PRINCIPLES OF MANAGEMENT

DECISION MAKING
BY –
RAKESH SHARMA
KAVAN TALATI
PRANSHAV PANDYA
SACHIN YADAV
CONCEPT OF DECISION
AND
DECISION MAKING
“Decision-making involves the selection of a course of action from
among two or more possible alternatives in order to arrive at a solution
for a given problem”.

Decision-making is an integral part of modern management. Every

manager takes hundreds and hundreds of decisions subconsciously or
consciously making it as the key component in the role of a manager.

 A decision can be defined as a course of action purposely chosen from

a set of alternatives to achieve organizational or managerial objectives or
goals.

 Decision making process is continuous and indispensable component

of managing any organization or business activities. Decisions are made
to sustain the activities of all business activities and organizational
functioning.
APPROACHES OF
DECISION MAKING
The outcome of a decision is directly related to the analysis,
approaches, and questions used in the decision process.
A systematic approach to decision making analysis helps
ensure that the right criteria are identified and defined and that
all appropriate alternatives are considered.
 When individuals are taught a decision making approach that
includes ways to define criteria, identify alternatives, and make
the decision analysis as objective as possible, they are much
more likely to explore all the options and possibilities relevant
to a particular decision.
There are several approaches of decision making. However,
these approaches can be classified into four main categories:
routine approach, scientific approach, quantitative approach
and creative approach.
 ROUTINE APPROACH

‘What has always been done when problem of such type arose’

Standard operating procedures are formal procedures for

finishing tasks, used by large organization and routine decisions

are made on such procedures.

This approach is the most common way.

The main problem with this approach is that it lacks

innovation.
 SCIENTIFIC
APPROACH

“What a manager needs for effective problem analysis is an

orderly system for processing information, a system in which
certain steps follow others in a fixed order.”
This approach has the following steps for decision making:-

 Identification of problem
 Acquiring preliminary observations about the problem.
 Stating tentative solutions to the problem.
 Investigating the problem thoroughly, using both current
knowledge and controlled experiments.
 Classification of data obtained
 Stating tentative answer to the problems.
 Adjusting and stating answer to the problem.
 Q UA N T I TAT I V E A P P R O A C H

 Quantitative approach of decision making has

been developed with the introduction of computers
in business.
 Quantitative approach of decision making involves
the following:-
Formulation of problem

Building a mathematical model to represent the

system under study.
Deriving answer from the model.

Testing the model and answer derived to ensure its

practicability.
Placing needed constraints over use of model and answer

Selecting final answer.

 C R E AT I V E A P P R O A C H

 Creative approach is the creativity that the manager uses

 It involves interaction of information, people and facilities
involved to bring the combination which is unique in some
way.
It involves bringing unique solutions to existing problems.

Examples of creativity in decision making are creation of new

products, creation of new method of working, creation of new
market, etc.
DECISION MAKING
PROCESS
DECISION MAKING
TECHNIQUES
There are various techniques of decision making
which are grouped into two broad categories: Non
quantitative and Quantitative techniques.
These techniques can be used either in
combination or exclusively depending on the nature
of decision and decision makers.
 N O N Q U A N T I TAT I V E T E C H N I Q U E S

Qualitative aspects in decision making.

Highly personal and widely known
Natural way to take a decision
Four types :-

I.Intuition
II.Facts
III.Experience
IV.Considered opinions
Q UA N T I TAT I V E T E C H N I Q U E S

Based on scientific approach and statistical approach to make good

decisions
Decisions are taken objectively and efficiently

Different types:-

1.Linear programming

2.Decision tree

3.Probability decision

4.Game theory

5.Queing theory
Decision tree
• A Tree shaped diagram that shows probability of
possible decision.
• It is a technique for solving the problem of
uncertainty.
CONSTRUCTION OF DECISION
TREE
• The first step is definition of various
alternatives.
• The second step is estimation of
probabilities for various events.
• The third step is calculation of payoff
from each alternative in various
events.
THANK YOU