DECISION MAKING

• J.W Duncan: A decision is a conscious

choice to behave or to think in a particular
way in a given set of circumstances. When
a choice has been made, a decision has
been made.
• Process of choosing a course of action
from two or more alternatives.
• Process by which a course of action is
selected as the way to deal with a specific
problem.
 Rational Decision-making
• Decisions are made for future –which is
full of uncertainities
• It involves opportunities to do something
that has not been done before- difficult to
come up with alternatives
• All the alternatives cannot be analysed
 Limitations of Rational decision-
making
• Information
• Time
• certainity
 Types of Decisions
• Programmed decisions - routine & repetitive
and are made within the framework of
organisational policies and rules
• Non-Programmed Decisions – to solve
unique, novel, unusual, non-recurring
problems in which the various alternatives
cannot be decided in advance. There are no
readymade solutions available.
• Strategic Decisions: choice of actions
related to allocation of resources &
contribution to the achievement of
organisational objectives.
– The decision is a major one
– Contributes directly to the contribution of
goals
– Involves changes in earlier decisions
concerning some organisational practices
• Tactical Decision: derived out of strategic
decision.
– related to day-to-day operations
– Mostly a programmed decision within the
context of policies, rules, procedures etc
– Outcome of the decision is of short-term
nature and affects a narrow part of the
organisation
– Authority to take tactical decisions can be
delegated to lower-level managers
 Decision-making Process
• Selecting an alternative:
– Experience- decisions must be evaluated
against future events, experience belongs to
the past
– Experimentation- try out the alternatives to
assess the outcome
– Research & Analysis- collection of
information and data and analyze the data
• Evaluation of alternatives: ultimate
decision-making point
– Quantitative & qualitative factors
– Marginal Analysis: compare additional
revenues arising from additional costs
– Cost effective analysis: finding the least costly
way of reaching an objective or getting the
greatest value for given expenditures
 Risk Analysis
• Almost everything we do in today's business
world involves a risk of some kind: customer
habits change, new competitors appear, factors
out of our control could delay the plans.
• Risk analysis and risk management can help to
assess these risks and decide what actions to
take to minimize disruptions to our plans.
• They also help to decide whether the strategies
we would use to control risk are cost-effective.
• We define risk as 'the perceived extent of
possible loss'.
• Different people have different views of
the impact of a particular risk – what may
be a small risk for one person may destroy
the livelihood of someone else.
 Decision Tree Analysis
• They provide a highly effective structure within
which you can explore options, and investigate
the possible outcomes of choosing those
options.
• They also help you to form a balanced picture of
the risks and rewards associated with each
possible course of action.
• They are useful for choosing between different
strategies, projects or investment opportunities,
particularly when your resources are limited.
 Keep these in mind while taking
decisions
• Importance of decisions
• Extent of responsibility
• Resources involved
• Degree of flexibility
• Degree of certainty of goals & premise12s
• Impact of decisions
• Other factors
– Personal values & organisation culture
– Group decion-making
– Creativity & innovation
 DSS-decision support systems
Decision Support Systems (DSS) are a specific
class of computerized information system that
supports business and organizational
decision-making activities. DSS is an
interactive software-based system intended to
help decision makers compile useful
information from raw data, documents,
personal knowledge, and/or business models
to identify and solve problems and make
decisions.
 DSS-decision support systems
• Use of computers to facilitate the decision-
making process of semi-structured tasks.
• These are designed to make the decision
process more effective
• Technical professionals in cooperation with the
managers design the system suitable for a
particular position
• Managers can manipulate data & explore the
effectiveness of alternative courses of action