DECISION MAKING

PANKAJ BAHL
M.B.A, 1st sem
12097154,SEC-B 61
 CONTEN
INTODUCTION TO DECISION.
TS

CLASSIFICATION OF DECISIONS.
DECISION-MAKING.
PRINCIPLES OF DECISION MAKING.
STEPS IN DECISION MAKING PROCESS.
HOW DECISIONS ARE MADE IN A ORGANISATION.
CHARACTERSTIC OF AN EFFECTIVE DECISION
MAKING PROCESS.
DECISION MAKING APPROACHES.
DECISION MAKING STYLES.
RATIONALITY IN DECISION MAKING;
-BOUNDED RATIONALITY;
-INTUTION IN DECISION MAKING.
PROBLEMS IN DECISION MAKING.
CONCLUSION.
 INTRODUCTION
Decision
Making a
choice from
two or more
alternatives.

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Classification of Decisions
1. Programmed decisions:- are
repetitive decision that can be
handled by a routine approach.
Types:-
A Policy
A Procedure
A Rule
2 Non-programmed decisions- are new
unique challenging highly risky and
difficult decisions.
CONTD

3. Strategic decision:-these are basic

long term, vital and very important
managerial decisions

4.Tactical decisions:-relates to day to

day operations of the organization and
has to be taken very frequently.
CONTD

5-Organizational decision:-When an
individual takes decision as an executive
or in official capacity it is known as
organizational decision

6-Personal decision :-These decisions are

those decision which are taken by an
individual in his personal capacity and
are concerning with a particular
individual.
What is Decision Making?
Decision making is the study of
identifying and choosing alternatives
based on the values and preferences of
the decision maker.
PRINCIPLES OF DECISION
There are eleven principles of
MAKING
collaborative problem solving.
Purpose-Driven
Inclusive,Not Exclusive
Educational
Voluntary
Self-Designed
Flexible.
Egalitarian.
Respectful.
Limited time.
Achievable.
Accountable.
THE DECISION-MAKING
PROCESS.
IDENTIFYING A PROBLEM and
DECISION CRITERIA and ALLOCATING
WEIGHTS to the criteria.
DEVELOPING, ANALYZING, and
SELECTING an alternative that can
resolve the problem.
IMPLEMENTING the selected
alternative.
EVALUATING the decisions
effectiveness.
STEP 1:- IDENTIFYING THE
PROBLEM
The first step in
decision making
process is the
problem
identification, that is
recognized what the
real problem is that
needs decision
making.
STEP 2:- IDENTIFYING DECISION
CRITERIA
Decision criteria are factors that are
important (relevant) to resolving the
problem. Certainly all available facts,
opinion, data have to be collected.

Step 3: Allocating Weights to the

Criteria
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 alternatives strengths

and weaknesses.
STEP 6: SELECTING AN
ALTERNATIVE
Choosing the best alternative

The alternative with the highest

total weight is chosen.

STEP 7: IMPLEMENTING THE DECISION

Putting the chosen alternative into action.
STEP 8: EVALUATING THE
DECISIONS EFFECTIVENESS
The soundness of the decision
is judged by its outcomes.
The decision making process-Example
Identification of a problem
My sales Reps need new
computers!
Identification of Decision Criteria Memory and Storage, Display Quality,
Better Life,Warranty, Carrying weight

Allocation of weights to criteria

Memory and Storage-10, Display
Quality -8, Better Life -6,Warranty -4,
Development of alternatives Carrying weight-3
Toshiba, HP, Soni Vaio, Qosmio,
Analyzing of alternatives
Gateway, Apple iBook, Lenovo, Dell
Toshiba, HP, Soni Vaio, Qosmio, Gatewa
Apple iBook, Lenovo, Dell
Selection of alternatives
Toshiba, HP, Soni Vaio, Qosmio,
Implementation of alternatives Gateway, Apple iBook, Lenovo, Dell

Toshiba!
Evaluation of decision alternatives
HOW ARE DECISIONS MADE
IN ORGANIZATIONS?
Decision environments include:

CERTAIN ENVIRONMENTS.
RISK ENVIRONMENTS.
UNCERTAIN ENVIRONMENTS.
 Certain environments
Exist when information is sufficient to
predict the results of each alternative in
advance of implementation.

Risk environments.
environments
Exist when decision makers lack
complete
certainty regarding the outcomes of various
courses of action, but they can assign
probabilities
of occurrence.
 Uncertain environments.

Exist when managers have so little

information that they cannot even
assign probabilities to various
alternatives and possible outcomes.

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CHARACTERSTIC OF AN
EFFECTIVE DECISION MAKING
It focuses on what is important.
PROCESS.
It is logical and consistent.
It requires only as much information and
analysis as is necessary to resolve a
particular dilemma.
It encourages and guides the gathering of
relevant information and informed opinion.
It is straightforward, reliable, easy to use,
and flexible.
Approaches to Decision
Making.
There are two major approaches to
decision making in an organization.
1. Authoritarian. The manager makes
the decision based on the knowledge
he can gather.
2. Group. The group shares ideas and
analyses, and agrees upon a decision
to implement.
 CONTD
Groups decision making is decision
making in groups consisting of multiple
members.
Advantages:-
Diversity:-
Varied experiences:-
Enhanced memory for facts:-
Greater Acceptability of decisions:-
Error detection:-
Collective understanding:-
More creative solutions:-
Shared responsibility:-
Motivational effect:-
Simplifies complex decisions:-
Decision making styles.
(1):-Decisive Decision Makers
Decisive decision makers are satisfiers and
unifocused. They collect limited information
and act quickly.
(2):-Flexible Decision Makers
They collect limited information but are more
flexible in choosing solutions than decisive
decision makers.
(3):- Hierarchical Decision Makers
They collect large amounts of information
and then select one best solution
CONTD
(4):- Integrative Decision Makers
They collect and evaluate information, but select
more than one solution.

(5):-Systemic Decision Makers

Systemic decision makers blend
integrative and hierarchical styles in a two-
step process. First they collect as much
information as possible for multiple
solutions. Then they prioritize solutions by
the best criteria from the information or for
their specific situation
MAKING DECISIONS Rationality

If appropriate means are

chosen to reach desired
ends, the decision is
rational.

Managers make consistent,

value-maximizing choices
with specified constraints
ASSUMPTIONS OF RATIONALITY

625
 A decision maker is said to exhibit Bounded-
rationality when they consider fewer options
than are actually available, or when they
choose an option that is not ? the best
overall ? but is best within the current
circumstances.

626
Intuition in decision making.
Making decisions on the basis of
experience, feelings, and accumulated
Judgment .
e.g
Experience-based decision

Affect- initiated decisions

Value based decision

Cognitive-based decisions

Subconscious mental processing

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PROBLEMS IN DECISION
MAKING
In every sphere of
life the success or
failure depends
upon quality and
correctness or
decision taken.
CONTD
Timing of Decision. The utility and
importance of decision is lost if it is not
taken at right time.
In decisiveness. To take decision is high
responsibility. The fear of its out come can
make some people timid about making a
decision,
Participation in Decision-making. Good

and better decision can be taken by taking

people into confidence. Different
viewpoints will give a wider thoughts to the
problem.
 CONTD
Failure to locate the root cause of theProblem.
Generally people try to cure the system rather than the
cause .

Decision Environment:-.If environment is healthy

decision will be accepted in a good spirit and will be
honestly implemented.

Implementation of Decision:- Taking effective

decisions are important but more important is its
proper implementation.
 CONCLUSIO
N.
For example,delaying a decision until
you have all the information , may make
it difficult for you to make timely
decisions. A too late decision isnt an
effective one. But neither is a quick
decision based on too little information.
So aim not at the ends of the continuum,
but somewhere in the middle. Collect
enough information to really understand
the situation and see multiple solutions.
THANK YOU