Decision Making

By: Karim Ismail (9185) & Nausheen Anwer (9350)

Concepts to be covered
 To examine different
decision making models.

 How to make an effective

decision making (key
factors)

 Different decision skills

 Steps of rational decision

making

 Common biases and Error

 Intuitive decision making

 Ethical decision making

 Video
 Decision making.wmv
Decisions are
center point of
our existence ,
everything goes
in and out of it.
“A decision is a judgment.
It is a choice between
alternatives. It is rarely a
choice between right and
wrong. It is at best a choice
between “almost right” __ DRUCKER”
and “probably wrong”.

“A manager by profession is a
decision maker; Uncertainty
is his opponent, overcoming
it is his mission.”
Definition
Decision Making:

The process of examining your

possibilities options, comparing
them, and choosing a course of
action.
Related Quotes
“Be sure you are right -- then go ahead.”
Davy Crocket.

“Doing what's right isn't hard --Knowing what's

right is.” Lyndon B. Johnson.

"There is nothing either good or bad, but

thinking makes it so" –
Shakespeare
Decisions Reflected in Ourselves
Material Self

Decisions about life(what we want in life, what

we want from life, our lifestyle), career,
materialism(opting for material desires),
choices of car, clothes, food, decorations etc

Spiritual self

Our believe in unknown, intangible beliefs, in

God or gods

Social self

Our friends , relatives, ethnic groups, societies,

communities etc.
Fundamental Factors & Constraints
Of Decision Making
Equation = M x G x S

Meme - A unit of cultural information that

represents a basic idea that can be transferred from
one individual to another, and subjected to mutation,
crossover and adaptation.
A cultural unit (an idea or value or pattern of
behavior) that is passed from one generation to
another by nongenetic means (as by imitation);
“memes are the cultural counterpart of genes".
Fundamental Factors & Constraints
Of Decision Making

Gene - Your genetic ability, to analyze,

process information, your psychology,
assessment, bearings of surrounding, intuition
and cognitive abilities.
Fundamental Factors & Constraints
Of Decision Making

Scene - Your environment (Financial and

Societal), political climate, the world and
worldwide policies.
Six C's of Decision Making

 1. Construct.
 2. Compile.
 3. Collect.
 4. Compare.
 5. Consider.
 6. Commit.
Six C's of Decision Making
 Construct a clear picture of
precisely what must be
decided.

 Compile a list of requirements

that must be met.

 Collect information on
alternatives that meet the
requirements.
Six C's of Decision Making
 Compare alternatives that
meet the requirements.

 Consider the "what might go

wrong" factor with each
alternative.

 Commit to a decision and

follow through with it.
Making Effective Decisions
Factors:

g Perception. g Goals.
g Priority. g Values.
g Acceptability. g Demands.
g Risk. g Style.
g Resources. g Judgment
Decision Making
Watch your thoughts;
they become words.

Watch your words;

they become actions.

Watch your actions;

they become habits.

Watch your habits;

they become character.

Watch your character;

it becomes your destiny.
___ Shakespeare
 MODEL OF DECISION
MAKING D E C IS IO N

P R O G R A M M E D N O N P R O G R A M M E D

REQUIRES THINKING UN-

ON GOING / RULES STRUCTURED EMPRICAL
STRUCTURED NOT UNIQUE

M O D E L

C L A S S IC A L A D M IN IS T R A T IV E

1. Approach Rational/Objective Satisfying Approach

2. Type Prescriptive (Idealized situation) Descriptive (Reality Based)

3. Knowledge Complete Fragmentary

4. Probability of risk Low High

5. Alternatives Many Only a few

available Broad Spectrum
Defined
6. Goals
Classical Model Assumptions

1. The decision maker operates to accomplish goals that are known and
agreed upon. Problems are precisely formulated and defined.

2. The decision maker strives for conditions of certainty, gathering

complete information, All alternatives and the potential results of each
are calculated.

3. Criteria for evaluating alternatives are known. The decision maker selects
the alternative that will maximize the economic return to the organization.

4. The decision maker is rational and use logic to assign values, order
preferences, evaluate alternatives and make the decision that will
maximize the attainment of organizational goals
Administrative Model
Assumptions
1. Decision goals are often conflicts and lack consensus among managers.
Managers are often unaware of problems or opportunities that exist in the
organization.

2. Rational procedures are not always used

3. Manager’s search for alternatives is limited because of human,

information and resource constraints.

4. Most managers settle for a satisficing rather than a maximizing solution.

The Link Between Perceptions and Individual Decision
Making
Decision Making occurs as a reaction to Problem
Decision
Decisionmaker
makeraware
aware
Problem that
thataaproblem
problemexists
exists
A perceived discrepancy and
anddecision
decisionneeds
needstoto
be
bemade
made
between the current
state of affairs and a
desired state.
Perception
Perceptionofof
Decisions the
thedecision
decision
Choices made from maker
maker
among alternatives
developed from data
perceived as relevant.
10% decrease in production
Outcomes
 DIFFERENCES
WESTERN EASTERN

1. Finding an answer. 1. Defining the question.

2. Struggle for the right 2. Focus on alternatives

answer.
3. Take longer time to
3. Always in a hurry to decide.
decide quickly.
 DECISION STYLES
Analytical Conceptual
Careful decision makers Broad outlook
Adapt to new situation Examine more alternative
Long range
Find creative solution

Directive Behavioral
Efficient, logical Work well with others
Use less information, Receptive to
Few alternative suggestions
make decision fast Avoid conflicts
Focus on short-term

Way of Thinking
How decision should be made?
Assumptions of the Rational
Decision-Making Model
Model
ModelAssumptions
Assumptions
Rational Decision-
Making Model •• Problem
Problemclarity
clarity
Describes how •• Known
Knownoptions
options
individuals should •• Clear
Clearpreferences
preferences
behave in order to
•• Constant
Constantpreferences
preferences
maximize some
outcome. •• No
Notime
timeor
orcost
cost
constraints
constraints
•• Maximum
Maximumpayoff
payoff
 Activity

Scene#1
You can say it is one of the good day of your life, you are
happy and content, you are out for dinner with your
partner who ends up with to be your boss’s daughter and
suddenly your eyes catch the entrance door where your
boss is coming with few people, you just can’t recall who
they are, as your mind cant absorb the whole situation.
Remember your boss hates you…. Now what?
Scene#2

Its an appraisal time, you work hard whole year for it,
you expect this year you will be have 20% increment in
your gross….. But it didn’t happen while other colleagues
got it….

Now what you will do???????

 Steps in the Rational Decision-
Making Model
1. Define the problem.
2. Identify the decision criteria.
3. Allocate weights to the criteria.
4. Develop the alternatives.
5. Analyze the alternatives.
6. Select the best alternative.
7. Implement the selected one.
8. Evaluate the decision’s
effectiveness
Step 1: Define the problem
 Problem
* A discrepancy between an existing and desired state
of affairs.
 Characteristics of Problems
* A problem becomes a problem when a person
becomes aware of it.
* There is a pressure to solve the problem.
* The person must have the authority, information, or
resources needed to solve the problem.
Step 2: Identify the decision criteria

 Decision criteria are factors that are important

( relevant) to resolving the problem.
* Costs that will be incurred (investment
required).

* Risks likely to be encountered (chance of

failure).

* Outcomes that are desired ( growth of the firm).

Step 3: Allocating weights to the
criteria
 Decision criteria are not of equal
importance:
* Assigning a weight to each item.
* Places the items in the correct priority
order of their importance in the decision
making process.
Step 4: Developing alternatives
 Identifying viable alternatives.
* Alternatives are listed ( without evaluation) that can
resolve the problem.

Step 5 :Analyzing alternatives

 Appraising each alternative’s strengths and weaknesses
* An alternative’s appraisal is based on its ability to
resolve the issues identified in step 2 and step 3.
Step 6: Selecting the best alternative
 Choosing the best
alternative
* The alternative with the
highest total weight is
chosen.

Step 7: Implementing the alternative

 Putting the decision to and gaining comment from
those whose will carry out the decision.
Step 8: Evaluating the decision’s
effectiveness
 The soundness of the decision
is judged by its outcomes.
* How effectively was the
problem resolved by outcomes
resulting from the chosen
alternatives?
* if the problem was not
resolve, what went wrong?
The Decision-Making Process

6–34
 Common Biases and Errors
 Overconfidence Bias
– Believing too much in our own ability to
make good decisions.

 Anchoring Bias
– Using early, first received information as the
basis for making subsequent judgments.

 Confirmation Bias
– Using only the facts that support our decision.
 Common Biases and Errors
 Availability Bias
– Using information that is most readily at hand.
• Recent

 Representative Bias
– “Mixing apples with oranges”
– Assessing the likelihood of an occurrence by trying to match it with a pre-
existing category using only the facts that support our decision.

 Randomness Error
– Creating meaning out of random events
The role of intuition
 Intuitive decision making
* Making decisions on the basis of
experience, feelings, and accumulated
judgment.
 What is Intuition ?
Their past experiences

Ethical values
and culture Experience-based Feelings or emotions
Decisions
Values or ethics- Affect-Initiated
based Decisions Intuition Decisions

Subconscious Cognitive-Based
mental processing Decisions

Data from Skills, knowledge, and

subconscious mind training
 Ethics in Decision Making
 Ethical Decision Criteria
• Seeking the greatest good for the greatest number.

– Rights
• Respecting and protecting basic rights of individuals.
– Justice
• Imposing and enforcing rules fairly and and and and
impartially.
 Ethics in Decision Making
 Ethics and National Culture
– There are no global ethical standards.
– The ethical principles of global organizations
that reflect and respect local cultural norms are
necessary for high standards and consistent
practices.
 Ethical Decision Making.wmv
Ways to Improve Decision Making
1. Analyze the situation and adjust your decision making
style to fit the situation.
2. Be aware of biases and try to limit their impact.
3. Combine rational analysis with intuition to increase
decision-making effectiveness.
4. Don’t assume that your specific decision style is
appropriate to every situation.
5. Enhance personal creativity by looking for novel
solutions or seeing problems in new ways, and using
analogies.
Any Questions?