Bahçeşehir University
Social Science Institutions
Ph D. Business Program
Management & Organization
Organizational Theory
Prof. Dr. Atilla DİCLE
Decision Making
Prep. by: İlhan ÇİFTÇİ
1
Decision – Making is a
indivual or corporate
selection for future
results. Sometimes It is
difficult to choose a
way that uncertanity
sistuations.
The cognitive process of
reaching a decision.
A position or opinion or
judgment reached after
consideration.
Choosing between
alternative courses of
action using cognitive
processes - memory,
thinking, evaluation, etc.
The process of mapping
the likely consequences of
decisions, working out the
importance of individual
factors, and choosing the
best course of action to
take.
Bahçeşehir University - Organizational
Theory
2
Decision Mistakes and Learning- I
Decision Mistakes and Learning- II
Decision Mistakes and Learning- III
Decision Mistakes and Learning- IV
Decision Mistakes and Learning- V
Today’s Business Enviroment
Demands more large - scale change via new strategies, reenginering, restructuring, mergersacqusitions,
downsizing, new product or market development, and so on
Decision Made Inside the Organization
Are based on bigger, more complex, more emonitionally charged issues
Are made more quickly
Are made in a less certain enviroment, with less clarity about means and outcomes
Require more cooperation from more people involved in making and implementing decisions
A new Decision – Making Process
Is required because no one individual has the information needed to make all major decisions
Is required because no one indivual has the time and credibility needed convince lots of people to implement
the decision
Relies less on hard data as a basis for good decisions
Is guided by a powerful coalition that can act as a team
Permits decisions to evolve through trial and error and incremental steps as needed.
Bahçeşehir University - Organizational
Theory
8
Decision Making Comlexity Categories
9
Programmed
Non Programmed
• Repetitive and well defined
• Procedures exist
• Criteria of performance are
normally clear
• Good information about
performance is available
• Alternatives are easily
specified
• Novel and poorly defined
• No procedure exist
• It is used when an
organization has not seen a
problem before and may
not know how to respond
• Clear – cut Decision criteria
do not exist.
• Alternatives fuzzy
Individual Decision Making
Individual Decision Making can be described in two ways:
Rational Approach: It is suggested that, how
Managers should try to make decisions. This is an ideal
managers may work toward but never reach.
Bounded Rationality Approach: It describes how
decisions actually have to be made under severe time and
resource constraints.
Bahçeşehir University - Organizational
Theory
10
Decision Making Parts
Definition:
Organizational Decision making as the
process of identifying and solving
problems. It has 2 major parts:
-Problem Identification
-Problem Solution
Problem Identification:
Information about enviromental and
organizational conditions is
monitored to determine if
performance is satisfactory and to
diagnose the cause of shortcomings.
Problem Solution:
Stage is when alternative courses of
action are considered and one
alternative is selected and
implemented.
Bahçeşehir University - Organizational
Theory
11
Individual Decision Making
Rational Approach
PROBLEM
PROBLEM
IDENTIFICATION SOLUTION
Monitor the
Decision
Enviroment
Develop Alternative
Solution
Define the Decision
Problem
Evaluate Alternatives
Specify Decision
Objectives
Choose the Best
Alternative
Diagnose the
Problem
Implement the Chosen
Alternative
Bahçeşehir University - Organizational
Theory
RATIONAL APPROACH
 Ratiıonal Approach model
is an ideal not fully achievable
in the real world of
uncertanity, complexity, and
rapid change.
 This model help managers
think about decisions more
clearly and rationally.
 It ensures make better
decisions even when there is
a lack of clear information.
 It has broken 8 steps and
illustrated left side .
12
Monitor the Decision Enviroment
Rational Approach
Financial
Statements
Performance
Evaluation
Industry Incides
Competitors
Activities
So forth.
Manager Reviews
13
Manager monitor
Internal and External
Informatipon that will
indicate deviations
from planned or
acceptable behavior.
Bahçeşehir University - Organizational
Theory
Define the Decision Problem
Rational Approach
Problem determination phases
Who was affected,
Who was involved
Where, when occur
How current activities influenced
Specify Decision Objectives
The manager determines what performance outcomes
should be achieved by a decision.
Bahçeşehir University - Organizational
Theory
14
Diagnose the Problem
Rational Approach
The manager digs below the surface to analyse the cause of the
problem. Additional data might be gathered to facilitate this diagnosis.
Develop Alternative Solutions
Before amanager can move ahead with decisive action plan, he or she
must have a clear understanding of the various options avaliable to
achieve desired objectives. The manager may seek ideas and
suggestions from other people.
Bahçeşehir University - Organizational
Theory
15
Evaluate Alternatives
Rational Approach
This step may involve the use of statistical techniques or personnel
experience to measure the probability of success.
Choose The Best Alternative
This step is CORE of the decision process. The manager uses his/her
analysis of the problem, objectives, and alternatives to select a single
alternative that has the best chance for success.
Bahçeşehir University - Organizational
Theory
16
Implement the Chosen Alternative
Rational Approach
Finally, the manager uses managerial, administrative and persuasive
abilities and gives directions to ensure that the decision is carried out.
The monitoring activity begins again as soon as the solution
implemented.
RESULT of Rational Approach Model
 First 4 step is related to problem identification and other 4
step is problem solution.
8 steps are integrated and can not be applied solely.
Deviations from the Rational Approaches are explained by
the bounded rationallity perspective.
Bahçeşehir University - Organizational
Theory
17
Individual Decision Making
Bounded Rationality Perspective
Managerial Decision Makings shows that, managers are
unable to follow an ideal procedure. Rational Approach
Model could not be worked with unideal cases. Time
contstraints, internal and external factors, ill defined
process lead to many decisions must be made very
quickly. Managers have only so much time and mental
capacity and, hence, cannot evaluate every goal,
problem and alternative.
Bahçeşehir University - Organizational
Theory
18
Constraints and Tradeoffs
Not only are large organizational decisions
too complex to fully comprehend, but
several other constraints impinge (vurmak,
çarpmak) on the decision maker.
Corporate culture and ethical values also
influence decision makings.
Bahçeşehir University - Organizational
Theory
19
The Role of Intution
The bounded rationally perspective is often associated with intuitive decision process. In
intutive decision making, experience and judgement rather than sequential logic or explicit
reasoning are used to make decisions. Intution is not arbitrary or irrational because it is
based on years of practise and hands on experience, often stored in the subconscious.
(bilinçaltı)
Intution plays an increasingly important role in problem identification in today’s fast – paced
and uncertain business enviroment.
A study of manager problem finding showed that thirty of thirty – three problems were
ambiguosu and ill defined.
Managers may walk a fine line between two extremes: on the one hand, making arbitrary
decisions without careful study, and on the other, rkying obsessively (saplantılı) on numbers
and rational analysis.
Bahçeşehir University - Organizational
Theory
20
Constraints and Tradeoffs during
Nonprogrammed Decision Making
Bounded Rationality:
Limited time, information,
resources to deal with
complex, multidimensinal
issues
Organizational
Constraints:
Level of: agreement, shared
perspective, cooperation, or
support; corporate culture
and structure, ethical values.
Personal Costraints:
Personel desire for prestige,
success; personal decision
style; and the desire to satisfy
emotional needs, cope with
pressure, maintain self concept
Decision
/Choice
Search for
a high –
quality
decision
alternative
Samuel F.B. Morse
Invented the
Telegraph with a lots
of Tradeoffs
Bahçeşehir University - Organizational
Theory
21
Organizational Decision Making
Today’s managers amd organizations are dealing
with a higher percentage of non programmed
decisions because of rapidly changing business
environmet.
Organizational Decision Making
Decisions are made about
organization strategy, structure,
innovation and acqusitions.
Executive Management interests
long maturity strategic decisions
and related to whole business,
middle level management interests
the applications middle and short
maturities and others interest the
very shot applications. This
situation is shown best organization
decision making structure.
23
Bahçeşehir University - Organizational
Theory
Organizational Decision Making
The process by which decisions are made in organizations
are influenced by a number of factors, particularly the
organization’s own internal structures and the degree of
stability or instability of the external enviroment.
It seperates four primary tyoes
Types of Organizational Decision Making
The Management Scieince Approach
The Carnagie Model
The Incremental Decision Process Model
Garbage Can Model
Bahçeşehir University - Organizational
Theory
24
Organizational Decision Making
Management Sicence Approach
The management Science Approach to Organizational Decision
Making is the anlog to the rational approach by individual
managers.
Success
Conditions
Weakness
• Problems analyzable
• Variables identifies
• Measurable
• Ignore human judgement
• Qualitative factors can not be considered such as
competitor reactions, consumer tastes, product
warmth
Bahçeşehir University - Organizational
Theory
25
Organizational Decision Making
Carnegie Model
Carnegie – Mellon University academic research helped formulate the
bounded rationality approach to individual decision making, as well as
provide new insights about organizational decisions.
Research by The Group indicated that, organization level, decisions
involved many managers and that a final choice was based on a colalition
among those managers.
Management coalitions are needed during decision making fro two
reasons.
Organizational Goals are often Ambiguous, and operative goals
of deparments are often inconsistent
Human cognitive Limitations
Instead of
Optimize Problem
Solution, satisfice
is used
Bahçeşehir University - Organizational
Theory
26
Organizational Decision Making
Incremental Decision Process Model
Twenty five Decisions made in organizations and
traced the events associated with these decisions from
Beginning to end.
One importance is that major organization choice are
Usually a serises of small choices that combine to produce the major
decision.
Based on this approach three major decisions are
important: - Identification
- Development
- Selection
Henry Mintzberg
and his associates
in MCGill
University develop
this.
Bahçeşehir University - Organizational
Theory
27
Organizational Decision Making
Garbage Can Model
 This Model is not Directly comparable to the earlier
models, bcs the garbage can model deals with the
Pattern or flow of multiple decisions within
Organizations. It ensures that and help us think of the whole organiztion and the
frequent decisions begin made by
managers throughout.
 The unique characteristic of the garbage can model is
that the decision process is not seen as a sequence of steos that begins with a
problem end with a solution.
Indeed, problem identification and problem solution may not be
connected to each other, An idea may be proposed as a solution
when no problem is specified, A Problem may exist and never generate
A solution and so forth.
James March and
his collegous
developed the
Organized Anarchy
Bahçeşehir University - Organizational
Theory
28
Organizational Decision Making
Garbage Can
Model
Incremental
Decision Process
Model
Carnegie Model
Coalition
Management
Science
Approach
Measurablity
Potential Solutions
Identification
Development
Participants
Choice Opportunities
Ambiguous
Satisfice
rather than
optimize
Problems
Selection
Organizational & Individual Decision
Making
Individual Decision Making
Organizational Decision Making
• Single Manager
• Individual , a single view point
• Intangible and tangible results are
more common.
• Affects the person and close
familiy.
• Generally take a decision is faster
than corporation and
implementation is interested
more narrow enviroment.
30
Decision
Making
• Several Manager
• May Departments play a role
for problem identifiaction and
solutuin, multiple view point
• Tangible Results only
• Affects corporate identity,
shareholders, stakeholders,
investors etc.
Some of The Successful Decision Owners
Bahçeşehir University - Organizational
Theory
31
Questions and Explanations
Bahçeşehir University - Organizational
Theory
32