Complete Course of Decisions Making

Making
Manageme
nt
Decisions
MBA 4th
Steve Cooke
Nigel Slack
Chapter 1: Decision Making in
Management
Learning Objectives
Good and Bad Decisions
Decision Making or Problem Solving?
Process of Decision Making
Elements of a Decision
The Range of Managerial Work Roles (Henry Mintzberg)
Management
Good or Bad Decisions
2 Approaches
1. Outcome of Decision
2. Process of Decision Making
Management
Decision Making or Problem Solving
1. Partly a Problem of Semantics

2. Problem Solving is an Element of Decision Making
3. Decision Making is an Element of Problem Solving
Management
1. Observe
2. Formal Recognition
3. Interpretation/ Diagnosis
4. Definition
5. Set Objectives
6. Determine the Options
7. Evaluate Options
8. Select option
9. Implement
10. Monitor
Management
1. Observe
The manager realizes/ feels that there may be

an opportunity to make decision in:
Organization or its Environment
May not base on hard evidence but may base on:

Intuition
General Feeling that all is not well
Management
2. Formal Recognition
The manager is sufficiently convinced that the

Need for a decision is real because:
Accumulation of Evidence
Evidence is clearly demonstrable
Deviation of a Performance Measure from
some Desired State
This is when the problem cannot be ignored
Management
3. Interpretation/ Diagnosis
There is need for a manager to diagnose the

True Nature of the problem in the presence of a
Set of Stimuli:
Faulty Diagnoses will seriously affect the decisions

making process
Different Perceptions, Interpretations and

Models of the True Nature of the Problem are
proposed
Management
4. Definition
The agreed Interpretation of the problem is

turned into its Operational Form:
Clarifying the Details of the problem

Formalizing a Written Statement
Drawing the Boundaries of the Decision
Management
Management
6. Determine Options
The Length and Importance of this depends on

how the Decision has been defined earlier:
Narrow Boundaries >> Options might be

already given
Broader Boundaries >> Creative Options

Management
7. Evaluate Options
Determining the extent to which each of the

Decision Options meets the Decision
Objectives:
Details of Consequences of Each Option are

explained
Use of a Mathematical Model

Management
8. Select Options
The phase of Decision Making Process towards all

the other stages have been working:
Procedure of Selection depends on the Size

and Constitution of Decision Making Body
Single Decision Maker >> Value System and

Interests
Multi-Decision Makers >> Combination of
Debate, Consultation, Delegation or Political
Process
Management
Management
10. Monitor
When the Selected Option is implemented, it

should be monitored to see how Effective it is to
solve the original problem:
If the Decision has effectively solved the

problem then the Decision Making Process
Ends here
If not, then it is again the original Observation

Phase and the process starts afresh
Management
The Elements of a Decision
The Key Elements of a Decision are:
1. The Decision Body

2. The Decision Options
3. The Uncontrollable Factors
4. The Consequences of Each Option
Management
The Decision Body
Who is the Person or Group of People (which are often the

representatives of different parts of the organization) e.g.
Committee, having the Authority to make the Final Decision?
Single Decision Maker >> Value System and

Interests
Multi-Decision Makers >> Combination of Debate,
Consultation, Delegation or Political Process
Influences the Options and the Ends

Controls which Options are Considered, which
information is relevant and how each Option is
evaluated
Views of Interested Parties
Personal Interests
Management
The Decision Options
The Alternatives Courses of Actions between which The

Decision Body must choose:
Heart of Decision Making: No Choices, No Decision
Yes/ No Options >> Infinite Options
How Evident/ Discernible at the start of Decision

Making Process
Classification of Decision Options
Given Fully developed at the start of process

Found Ready Made Fully developed & found in
the environment of decision and discovered during
the process
Custom Made Developed Specially for the
decision in question
Management
Uncontrollable Factors
Those parts of the decision which, although having an

influence on the Final Outcome but cannot be controlled by
Decision Body:
Follow the following Three Steps while considering

Uncontrollable Factors:
Indentify the Factors
Indentify the States or Levels which each

Uncontrollable Factors could take
Attempt to Predict the likelihood of these states

Management
Consequences
The Outcomes; for each combination of Decision Option and

the State of Nature, there will be a Consequence.
Decision Options (N) & Mutually Exclusive States

of Nature (M) then there will be NXM
Consequences
Primary Consequences: which are the

straightforward statements of the operational
results
Surrogate Consequences: which are the
interpretation of the results
Evaluated Consequences: which are the
measure of the worth or the utility of the outcome
to the decision body
Management
The Range of Managerial Work Roles
Chapter 2: Content & Context of
Management Decisions
Learning Objectives
Types of Management Decisions
The Decision Environment
The Approach to Decision Making
Types of Management Decisions
1.Strategic or Operational
2.Structured or Unstructured
3.Dependent of Independent
1. Strategic or Operational : How much organization a
decision
Strategic encompasses
Decisions
Set the intended Direction of the Organization (Future of the Organization)
Relate the Organization to its Environment
Broad in Scope
Long Term
Carried out by Senior Managers
Relatively Unconstrained
Infrequent
Encompass Large part of the Organization
High Degree of Risk/ Uncertainty due to ever changing or High Rate of Change
in Environment
Operational Decisions
Concerned with Input/ Output Relationship of a Department
Routine and Predictable
Short Term
Carried Out by Lower/ Mid Level Managers
Repetitive
May only Concerned with small part of the Organization
Low Risk
2. Structured or Unstructured : How well defined the
decision is?
Structured Decisions
Well defined
Decision Body is defined

Extent of Decision
Decision Options
Evaluation Criteria
Procedure to reach Option Choice is well understood
Unstructured Decisions
The opposite of a Structured Decision

3. Dependent or Independent : How connected the decision
is with others?
2 Scales
The scale representing the Degree of Influence of Past and Possible

Future Decisions
The scale representing the Degree of Influence across other Areas of the
Organization
1.Core and Boundary Decisions
2.Functional Area and Boundary Decisions
3.Environment Defined
A. The Specific Environment

B. The General Environment
4.Complexity, Change and Perceived Uncertainty

1.Core and Boundary Decisions
Core Decisions: The decisions which lie deep within the

Organizations Environment
Inputs from within the Organization and Outputs go

back into the Organization
Taken at all levels of Organization but mainly
Operational in Nature
Boundary Decisions: These lie at the Boundaries of

Organizations Environment
Managers are concerned to manage the Interface

between the Organization and its Environment
The relationship may be Strategic or Operational

2. Functional Area and Boundary Decisions
Every Functional Area of an Organization is involved in both

Core and Boundary Decisions
But some will lay more stress on either Core or Boundary
Decisions
Example:
Operations Function
Marketing Department
3. Environment Defined
The Totality of Circumstances (of whatever kind) under

which the Organization Operates:
Organizations do not deal with all parts of their Environment

Much of the Total Potential Environment can be considered
Inactive for any decision
The Environment of an Organization can be:
A. Specific Environment
B. General Environment
A. Specific Environment
Of the Total Environment of any Organization it is the part

which:
The organization relates directly and on a more or less

Regular Basis e.g.
Customers
Suppliers
Local Government
Local Groups
Trading Standards Authorities
B. General Environment
The Environmental Features which are Common to

Large Number of Organizations (may be within the same industry
or may be not) at the Same Time form General Environment e.g.
Technical
Legal
Political
Economic
Demographic
Ecological
Cultural
Complexity, Change and Perceived Uncertainty
Simple or Complex Environment:
An environment is Simple if it has Fewer Elements and

which are probably Similar to each other and Well
Understood.
A Complex Environment has Large number of Factors
which may be Different from each other and their inter-
relationship difficult to comprehend.
Static or Dynamic Environment: An Environment is Static if it

is Stable and Unchanging and Dynamic Environment is Subject to
change which possibly may be difficult to forecast
The Character of decision is shaped by the decision itself but
also by The Approach of the Decision Maker:
Managers Discretion:
The Power or The Right to decide, choose is called as

Discretion
The way Manager Sees a Decision and the Decision
which is formalized may be different
Purpose:
Either to make any solution more Useful or to Simplify

it for easy Analysis

Managers Use/ Exercise their Discretion in Two Ways and
thus there are Two Approaches to Decision Making
The focus of these approaches is on the Decision Elements
1. Boundary Discretion: What and How Many Decision

Elements to include in Decision Making
2. Treatment Discretion: The Way Decision Elements are

Treated
1. Boundary Discretion
Decision Making Body: Single Decision Maker or

Multi-Decision Makers
Objectives are to be Simple with Single Measure or

have Several Objectives with different Measures
Range of Options be Limited to those which are

Immediately Discernable or it be Widened through
Comprehensive Research
Number of Uncontrollable Factors: All or one Single

Most?
Consequences can be described by a Single

2. Treatment Discretion
Controllable Factors:
Should we describe Controllable Factors by taking

their Most Likely Values or Range of Values?
Should we treat Factors as Controllable which are
Partly within Our Control?
Consequences:
Should we know the each Possible Consequence

with Certainty
Or we assume that each Combination of Decision
Options and States of Nature could produce
Range of Possible Consequences
Impact:
The Approach or Discretion used by Manager

affects:
Where the Decision is placed in the Three

Dimensions of Decision i.e.
Strategic Operational
Unstructured Structured
Interdependent Independent
Chapter 6: Modeling
Learning Objectives
What is a Model?
Forms or Levels of Models
The Uses of Modeling
The Process of Modeling
Two Alternatives to Conventional Mathematical Modeling
Chapter 6: Modeling
What is a Model?
A Model is an Explicit Statement of our Image of Reality:
It is a representation of the relevant Aspects of a

Decision concerning to Decision Maker
It represents the Decision Area by Structuring and
Formulizing the Information the Decision Maker
possesses
Eventually it is an Abstraction of a Complex Reality
Chapter 6: Modeling
1.Verbal Descriptive Models

2.Analogue Models
3.Relationship Models
Chapter 6: Modeling
1.Verbal Descriptive Models: Such models only communicate

The Gist of Reality.
Descriptive Models only provide Necessary

Information on which decisions can be made.
The information is simplified in Two Ways:
Deliberate Exclusion: Leaving out what has

happened by making a Judgment of Relative
Importance of Events
Compression & Aggregation: Simplifying several

Comments, Reactions and Events into one Over All
Result
Chapter 6: Modeling
2. Analogue Models: The Comparison of Observed

Situation with Analogues Situation.
Analogue Models represent One Set of Properties

with an other.
Analogue Models rely on Implications and

Associations to describe the Underlying Structure of
a Problem
They do not explain The Relationship between the

Various Elements which give Problem its Character
Chapter 6: Modeling
3. Relationship Models: Influence Relationships are

Implied between Elements or Events in a Decision
Situation.
The relationships may be Quantified
At this Level, the Model is capable of being translated into

a Formal Language e.g. Mathematical Symbols
Chapter 6: Modeling
The Uses of Models
Models can be used to aid Decisions in many ways and at All

Stages in Decisions: Models are used for:
Enhancing Understanding
Stimulating Creativity
Evaluating Alternatives
Chapter 6: Modeling
The Uses of Models
Enhancing Understanding
A model acts as a Vehicle for Communication
The information is shared with other related managers
It initiates debate until a consensus view of the Decision is

achieved
Helps in understanding Challenges, Assumptions and

the Relationships among Various Assumptions
Chapter 6: Modeling
The Uses of Models
Stimulating Creativity
Models provide a tool for communicating our Perceptions

of a Problem and thus Open Challenge and Debate
Through debate New Ideas are generated
Also we get New Factors and New Alternatives for the

Solution of the Problem
Chapter 6: Modeling
The Uses of Models
Evaluating Alternatives
Models are used for Evaluation both Directly and

Indirectly
Direct Evaluation: Indentifying Single Best Option

or the Option which will prove Satisfactory for the
Decision Maker
Indirect Evaluation:
The Models can be used to predict the Behavior

of a Certain System (Set of Variables under a
Specified Conditions).
The behavior of the System (Prediction) is then
Chapter 6: Modeling
Essential Pre-requisites to the Development of Models are
Understanding Key Variables with the Decision
A knowledge of Pattern of Influence between the Variables

(relationship between variables)
An Appreciation of the Range of Alternative Approaches

available in the Field of Symbolic Modeling
Cause Effect Diagrams

Major Mathematical Models
Alternatives to Mathematical Models
Heuristics
Simulation Models
Chapter 6: Modeling
Variable: A variable in a decision is some element which takes

on different value
Parameter: A decision Element which has a constant value

over a Period of Time
Types of Variables
Exogenous Variables
Endogenous Variables
Chapter 6: Modeling
Exogenous Variables:
Independent Inputs to the Model which may be

affecting the decisions
They can be Controllable or Uncontrollable
Endogenous Variables:
Out Put of the decision (the consequences)

They are generated by the Interaction between
Chapter 6: Modeling

A knowledge of Pattern of Influence between the Variables
(relationship between variables)
An Appreciation of the Range of Alternative Approaches available

in the Field of Symbolic Modeling:
Cause Effect Diagrams:
The simplest way of indicating that some

Relationship exists between Factors within a
Decision is to show the Direction of Influence by
Arrows on a Cause Effect Diagram
Can be drawn from working Backwards from

Endogenous Variables to Exogenous
Variables
Disadvantage: Unable to describe the Nature of

Chapter 6: Modeling

Cause Effect Diagrams

Chapter 6: Modeling

Mathematical Models:
The Use of Symbols to describe the Decision

Variables and Relationship between them
The most Convenient Set of Symbols for this task

are Conventional Mathematical Symbols since
there are well established Rules for their
Manipulation
Chapter 6: Modeling

Mathematical Models:
Chapter 6: Modeling

Operational Research:
Building Quantitative Models to aid the Managers

in their Decision Making is the Keystone of
Operational Research (OR)
An Approach to aid Management Decisions

through Modeling
Producing Powerful Standard Models
For Example:
Allocation Models
Chapter 6: Modeling
Chapter 6: Modeling

Simulation Modeling: Simulation is a Model of a
Procedure expressed in Precise Symbols
Simulation Models rely on a Statement of a

Procedure which underlies the Logical
Relationship between Variables
It usually takes Form of a Flow Chart which explain

Interrelationship between Variables
Simulation Model is used to Execute the

Procedure described in Flow Chart and the
Behavior of the System being Modelled is
Simulated
Simulation Models explore the Consequences of a

Chapter 6: Modeling

Corporate Modeling:
Corporate Models are used to aid Corporate
Decisions
The differ from other Models because of the

Nature of the Variables involved specially
Corporate Modeling considers wide range of

social, legal, technological etc. variables and an
equally broad collection of Objectives.
Term Corporate Modeling has to mean:
Models which use Conventional Accounting
Measures & Relationships
Chapter 7: Modeling Uncertainty
Learning Objectives
Certainty, Uncertainty and Risk
Options, Elements, States of Nature,

Consequences
Options, Elements, States of Nature,

Consequences
Certainty &
Uncertainty
Certain Uncertai
ty nty
Certainty
When managers take certain decisions, they are Reasonably

Confident of the Precise Nature of Consequences of any
Option Chosen
Under state of Uncertainty Only one State of Nature is

Possible
If any Variation which is possible will not affect the

Consequences of choosing a Particular Option
The decision is considered to be Insensitive to

However, this does not imply that the Decision Making

Process will be particularly Easy or Straightforward
Uncertainty
Under Conditions of Uncertainty we cannot predict the

Consequences of any Decision
We have very Little Confidence in our View of what States

of Nature are Possible
We are also not Confident about the Likelihood of

Occurrence of any State of Nature
Our Understanding of the Structure of the Decision will

be Poor
Information regarding decision will be Limited and

Ambiguous
Risk
When Conditions of Certainty do not exist but we are able
to make Confident Predictions regarding the Probabilities
that any Particular State will Occur then:
Decision is said to be Occurring Conditions of Risk
Most Management Decisions lie between Total Uncertainty

and Risk This area is referred to as Plain Uncertainty
We can usually Indentify the States which are Likely to

Occur
We have Sufficient Knowledge to predict the Likelihood of

the Occurrence of Each State
Under Risk, it useful for Decision Makers to proceed as if the

have Confidence in their Estimates of Possibilities
Chapter 9: Decision Objectives
Learning Objectives
Types of Organizational Objectives
Strategic and Operational Objectives
Multiple Objectives
Implicit and Explicit Objectives
Efficiency and Effectiveness
Intrinsic and Extrinsic Objectives
Setting Decision Objectives
Types of Organizational Objectives

Primary Objectives: These reflect the Fundamental Reason for
the Organizations Existence
Primary Objectives may include Survival of the Company,
Independence form Outside Control, Profit etc.
Strategic Objectives: These guide the Organizations Long Term
Direction towards the achievement of Primary Objectives
Strategic objectives may include Developing Innovative Products,
Keep presence in a Particular Market, Fund Projects from internal
sources only etc.
Operational Objectives: Interpretation of an Organizations Strategic

Objectives into Manageable Terms for Short Term Decision Making.
Operational Objectives may include Controlling Budgets, Giving In

time Delivery, Managing Unit Costs etc.
Strategic and Operational Objectives
Strategic and Operational Objectives have Different

Purposes and are expressed in Different Ways
Operational Level Objectives are shaped by whatever Strategic
Objectives are adopted
There are different Layers of Objectives Broad at the Beginning

(Strategic Objectives) and becoming More Specific as they approach
Operational Level
The Means End Chain

Means Ends Chain

If Objectives are present at Different Levels in an Organization
then,
An Objective to one Decision Maker will be Means of
Achieving a Higher Objective for a Higher Decision Maker
In Practice, Means Ends Chains are Interconnected in a

Complex Manner.
Mean- Ends Chains then explain
How? When moving Downwards from Strategic Objectives

that How the Objective will be achieved at Operational Level
Why? When moving Upward from Lower Level the Chain

answers why an Objective should be achieved
Means Ends Chain

Multiple Objectives
Organizations pursue More than one Objective at the same
time:
A company wants to Increase Rate of Return, Grow in the

Market, Make Innovative Products etc.
Multiple Objectives can be Conflicting or they can be Compatible
with each other
Multiple Objectives can compete with each other for resources even if
they are not Conflicting
When an Organization is pursuing Multiple Objectives, then Priorities

may be set for each Objective
The prioritization may Set Constraints for other Objectives
The prioritization should not be Strict and Managers should be willing to

Implicit and Explicit Objectives

Explicit Decisions are:
Clearly and Unambiguously Stated (Preferably written

down)
Fully understood by all decision makers within the

Organization
How to make Objectives Explicit?
Do Objectives State what organization does not want to do?
Are the objectives are useful guide to Action?
Are the Objectives reasonably Comprehensive and State the

implications for all Stakeholders?
Efficiency and Effectiveness

Efficiency:
Efficiency is measured is as some function of Output

per of unit Input Resource
Efficiency Objectives are used to increase the Per Unit

Output against per Unit of Input
Effectiveness:
Effectiveness Objectives consider the Characteristics

of the Output as well as the Efficiency of its Generation
Intrinsic and Extrinsic Objectives

Extrinsic Objectives:
The Objectives which managers talk about as Applying to

their decisions are Extrinsic Objectives
They exist as they are considered as being Efficient in

achieving the the Hierarchical Objectives
Intrinsic Objectives:
The Objectives which are set by the Intrinsic Value of

Extrinsic Objectives

Objectives Should be Clear
Objectives Should be Consistent
Objectives Should be Agreed
Formalization of Objectives

Objectives Should be Clear
Clear and Explicit Statement

Clear Time Period
Developing and Communicating Explicit Objective

Statements
Sharing and Agreeing Objectives with those responsible

for their achievements
Reviewing how far Objectives have been achieved at
Regular Intervals

Management by Objectives
Sub-ordinate Managers participate with their

Superiors in agreeing Performance Goals which are to
be achieved or bettered by them over a Period of Time
Participation in Target Setting and Evaluation of

Performance
Increase Risk taken by the performers

Increases Level of Motivation
Increases Level of Commitment

Objectives Should be Agreed
Agreement is sought from those who has to achieve the

Objectives i.e. Subordinates and Peers
Making participants to Commit themselves to the

Accomplishment of the Objectives
Can be achieved through Involvement as in increases:
Understanding and Commitment

Improves the views on feasibility, Constraints,
Resources Available

Formalization of Objectives
1. Making an Objective Explicit requires:
Clear and Unambiguous Statement

Fully understood by all Participants
2. Criteria for a Sensible Objective include:
Necessity, Practicability, Relevance, Measurability
3. Success Criteria
Standards through which we measure the

Achievement of any Objective
Mid Term Result Summary
Chapter 10: Organizing for Decision
Learning Objectives
The Key Role of Information
Information Needs in Stable Conditions
Information Needs in Conditions of Uncertainty
Establishing the Decision Point
Choice of Management Style
The Effective Decision Group
Organizing for an effective Team
The Team Types
Organizing for Decision

The real Impact of Poor Decisions Making is created by
the cumulative effect of Large Numbers of Poor Quality
Decisions:
Reducing the Effectiveness of Organization

Threatening the Success and even the Existence of
Organization
In order to avoid the Large Numbers of Poor Decisions;

Organizations Set up Mechanisms and Processes. Such
Processes address two separate but linked Needs:
that when Problems arises, Decisions do actually get

taken
that when Decisions are made, they shall be Good
Decisions
Processes / System
To achieve the Organizational Objectives;
that when Problems arises, Decisions do actually get

taken
that when Decisions are made, they shall be Good
Decisions
Organizations develop many Process/ Systems with:
Several Components
Several Skills are also required to make High Quality
Decisions
Such areas where these Process/ Systems and Skills can Benefit
are:
The Key Roles of Information
Key Roles of Information are
Necessary Operating Condition for Rational Decision Making
Managers Need to Gather and Collate Information in

order to decide if a Problem Exists or Not
Information is needed after the Implementation of the

chosen solution in order to Determine its Effectiveness
Establishing Information Process/ System for Decision

Making
Indentify and Establish the Nature of Information

Required
Establish Sources from where the Information is Likely to
The Key Roles of Information

Establishing Information Process/ System for Decision
Making
There are Three Basic Factor which will affect the Complexity
of Information Process/ System Required:
Task Uncertainty: Greater the Degree of Novelty &

Uncertainty results in Greater amount of Information that
has to be Processed and Shared
The Number of Elements Involved: Greater the

Number of Elements involved (e.g. size of organization,
number of tasks or products undertaken etc.) will result in
High Information Needs
The Interdependence of Decision: High Degree of

Establishing Sources of Information

The process of Gathering and Collating Information is
Continuous in Nature. The Information is Needed:
1. In order to Monitor any Changes in the Input Conditions

from the Environment
2. To check how well the decision has been implemented in

the Organization
3. To Evaluate the Performance of the Chosen Course of

Action in meeting the Set Objectives
Information Needs in Stable Condition

Under Stable Conditions:
The problems which arise are internal in Nature

Input Conditions (General Environment) do not have greater
Impact on Organization
Therefore, the focus is on:
1.To check how well the decision has been implemented in the
Organization
2.To Evaluate the Performance of the Chosen Course of Action
in meeting the Set Objectives
But,
Managers should not neglect to Monitor changes in General
Environment
Any movement away from Stability
Information Needs in Conditions of Uncertainty

Under Conditions of Uncertainty:
Decision Makers face variety and Variability in the problem
they face
Lack of Routine means the Information System has to be
Flexible to Gather Information from Many Sources to meet the
needs of Range of On-off Decisions
The task of Monitoring Implementation Effectiveness of and
Achievement of Objectives is difficult
Due to High amount of Information and the Technical Nature
of Information, Decision Maker is dependent on other people
for Information Gathering and its Interpretation
Employees with Higher and Diversified Skills are required
Establishment of adequate Information Sources and
Channels is required for Effective Decision Making in
Establishing Decision Point

Decision Point: It means where (hierarchical Level) the actual
Decision is made in organization
Historically, Decision Making is reserved for Senior Position but
it is suggested that it should correspond to the Nature of the
Problem or Task.
The level at which Decisions are made will depend on:
1. Routineness of Task:
If Task is routine, it is then Possible to Centralize certain aspect of
Decision Making Process
Rules and Procedures are established and Managers use to work
through Decision and choose correct course of Action
Non-routine Tasks and Variations requires too many decisions from
Central Body, therefore, can not be Centralized
Guidelines in Terms of Goals and Objectives are Set and Decision
Making is done to achieve the Set Goals
This limits the amount of Information to Travel Great Distances and
Establishing Decision Point

2. Interdependence of Task:
If High Degree of Interdependence is present then Decision Making
is likely to be focused at Higher Level so that coordination can be
achieved
Development of a Decision Making Power into Problem

Solving Units
Most of the Organizations now operate under the Conditions
which:
Produce Variety of Problems
Uncertainty
Under such conditions, a Centralized Decision Body is less
Effective
An appropriate approach is to Locate Decision Making Power at
the Lowest Point where problem can be Solved
Advantages:
It reduces the Volume of Vertical Flow of Information
reducing the Risk of Distortion and Overflow
It allows Quick Response as both the Distance and Time
between Information being Received and Decision being
made is Shortened
Involvement in Decision Making is Motivating for
Choice of Management Styles

In terms of making the Most Effective Decision, managers
can:
Indentify a Management Style which is regarded as

being effective in Solving a Problem
A Choice of Style is presented which ranges from Highly

Autocratic to being Highly Democratic and Participative

The Range of Styles has Five Basic Strategies
Style A: The manager makes Decision personally, using the

information which is immediately available
Style B: The manager obtains Information from subordinates

and then make the decision. Involvement by others is Limited
strictly to Provision of Information
Style C: The manager Discusses the problem with

Subordinates on Individual Basis, while retaining the Decision
Making Role
Style D: The manager Discusses the problem Collectively

with Subordinates while still retaining the Decision Making
Role

Number of Decision Dimensions are indentified which when
considered together allow a manager to decide which if these Five
Styles to adopt:
The Quality Dimension >>>> Choice of Alternative

Solution
If any of the Solution is Acceptable >>> Any Style can

be Used
If it is certain that One Solution will be better than
Other >>> High Quality Solution is Selected
The Information Dimension >>>> Who has the

Information? What Information is needed?
If there is uncertainty, either in what information is

needed or from to get it >>> the subordinates can be
The Commitment Dimension >>>> To what Extent of is

Commitment and Acceptance from others Crucial for
Success?
Underlying Assumption >>> The more people are

involved in Decision Making Process the more they will
be Committed to its Successful Solution
The Capability Dimension >>>> Is Group is Capable of

producing a Quality Decision
If Group Members are Capable of Producing high

Quality Solution it >>> Decision Strategy based on
Group Involvement
If not and there can be disagreements on Preferred

Solution >>>> The manager have to make Final
The activities of subordinates, Singly or Collectively, may

determine the success or failure of attempts at Problem Solving as
Subordinates:
Provide Information
Contribute in Implementation of Decisions
In Four out Five Management Styles, the Manager depends
on Subordinates for Successful Outcomes
Organizations can further increase their Capacity for High

Quality Decision Making by Making and Developing Effective Teams
of Managers and Subordinates.
Effective Work Groups require the Investment of Time, Resources

and Energy
For Effective Decision Groups, there are Several Needs which

should be met. These needs include:
Content Needs >>> what the Group is Primarily Doing?

Specialist Skills and Abilities
Knowledge and Information
Process Needs >>> How the Team/ Group actually

Operates
Skills which are required to Work Together and Live
Together
Process Needs are further Sub-divided in Two

Categories
Task Process Skills

Maintenance Process Skills

Process Needs are further Sub-divided in Two Categories
Task Process Activities: Skills which are needed for
Problem Solving and Task Accomplishment and include such
activities:
Initiating Putting New Ideas or Starting up New

Activities
Asking Getting Information/ Views, actively searching

for facts & Ideas
Giving Volunteering Information and Ideas, making

Suggestions
Clarifying helping in understanding, re-stating,

defining terms, asking for explanations

Maintenance Process Activities: Skills which are needed
for Long Term Cohesiveness and Well Being of the Group
Harmonizing Brining others together, exploring and

reconciling disagreements
Gate Keeping - Bringing others into discussion, allowing
everyone to participate
Encouraging Agreeing, responding positively to others,
building and supporting
Listening showing that ideas are heard, showing
understanding
Standard Setting Stating feelings and beliefs, bringing
things out into open discussion

Maintenance Process Activities: Skills which are needed
for Long Term Cohesiveness and Well Being of the Group
Harmonizing Brining others together, exploring and

reconciling disagreements
Gate Keeping - Bringing others into discussion, allowing
everyone to participate
Encouraging Agreeing, responding positively to others,
building and supporting
Listening showing that ideas are heard, showing
understanding
Standard Setting Stating feelings and beliefs, bringing
things out into open discussion
Organizing for an Effective Team

Effective Teams are Organized by developing:
Content Capability
Task Process Skills
Maintenance Skills
Developing Content Capability: This is measured by
Academic or Professional Qualifications, Job Experience,
Training or Chosen Area of Interest.
In order to increase Content Capability, managers can:

Recruit Group members with as wide a Range of Skills
and Expertise as possible
Encourage Team members to keep their knowledge &
Expertise up to date
Practice
Reading
Organizing for an Effective Team

Effective Teams are Organized by developing:
Task Process Skills: Skills in this area are Developed
through:
Training and Experience
Regular Group Tasks as Learning Vehicles
Through De-briefing and Reflecting
Acknowledgment of such Behaviors which help in

accomplishment of Group Tasks
Maintenance Process Skills: Skills in this area are

Developed through Group Trainings designed to help
individuals:
Explore and Understand their Values, Motivation and
Behavior
Course Assignments
Assignment # 1
Mr. Janbaz Khan is in the process of buying his Marriage Dress .

Indentify Decision Elements in this case i.e.
Decision Body
Decision Options
Consequences
Assignment # 2
You are preparing for your Final Exam. Your Objective is to

achieve 95% Marks. Draw a Means Ends Chain for
achieving this Objective
Chapter 12: Information for Decision
Support
Learning Objectives
Characteristics of Information
Computerized Information Support
Management Information Systems
Decision Support Systems
Support
Information Content can be described by many Attributes or

Characteristics. Which determine the usefulness of the Information
in a given Situation.
Some of the important Characteristics of Information are:
Language:
Verbal Information can be rich in Meaning which Quantitative
Information lacks
Some decisions, mainly Strategic require a Fuller Qualitative
Information rather than a precise Quantitative Information
Some Decision Makers are more influenced by either
Qualitative or Quantitative Language
Format:
Support
Degree of Detail:
As information becomes more aggregated, its ability to
discriminate between the Elements within the Decision
decreases.
Annual Sales >>> Over All Demand
Monthly Sales >>> Seasonality of Sales
Timeliness:
Timeliness is the Time between the Information being

received and the Time at which the Decision is taken.
Sometimes the Timeliness of Information is Negative i.e.
information is not received until after has been taken
Information Source:
The source of Information will affect the Confidence a
Manager has in Information.
Support
Age:
The Veracity of Information is the Function of Time.
Information becomes Dated Immediately after it is
produced
The Currency of Information becomes Important when
decision is taken in an Unstable Environment or when the
Decision is Short Term
Support
Management Information Systems (MIS)
Most organizations generate a Vast Amount of Data which is
stored:
Either as an indication of what is currently happening

Or as a past Record of what has happened
Management Information Systems (MIS) are a result of

development of Computing Power to try and make Computer
Based Systems more helpful to Management Decision
Making
Academically, MIS refers to Group of Information

Management Methods aiming at Automation or Support of
Human Decision Making
Support
Evolution of MIS:
Automation
Integration of Various Information System
Automation
The first application of Computer Based Systems were
Data Processing
It was mainly done to remove Clerical and Transaction

Processing Operations from Humans to Computer
The automation was done through:
Filing and Recording Information
Keeping and Issuing Periodic Summaries and Reports
contained in Files
Automation was aimed at Resource Efficiency

Support
Evolution of MIS:
Integration of Various Information System
After the establishment of Simple Systems it was observed that

different Systems are using the Common Data Files.
It made sense to Integrate different Systems together to

form a kind of Information Central Information
System.
In practice, it is extremely difficult to implement Total

Information Systems
Support
Benefits Aimed from MIS
In terms of providing Information to aid Decision Making,
three types of benefit from MIS are desired
Computer Systems could be Programmed to Replace

management decision makers
On Line, Real Time, Information Systems would give

Instant and Current Information whenever it was needed.
It can be very Costly to provide such a Service
MIS would provide More Information, and thus

Knowing More a manager would make Better Decisions
Support
Decision Support Systems (DSS)
A Decision Support System (DSS) is one which provides
information with the Direct Objective of Aiding or Supporting
Managerial Decision Making.
Conventional Clerical Processing, such as Payroll is not

Regarded as DSS
Decision Support Systems (DSS) have three Possible
Elements:
A Database which contains data that could prove

Pertinent to Decision.
The data can be Internally or Externally Generated
A system for Analyzing or Re arranging the Data, in a

similar way to Conventional MIS
Support
Abilities of Decision Support Systems
DSS is a generic name given to any type of Information

System which is used to help Decision Makers
A DSS can:
Retrieve a single Item of Information

Provide ad hoc Data Analysis
Aggregate or Re arrange Data in the form of Reports
Estimate the Consequences of a Proposed Decision
Propose Decision
Make Decision
Support
There may be Seven Types of DSS
File Drawer Systems: A File Drawer System is a computer

based version of a manual filing system. It gives access to
Data with very little Analysis Ability
Data Analysis System: Data Analysis Systems are used to

Analyze the Files of existing Data
Analysis Information Systems: The purpose of these

systems is to provide Decision Makers with Information,
making use of Decision Oriented Data Bases and Small
Models
Accounting Models: Accounting Models use Definitional

Relationships to forecast the Consequences of adopting
Support
There may be Seven Types of DSS
Representational Models: These are similar to

Accounting Models, but Representational Models use
Relationships that are Speculative or Tentative.
Optimization Models : This class of DSS include Models

which, within themselves, are Capable of Optimization
Suggestion Models: This class of DSS is capable of giving

answers, based on its knowledge of required data and some
mathematically based Decision Rule.
The underlying purpose of this type of DSS is to give

output which is a Specific Recommendation for Action
Chapter 13: Evaluation
Learning Objectives
Factors to be Evaluated
Evaluating Resource Requirements
Evaluating Degree to Fit
Financial Evaluation
Evaluating Risk
Evaluating The Effect on Future Flexibility
Evaluation
Evaluation literally means determining the usefulness, value or
worth or something.
For our understanding, we assume that:
Decision Objectives are Sufficiently well understood

Decision Criteria is defined
Alternative Options have been indentified
Consequences of each Option are also well understood
Factors to be Evaluated
Precise set of Attributes to be evaluated for each Option should
depend on the Nature of the Decision itself
However, there are some factors which have a general

Importance. These factors are:
The Options Resource Requirement

The Options Degree of Fit
The Options Financial Consequences
The Options Degree of Risk
The Options Affect on Future Flexibility
Evaluating Resource Requirement

Three broad categories need to be assessed while Evaluating
Resource Requirements of an option:
What technical or Human Skills are required to implement

the option?
What are Capacity Requirements in terms of Operational

requirements necessary to cope with Increased Level of
Activity?
What are the Funding or Cash Requirements?


Skills Requirements:
Every Decision Option will need a Set of Skills to be present

in the Organization
If an Option requires a Course of Action which is similar to

Usual Activities of the Organization then the Required Skills
may be already present
If the Option involves completely New Set of Actions, then it

is necessary to indentify the required Skills to match these
against those existing in the Organization

Capacity Requirements:
Determining Capacity requirements involves detailing the

Quantity of Resources People, Facilities, Space, Material etc.
Financial Requirements:
The most important Resource Requirement is perhaps, How

much Cash would the Option require and Can we afford it
For Operational Decisions, it may mean a One Off Cost

(buying a New Production Machine) and for Strategic Decisions,
it may need an examination of the Effect of Each Option at
Organizational Level
Evaluating Degree of Fit

Degree of Fit:
An important Characteristics of any Decision Option is its

Degree of Fit with other activities of the Organization
The Degree of Fit of an Options indicates the extent to

which any Activity Implied as Consequence of an Option is
Congruent or Compatible with the way in which the
Organizations Resources are Currently Organized
Evaluating Degree of Fit of an Option is different from

Evaluating Resource Requirement of an Option
Resource Requirement >>> Can we do it?

Degree of Fit >>> Can we do it without Disadvantaging
or Distracting Current Activities

Degree of Fit:
Options which have Good Fit:
Do not Detract and can even improve, Existing Activities

Help in Exploiting or Complementing Existing Skills
Help in full Utilization of Existing Capabilities
Options with Poor Fit:
Detract from Normal Activities
Detraction is made either by requiring Different Skills

from those which are Currently used or by requiring
different Operating Objectives

Degree of Fit:
Degree of Fit has it impacts on different Functional Areas in
different ways e.g. Marketing, Operations
Manager must not be blinded by benefits of Degree of Fit in

one Functional Area and Disadvantage of the same Options
must also be considered
In practice, evaluating the Consequences of Fit of an Option

in different areas is that it can not be easily Quantified
Evaluating Risk
The Risk inherent in any Decision Option can be a result of the
Decision Makers inability to predict or estimate:
the internal Effects of an Option within the Organization
The Environment Conditions prevailing after the Decision is
taken
The reaction of other bodies within the Environment to the
decision
Risk is conventionally described by range of Possible Outcomes
The most useful measure of the Risk of an Option is the
Dispersion or Spread of its Possible Outcomes and the most
convenient Measure of Dispersion is Standard Deviation
The most satisfactory method of expressing the Spread of
Consequences is a Proportion of the Expected Pay Off.
Evaluating Risk
Standard Deviation: It shows how much variation or

'dispersion' there is from the 'average' (mean, or
expected/budgeted value). A low standard deviation indicates that
the data points tend to be very close to the mean, whereas high
standard deviation indicates that the data is spread out over a
large range of values.
Evaluating The Effect on Future Flexibility
A decision can not be viewed as being totally Independent of

other Decisions
Decisions influence other decisions by Constraining the Range
of Options or Room for Maneuver in Future Decisions
Building flexibility in Decision Making is Costly
A flexible Strategy will be more Costly Initially than the Strategy

which has been designed to Focus on Set of Future Events which
actually occur
It is appropriate to place Focus more on Flexibility:
Where uncertainty is very high

where cost of Redressing a Wrong Decision is High and so
the Total Cost of Series of Decisions is very Sensitive to the

Complete Course of Decisions Making

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Complete Course of Decisions Making

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Making

Good or Bad Decisions

Decision Making or Problem Solving

1. Partly a Problem of Semantics

Process of Decision Making

Process of Decision Making

The manager realizes/ feels that there may be

May not base on hard evidence but may base on:

Process of Decision Making

The manager is sufficiently convinced that the

Process of Decision Making

There is need for a manager to diagnose the

Faulty Diagnoses will seriously affect the decisions

Different Perceptions, Interpretations and

Process of Decision Making

The agreed Interpretation of the problem is

Clarifying the Details of the problem

Process of Decision Making

The Length and Importance of this depends on

Narrow Boundaries >> Options might be

Broader Boundaries >> Creative Options

Process of Decision Making

Determining the extent to which each of the

Details of Consequences of Each Option are

Use of a Mathematical Model

Process of Decision Making

The phase of Decision Making Process towards all

Procedure of Selection depends on the Size

Single Decision Maker >> Value System and

Process of Decision Making

When the Selected Option is implemented, it

If the Decision has effectively solved the

If not, then it is again the original Observation

The Elements of a Decision

The Key Elements of a Decision are:

1. The Decision Body

Who is the Person or Group of People (which are often the

Single Decision Maker >> Value System and

Influences the Options and the Ends

The Alternatives Courses of Actions between which The

Yes/ No Options >> Infinite Options

How Evident/ Discernible at the start of Decision

Classification of Decision Options

Given Fully developed at the start of process

Those parts of the decision which, although having an

Follow the following Three Steps while considering

Indentify the Factors

Indentify the States or Levels which each

Attempt to Predict the likelihood of these states

The Outcomes; for each combination of Decision Option and

Decision Options (N) & Mutually Exclusive States

Primary Consequences: which are the

Types of Management Decisions

Decision Body is defined

The opposite of a Structured Decision

The scale representing the Degree of Influence of Past and Possible

The Decision Environment

1.Core and Boundary Decisions

2.Functional Area and Boundary Decisions

A. The Specific Environment

4.Complexity, Change and Perceived Uncertainty

1.Core and Boundary Decisions

Core Decisions: The decisions which lie deep within the

Inputs from within the Organization and Outputs go