the knowledge & information. Satisfaction & commitment. Personnel development. More risk taking

Negative aspects of group decision making

Time consuming & costly. Individual domination. Problem of responsibility. Groupthink.

Techniques of decision making

Traditional techniques:
Programmed decision making
Habits Operating procedures Organizational structure

Non- Programmed decision making

Non repetitive problems Judge & solve through intuition & creativity Non scientific method of decision making Perception of manager towards problem
Neeru, page no 216-220_ L M Prasad

 Modern Techniques:
Programmed decision making: Break even technique Inventory model Linear programming Simulation Probability theory Decision tree Queuing theory Gaming theory Network theory ( PERT/ CPM- project evaluation review techniques/ critical path method)

Non- Programmed decision making:

Creative techniques Participative techniques Heuristic techniques
Decision support system Regression analysis Expert system

Models of decision making

Rational/ normative / economic man Non- rational/ administrative model/ man

They are normative They are theoretical or unrealistic in nature They follow deterministic approach to problem solving They presume that manager can make optimum decisions

They are descriptive They are practical or realistic in nature. They follow Probabilistic approach to problem solving. They presume that manager can satisfying decisions

Rational/ normative / economic man

Non- rational/ administrative model/ man

They are based on complete information of environment ( Internal & external) and knowledge of various alternatives that help in arriving at the best alternatives They believe that outcome of each alternative is known with certainty & perfection They have no scope for managerial judgment, intuition ,personal biases. They advocate perfect rationality in decision making

They are based on incomplete information of environment ( Internal & external) factor and limited knowledge of various alternatives that help in arriving at the best alternatives. They believe in incomplete knowledge about outcomes of various alternatives They are based on managerial judgment, intuition and personal biases. They advocate bounded rationality in decision making