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STRATEGY AND

DECISION MAKING
EM-III

DECISION MAKING

Decision Making
The nature of management decisions
The decision-making process
Decision-making techniques

The nature of decision making


Decision making:
Usually to solve problem
Scientific and Management decisions
Is it straight forward?
May be for engineers and scientists
But for management decisions, that involve people and affect many

more people in a changing and uncertain environment, it is totally


different(case studies)

Management decisions
Decision making steps are:
Defining problem
Gathering problem related facts
Comparing these with right and wrong criteria based on knowledge and

experience
Taking the best course of action

Management decisions
Main characteristics of management decision making:
Often ill-defined or unpredictable problem; human factor; unlike

scientific laws
Management problems have much wider scope and affect many

people and functions, All of these with varying interests, objectives and
requirements
Information gathering for decision is often hazardous process; info

Is based on guesswork, rumor or hearsay; decision based on such


information can be dangerous & not accurate.
Several alternatives with different and unpredictable consequences

that vary with time due to market or people, so choosing one become
difficult

Management decisions
Main characteristics of management decision making:

(contd)
Rarely exists a best solutions in management problems;

compromises are to be made


Once a decision is made it requires consensus and commitment

from the affected people to implement.


Continuous monitoring required in order to judge the validity of the

decision made in a changing environment


The process of management decision making cannot be learnt; it is

mostly based on experience and judgment

Yes

Decisio
n
critical
?

No

No

No

Decisio
n
routine
?

Manager
have
sufficient
informatio
n?

Yes

Yes

Delegate

Yes

Involv
e
others
?

No

Involve others

Fig. 6.2 Management decision flow


diagram

Make decision

Decision-making process
Any decision, good or bad, is better than no decision at all
Nothing can be worse than sitting indecisively on the fence.
Half a decision is much worse than no decision at all
A decision is worthless if it cannot be implemented, actions needed

to carry it out must be the part of the decision and not added later
Differ decision?

Routine or
unique? Cause
or symptom?

Define
problem

Own or team?

Decide on
method for
arriving at
decision

Facts or opinions?
Short or
exhaustive list
Quality
solution
exists?
Extent of
compromise?
Boundary conditions
met?
Easy or difficult?
Commitment
needed
Impact on
others?

Fig. 6.3 The decision-making

Feedbac
k

Time factors?

Identify if a
decision is
needed

Define
alternative
solutions
Select best
solution
Modify based
on
compromise
factors
Build
implementation
factors into
decision
Carry out
decision

Monitor
results

Decision-making techniques
Decision techniques; trees and tables; e.g. table 6.2
Decision-making techniques usually adopt a two-stage process
1.
Determining the method for arriving at a decision; such as whether to
involve others or not
2.
Arriving at a decision
(Company decide condition under which customer grant Credit)

Table 6.2 Decision matrix on the criteria for credit


Options
Question

Done business before?

Turnover exceeds defined value?


(L/S)

Recommended by an existing
client?

Accept/reject?

The Vroom-Yetton model


It proposed a set of possible management decision-making styles; AI

very autocratic to GII democratic and a set of seven questions to decide


the style to be used Table 6.3 Decision making style
Style

Description

AI

The manager makes the decision entirely on his/her own

AII

The manager first collects information from others (possibly telling


them why the information is needed) and then makes the decision on
his/her own

CI

The manager discusses the problem individually with others and gets
their input before making decision on his/her own

CII

The manager discusses the problem with a group of people (usually


the most affected) and gets their collective input before making
decision on his/her own

GII

The manager discusses the problem with a group of people (usually


the most affected) and lets the group make the decision. The manager
does not try to influence the group to accept his/her solution

The Vroom-Yetton model


Table 6.4 Questions involved in the Vroom-Yetton method
Question

Description

Is one solution likely to be much better than any other; i.e. is


there a quality solution?

Does the manager have enough information to make a quality


decision?

Does the manager know which information is missing and where


to find it?

Is commitment to the decision by others important for its


implementation?

Will others accept the solution if they are not involved in


decision-making process?

Do all the people share in the same goals?

Will there be a conflict between the affected people regarding


alternative solutions?

The Vroom-Yetton model


The questions are supposed to be asked for any situation

in which the manager needs to decide on whether to


involve others
A decision tree is followed based on the answers to

questions, which leads to the correct style to be used


If several examples are equally good then the choice is

usually made on the basis of the least amount of effort


(person-hours) involved

Case study:
Feeding the line

The Kepner-Tregoe method


It specifies a series of steps to analyze a problem:
1.
Specify the problem in terms of what it is and what it is not
2.
Identify the differences (distinctions) between what the problem
is and what it is not
3.
Look for the causes (solutions) that explain these differences
(distinctions)
4.
Test the cause (solution). Compare what actually happened
with what would have happened if the proposed cause
(solution) had been in action.

The case study


A hot stand