DECISION MAKING

DECISION-MAKING DEFINED


Decision Making is a managerial process involving selection of a particular course of action out of alternatives for solving a problem or achieving objectives.

DECISION MAKING
According to Peter Drucker: Whatever

a manager does, he does through Decisionmaking

DECISION MAKING
A Decision is a choice from among two or more alternatives. Decision making permeates every part of management practice. It is, however, not the sole province of the managers. Sometimes it is a reflex action, but otherwise it is a well thought activity.

CHARACTERISTICS OF DECISION MAKING

Is a human and social process. Involves judgment & discretion of the decision-maker. Purposive activity. Requires giving freedom to the manager. Not entirely a rational process. Integral part of all the management functions.

GENERAL DECISION- MAKING PROCESS

Perception of the deviation and Defining the problem

Collection of all relevant data

Diagnosis and analysis of the problem

Finding the root cause of the problem

Identification of resources and constraints

5
Continued

Cont..

GENERAL DECISION- MAKING PROCESS

Development of criteria for Successful solution Generation and development of alternatives

6 7

Evaluation of alternatives and selection of an alternative

Implementation of the decision

Monitoring and feedback

10

GENERAL DECISION- MAKING PROCESS

STEP 1: Perception of the deviation and defining the problem  Realization that a problem exists and then addressing it.  How do you realize?
Desired state Deviation / Discrepancy Actual state Problem exists

Problem once isolated, must be defined and preferably be written.

GENERAL DECISION- MAKING PROCESS

STEP 2: Collection of relevant data  Information relevant to the problem must be gathered.  Data can be collected from external sources or internal sources.  Adequate data should be collected. Excessive information requires time and effort which is costly. Inadequate information results in bad decisions.

GENERAL DECISION- MAKING PROCESS

STEP 3: Diagnosis and analysis of the problem  Collected information is subjected to in-depth analysis.  Information should be as much accurate as possible.  4 kinds of information are there: Facts (Totally accurate and highly reliable) Inference (Deduction about a situation based on evidence) Speculation (Subjective in nature, not verifiable, personal in nature) Assumptions (Least reliable, Based on person)

GENERAL DECISION- MAKING PROCESS

STEP 4: Finding the root cause of the problem  Most important aspect of understanding the problem.  Process is complex as there can be interdependent variables.  Difference should be made between symptoms and causes. eg: Recurrent sore on a finger-skin cancer. So treatment should be for cancer and not sore.

GENERAL DECISION- MAKING PROCESS

STEP 5: Identification of resources and constraints  Before solving the problem, critical look must be taken at the resources available and the constraints that might make solution unfeasible.  E.g.: NASA-had sent two satellites in space, went out of controlled orbit. Had to be brought back to earth.So, cost of retrieval studied plus the technical and financial constraints for the same. Then the solution was decided.

GENERAL DECISION- MAKING PROCESS

STEP 6: Development of criteria for successful solution  Criteria is a set standard and all the alternatives are checked against these criterion.  Two types of criteria Must criterion (what is essential and has to be there) and Want criterion (Desirable things) Eg: We have a guest lecture. Speaker will be using LCD and collar mike. 200 students are required to attend the lecture.

GENERAL DECISION- MAKING PROCESS

STEP 7: Generation and Development of alternatives  All potential possible alternatives or solutions to the problems should be considered.  Then, all these alternatives should be analyzed.  Creativity should be encouraged as it can lead to a unique solution.  Brainstorming technique can be used in case of group decision making. It helps in generation of lot of ideas.

GENERAL DECISION- MAKING PROCESS

STEP 8: Evaluating alternatives and selecting an alternative  Evaluation of an alternative and choosing the best alternative with the maximum advantages is the most critical step of this process.  Alternatives should be evaluated against the criterion set in STEP 6.

GENERAL DECISION- MAKING PROCESS

STEP 9: Implementation of the decision  Implementation means putting the selected alternative into action and seeing it through to its completion.  Implementation becomes easier if the person implementing it was also involved in the Decision-making process.  The details of this should be communicated to all the people concerned.

GENERAL DECISION- MAKING PROCESS

STEP 10: Monitoring and Feedback  Feedback provides us information about the effectiveness of the implemented decision.  Periodic reports on the implementation of the solution should be taken. This helps in Preventive and Curative maintenance.

RATIONAL DECISION- MAKING MODEL

Define the problem Identify Decision criteria

1 2 3

Weight the criteria

Generate alternatives Rate each alternative on each criteria

Compute the optimal decision

6
Continued

RATIONAL DECISION- MAKING MODEL

EG: TO CHOOSE A CLASSROOM FOR TAKING LECTURE 1 SEATING CAPACITY (40) 35 35 35 CRITERION 2 LCD (40) 40 30 0 3 Benches TOTAL (20) (100) 20 20 20 95 85 55

ALTERNATIVES

A B C

PHASES IN DECISION MAKING (HERBERT SIMON)

(I D C) 1) INTELLIGENCE ACTIVITY Searching the environment. 2) DESIGN ACTIVITY Inventing, developing and analyzing possible courses of action. 3) CHOICE ACTIVITY Selecting a particular course of action from the available alternatives.

PHASES IN DECISION MAKING (MINTZBERG)

Phase 1 IDENTIFICATION 1) Recognition 2) Diagnosis

Phase 2 DEVELOPMENT 1) Search 2) Design

Phase 3 SELECTION 1) Judgment 2) Analysis 3) Bargaining Authorization

SOME COMMON ERRORS IN DECISION MAKING



  

 

Sometimes people are indecisive and take longer time in taking decisions. Postponing the decision until the last moment. Failure to isolate the root cause of the problem. Failure to assess the reliability of informational sources. Method for analyzing the information may not be a sound one. Bias in Decision making. Decisions will not be good if taken in an emotional state.

DECISION-MAKING STYLES
High

ANALYTICAL
TOLERANCE FOR AMBIGUITY

CONCEPTUAL

DIRECTIVE
Low Rational

BEHAVIOURAL

Intuitive

WAY OF THINKING

DECISION-MAKING STYLES
This model identifies four different individual approaches to making decisions : DIRECTIVE : Make decisions fast, efficient and logical. ANALYTICAL: Desire more information and consider more alternatives. Careful decision makers. CONCEPTUAL: Broad in outlook and consider many alternatives. Find creative solutions to problems. BEHAVIOURAL: They work well with others. Try to avoid conflicts and seek acceptance.

GROUP DECISION-MAKING
Based on the adageTwo Heads are better than one. There can be consensus or the decision can be arrived at through simple majority.

GROUP DECISION-MAKING ADVANTAGES

More information and greater number of alternatives. Implementation of decision easier as the people responsible for implementation participated in decision making. Inputs from large number of people eliminates the biases that are there in individual decisions. Gives opportunity to many people to participate in decision making process. Group decision making is more democratic whereas individual decision making is autocratic in nature.

GROUP DECISION-MAKING DISADVANTAGES

Highly time consuming process. Personality conflicts can create problems. Social pressures can force people to hide their true opinions. Focus effect- group may focus on few or one suggested alternative and spend all time evaluating that. Groups inclined to invest more in initial decisions, simply to justify having made these in the first place.

GROUP DECISION-MAKING DISADVANTAGES

Group think - a word coined by Irving Janis. It indicates a situation where members desire for complete consensus overrides their motivation to disagree with an argument or critically and realistically evaluate other alternatives. This specially true when the group is a high cohesive one. Groups may shift either towards more risk taking or towards less risk taking than the individuals and either of the shift may be undesirable.

GROUP DECISION-MAKING TECHNIQUES

BRAINSTORMING
Involves a group of people(5-10), sitting around a table in classroom setting, generating ideas. Primary focus is Generation of ideas rather than Evaluation of ideas. (Reason:- More ideas will lead to better creativity) All ideas written on blackboard so that everybody can see it and try to improve on that. Leader defines the nature of problem and the rules to be followed.

GROUP DECISION-MAKING TECHNIQUES

BRAINSTORMING
No judgment on the ideas when they are generated. Welcome wild ideas. They sometimes result in unique solutions. Strive for quantity and not quality. All participants are encouraged to improve or modify other participants suggestions. Time consuming process but democratic in nature.

GROUP DECISION-MAKING TECHNIQUES

DELPHI TECHNIQUE
Modification of Brainstorming technique. Involves obtaining opinions of experts physically separated from each other and in different geographical locations Process not for specific problems, but for assessing the impact of future events on our society. Group members are not influenced by each other.

GROUP DECISION-MAKING TECHNIQUES

Problem defined by the Delphi leader A Sample of experts selected. Questionnaires developed and sent to them Responses compiled and summarized into 2nd questionnaire

New responses compiled and new questions are prepared Cycle stops when consensus is reached

Participants asked to reevaluate responses

Solution is developed.

GROUP DECISION-MAKING TECHNIQUES

NOMINAL TECHNIQUE
Very similar to Brainstorming but it is considered to be more effective. Group members all physically present, but do not directly interact with each other. Highly structured procedure used for generating and analyzing various ideas and alternatives.

GROUP DECISION-MAKING TECHNIQUES

NOMINAL TECHNIQUE Leader defines and explains the problem Members silently write down all possible solutions

Small group sits around the table

Ideas are ranked and highest ranked idea is chosen.

Ideas are discussed, clarified and evaluated by members

Leader collects and records all these solutions

GROUP DECISION-MAKING TECHNIQUES

FISHBOWLING
Centre chair

Another variation of Brainstorming but it is more structured and to the point. Decision making group of experts is seated around in a circle with a single chair in the center. Group leader sits on that chair and gives his views on the problem and proposes solutions. Other members can ask him questions but no irrelevant discussion or cross talk is allowed.

GROUP DECISION-MAKING TECHNIQUES

FISHBOWLING - STEPS Group of experts sit around the table Leader invited to sit in the center and give his views Turn by turn each member gets a chance to sit on centre chair and express his views.

After all experts express views, alternatives are discussed and choose one by consensus.

Questions addressed Only to the centre chair and no cross talks allowed

GROUP DECISION-MAKING TECHNIQUES

DIDACTIC INTERACTION: Applicable in situations which can have only 2 solutions (Yes or No). E.g.: To buy or not to buy, To merge or not to merge. Such situation requires exhaustive and extensive discussion & investigation since a wrong decision can have serious consequences.

GROUP DECISION-MAKING TECHNIQUES

DIDACTIC INTERACTION: STEPS
Group divided into two sub-groups 1) Favouring go 2) Other favouring No go 1st Group lists all pros and 2nd all cons Both groups meet and discuss their view points

Discussion again and then a final decision by mutual agreement

Now groups switch sides and try to find weaknesses in their original view points

CREATIVITY IN DECISION MAKING



Essential for making effective and unique decisions.  Creativity refers to the process by which novel but situationally appropriate outcomes are brought in picture.  Essence of creativity is the element of freshness, originality, and novelty that is appropriate to the context.

THE CREATIVE PROCESS

PREPARATION

INCUBATION

PERSISTENCE

INSIGHT

VERIFICATION

CHARACTERISTICS OF CREATIVE INDIVIDUALS



   

 

A willingness to give up immediate gains to reach long-range goals. A great amount of energy. An irritation with the status-quo. Perseverance A belief that daydreaming is not a waste of time Inventive thinking style. Sound knowledge in their respective fields.