Decision making

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Decision making
Module 7
Types of decisions

• Programmed decision making
• Non programmed decision making

Types of decisions levels of management
Information required for decision making

• Decision making undead certainty
• Decision making under risk
• Decision making under uncertainty

Decision making models

• The rational model
• The administrative model
• The practical model
• The conflict model
• The garbage can model

Impediments to optimal indidividual decisions

• Framing
• Heuristics (availability vs representative
  heuristics)
• Escalation of commitment
• Illusion of control

General decision making styles
Group decision making
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Decision making
Decision making per se is the act of choosing
one alternative From among a set of
alternatives Griffin Decision making is the
process of identifying and choosing Alternative
courses of action in a manner appropriate to The
demands of situation Krietner. Decision making
is the process of choosing one alternative From
among several Moorhead/griffin Decision making
is the process by which managers respond To the
opportunities and threats that confront them
by Analyzing the options and making
determinations, or Decisions, about specific
organizational goals and course Of
action Gareth_r_jones.
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Programmed vs. non programmed decisions
Programmed
Nonprogrammer
Characteristics
Well structured
Poorly structured
Type of decision
Repetitive, routine
New unusual
Frequency
Clear, specific
Vague
Goals
Readily available
Not available, Unclear channels
Information
Minor
Major
Consequences
Lower levels
Upper levels
Organizational level
Short
Relatively long
Time for solution
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Types of managerial decisions
Problem
Procedures
Examples
Decision
Businessprocessing Payroll vouchers. College
processing Admission Applications. Hospital
preparing a Patient for surgery. Govt using a
state- Owned motor vehicle
Repetitive, Routine
Rules, Standard, Procedures, Policies
Programmed
Businessintroducing A new product. College
constructing A new class room Hospital reacting
to A regional disease Epidemic. Govt solving a
intense Inflation problem
Complex, Novel
Creative Problem Solving
Non Programmed
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Types of decisions and levels of management
Non programmed Decions
Broad, structure, infrequent Much uncertainty
Top
Both structured and Unstructured
Middle
Type of problem
Management levels
Frequent, structured, Repetitive, routine Much
certainty
Lower
Programmed Decions
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Decision making under certainty
Alternatives
Probability Of Occurring
Outcome
Goal to Maximize Profit
Information Condition
Promote
1,000,000
1.0
1,000,000 profit
Certainty
200,000
1.0
200,000 profit
Do not Promote
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Decision making under risk
Alternatives
Probability Of Occurring
Outcome
Goal to Maximize Profit
Information Condition
Promote
600,000
Large market0.6
1,000,000 profit
680,000
Small market0.4
200,000 profit
80,000
Risk
120,000
Large market0.6
200,000 profit
140,000
Small market0.4
50,000 profit
20,000
Do not Promote
Expected value
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Decision making under uncertainty
Alternatives
Probability Of Occurring
Outcome
Goal to Maximize Profit
Information Condition
Uncertain
Promote
?
Uncertain
Outcomes Unknown
?
Uncertain
?
Uncertainty
?
Uncertain
?
Uncertain
Outcomes Unknown
Uncertain
?
Do not Promote
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Capacity planning problem
Possible future demand
High
Moderate
Low
Alternatives
Small facility
10
10
10
Medium facility
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12
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Large facility
2
16
(4)
Present value in millions
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Rational model
Statement of Situational goals
Information
Identification of problem Criteria development
Information
Programmed Or Nonprogrammer Decision?
Programmed
Non programmed
Information
Generate all Possible alternatives
Apply decision rule
Information
Evaluate all alternatives
Rational choice of best Possible alternative
Implementation
Information
Control measurement Adjustment
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Evaluation of alternatives
Retain for further Consideration
Yes
Is the alternative Consequences Affordable?
Eliminate From the Consideration
No
Yes
No
Is the alternative Satisfactory?
Eliminate From the Consideration
Yes
Is the alternative Feasible?
Eliminate From the Consideration
No
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Bases from selecting from among the alternatives
courses
Experimentation
Choice Made
Reliance On the Past
Experimentation
Research Analysis
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Why information is incomplete?
Ambiguous Information
Uncertainty Risk
Incomplete Information
Time constraint Information Costs
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Practical model
State situational goals, Which may be multiple
Information
Identification of problem Criteria development
Information
Programmed Or Nonprogrammer Decision?
Programmed
Non programmed
Information
Generate as many Possible alternatives as Time
and money permit.
Apply decision rule
Information
Evaluate all alternatives As objectively as
possible
Rational choice of best possible
alternative, Based on available information
Implementation
Information
Control measurement adjustment. Monitor
environmental changes
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The garbage can model of organizational decision
making
Problems
Problems
B
Solutions
Solutions
A
Participants
Participants
Choice Opportunities
Choice Opportunities
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A model of escalation of commitment

• Project characteristics.
• A delayed return on
• Investment.
• Setbacks attributed to
• temporary causes

• Psychological factors.
• Information processing
• Errors
• Ego defense

Poor Results
Escalation Of commitment

• Social forces.
• Peer pressure
• Saving face

• Organizational factors.
• Breakdown in communes
• Politics
• Organizational inertia

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Decision making styles
Conceptual
Analytical
High
Tolerance for ambiguity
Directive
Behavioral
Low
People social Concern
Task technical Concern
Value orientation
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Decision making styles characteristics
Analytical
Directive

• Prefer complex
• problems
• Carefully analyses
• alternatives.
• Enjoy solving problems
• Willing to use
• innovative methods

• Prefer simple,clear
• solutions.
• Make decisions rapidly.
• Do not consider many
• Alternatives.
• Rely on existing rules.

Behavioral
Conceptual

• Concern for their
• organization.
• Interest in helping
• Others
• Open to suggestions
• Rely on meetings

• Socially oriented.
• Humanistic and
• artistic approach.
• Solve problems
• creatively.
• Enjoy new ideas.

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Group decision making
Advantages and disadvantages of group decision
making
Obstacles to quality group decision making

• Groupthink
• (When too much cohesiveness is dangerous)
• Group polarization
• (The extreme nature of group decisions)

Improving the effectiveness of group decisions

1. The Delphi technique
2. The nominal group technique
3. Brainstorming

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Advantages and disadvantages of group decision
making
Social pressure
General pool of Knowledge
Domination by Vocal few
Different Perspective
Logrolling
Greater Comprehension
Goal Displacement
Increased Acceptance
Group thing
Training ground
Should Group make Decisions?
Disadvantages
Advantages
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The groupthink process

• Group
• Characteristics.
• Group cohesiveness.
• Leader promotion of his preferred solution.
• Insulation of group from the opinion of expert.

Closed style Leadership
Time pressure

• Groupthink symptoms.
• Illusion of invulnerability.
• Collective rationalization.
• Unquestioned morality.
• Excessive negative
• stereotyped views of
• opponents.
• 5. Strong conformity
• pressures
• 6. Self-censorship of
• dissenting ideas.
• 7. Illusion of unanimity.
• 8. Self-appointed mindguards

• Decision making
• Defects.
• Few alternatives
• No examination of
• Preferred alternative.
• No reexamination of
• Rejected alternative.
• Rejection of expert
• Opinion.
• Selective bias of new
• information.

Poor decisions
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Devils advocacy dialectical inquiry
Dialectical inquiry
Devils advocacy
Presentation of Alternative 2
Presentation of Alternative1
Presentation of Chosen alternative
Debate between Alternatives
Critique of chosen Alternative
Reassessment of Chosen Alternative (Accept?
Modify? Reject?)
Reassessment of Alternatives (accept1 or
2? Combine 1 2?)
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Prescriptions for prevention of groupthink
Leader prescriptions

1. Assign everyone to the role of critical
   evaluator.
2. Be impartial do not state preferences.
3. Assign the devils advocate role to at least one
   member
4. Use outside experts to challenge the group
5. Be open to dissenting points of view

Organizational prescriptions

• Set up several independent groups to study the
  same
• Issue.
• 2. Train managers and group leaders in groupthink
• Prevention techniques.

Individual prescriptions

• Be a critical thinker
• Discuss group deliberations with a trusted
  outsider
• Report back to group

Process prescriptions

• Periodically break the group into subgroups to
• discuss the issues
• 2 take time to study external factors

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Delphi technique
2
3
1
Present The Problem To Experts
Experts Record Solutions, Recomme- Ndations
Enlist the Cooperation Of experts
Problem
4
5
Experts responses Are compiled Reproduced
Responses are Shared with All others
6
Experts comment on other Ideas propose a
solution
Solution
If no consensus Is reached
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Solutions are compiled
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The nominal group technique (NGT)
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Each participants Ideas are Presented, One at a
time are Written on chart Until all ideas
are Expressed.
2
1
Participants Privately Write down Ideas
about Problem Solving
A small group Gathers around A table
receives Instructions Problem is Identified
4
Each idea is Discussed, Clarified, Evaluated
by Group member
5
The highs ranking Idea is taken as The groups
Decision
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Participants Privately rank the Ideas in their
order Of preference
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Brainstorming
One manager describe in broad Outline the problem
1
The members present ideas Clarify them with
brief Explanation
2
Group members Are not allowed To criticize
Everyone Withholds Judgments Until
Alternatives Have been Heard
Group members Are encouraged To be as
Innovative And Radical as Possible
One member of the group records The
alternatives/ideas on Flip chart
3
Group members debate the pros Cons of
ideas/alternatives
4
Short listing of best alternative
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