Decision Making
Presented by :
Dhamsania Druvi P - 2040623010
Deepthi R - 2040623036
Decision Making
The process of identifying & selecting suitable course of action to
solve specific problem or take advantage of an opportunity.
• Present : Decision making connects organizations present circumstances
to future.
• Past : Decision making also draws on past experiences positive &
negatives will help for future.
• Future : Objectives for future based on past experiences .
Problem
Situation that occurs when actual state of affair differs from desired state of
affairs.
William pounds stated problem finding process :
•
A deviation from past experience : This years sales falling behind last
years , expenses have suddenly increased such events signals to manager that
problem has risen.
•
A deviation from set plan : Department exceeding its budget , project is off
schedule such events tells managers something must get done to get plan
back on course.
•
Other people often bring problem to manager : Late deliveries of goods ,
employee resigns make manager to daily involve problems .
•
The performance of competitors : When other company develop new
improvements in operating procedures managers may have to revaluate
procedures in his organization.
Opportunity Finding
• Opportunity : According to David B Gleicher, “Situation that occurs
when circumstances offers a chance to organization to exceed stated
goals & objectives”.
• Dialectical inquiry method : A method of analysis in which decision
maker determines & negates his assumptions, creates countersolutions
based on negative assumptions, its also called as devil’s advocate
method.
• Also “Peter Drucker” made clear that problems rather than taking as a
problem take it as opportunity –key for managerial & organizational
success.
Nature Of Managerial Decision Making
• Programmed decision : solutions to routine problems determined by rules,
procedure & habits.
• Eg. Manager rarely have to worry about salary of newly join employee
because organization generally have salary scale for all positions.
• Non programmed decisions: specific solutions created through
unstructured process to deal with non routine problems.
• Eg. Problems such as how to allocate organizational resources, how
community resources will improve.
Thresholds For Problem Recognition
How big the gap between actual and desired state of affiars?
How does gap affect the company?
How hard to fix it?
How quickly we need to fix it?
Points to be considered:
• Setting priorities
• Is the problem easy to deal with :
• Might the problem resolve itself
• Is this my decision to make ?
Certainty, Risk & Uncertainty
• Certainty: Decision making conditions in which managers have accurate ,
measurable alternative & reliable information about outcomes of various
alternatives under consideration.
• Risk: Decision making condition in which managers whether probability
of a given alternative will lead to desire goal or outcome.
• Probability: A statistical measure of chance a certain event or outcome
will occur.
• Uncertainty: Decision making condition in which managers face
unpredictable external conditions.
Sources :
1) manager may face external condition that are partially beyond their
control like weather.
2) manager may not have access to key information.
Rational Model Of Decision Making
 A four step process that helps managers weigh alternative & choose
alternative with best chance of success useful in making non
programmed decision making.
 Investigate the situation:
 Developed alternatives
 Evaluate alternatives and select best one
 Implement and monitor
Rational Model Of Decision Making
1.



Investigate the situation
Define problem
Diagnose causes
Identify decision objective
4. Implement and monitor

Plan implementation

Implement plan

Monitor implementation and
make necessary adjustments
2.Develop Alternatives
Seek creative alternative do not
evaluate yet.
3.Evaluate the alternatives
select the best one available

Evaluate alternative

Select best alternative
and
Rational Model Of Decision Making
Stage 1: investigate the situation
•Define the problem: defining the problem in terms of the organizational
objectives that are being blocked helps to avoid confusing symptoms with
problems.
•Eg. Resignation from unskilled employee is an opportunity rather than
problem for a manager, as it can be replaced by more skilled employee.
•Diagnose the cause: manager can ask a number of diagnostic questions.
•Identify the decision objectives: once the problem has been defined and
the causes diagnosed, the next step is to decide what would constitute an
effective solution.
Stage 2: develop alternative :
Brainstorming : decision making & problem solving technique in which
individuals or group members try to improve by spontaneously proposing
alternatives without concern for reality or tradition.
A) seek creative alternative
B)do not evaluate yet
Stage 3: Evaluate alternatives & select best one available :
a)Evaluate alternative
B)Select best alternative
Stage 4: Implement & monitor:
A)Plan implementation
B)Implement plan
C)Monitor implementation
D)Make necessary adjustment
Rational Model In Perceptive
• The rational model conjures up an image of the decision maker as a super
calculative machine.
• But manager must take decision within tight time constraints and with less
information than they would like to have.
• Three concept have emerged over the year to help put their decision making
in perspective.
• Bounded rationality: the concept that managers make the most logical
decision they can within the constraints of limited information and ability.
• Herbert simon proposed the theory of bounded rationality, points out that
decision maker must cope with inadequate information about the nature of
the problem and its possible solution.
Rational Model In Perceptive
• Satisfice: decision making technique in which manager accept the first
satisfactory decision they uncover.
• Heuristic principles: a method of decision making that proceed along
empirical lines , using rules of thumb. To find solution or answers.
• Availability: people sometimes judge an event’s likelihood by testing
it against their memories.
• Representativeness: people also tend to assess the likelihood of an
occurrence by trying to match it with a preexisting category.
• Anchoring & adjustments: people do not take decisions out of in a air.
I.
II.
Game theory: the study of people making interdependent choices.
Chaos theory: the study of dynamics patterns in large social system.
Thank You