decision making and techniques of decision making


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10.CASE STUDY18 to 19



INTRODUCTIONThe thought process of selecting a logical choice from the available options. When trying to make a good decision, a person must weight the positives and negatives of each option, and consider all the alternatives. For effective decision making, a person must be able to forecast the outcome of each option as well, and based on all these items, determine which option is the best for that particular situation. In psychology, Decision-making is regarded as the cognitive process resulting in the selection of a belief or a course of action among several alternative possibilities. Every decision-making process produces a final choice that may or may not prompt action. Decision-making is the process of identifying and choosing alternatives based on the values and preferences of the decision-maker.FUNDAMENTAL OF DECISION AND DECISION MAKING CONCEPT OF DECISION: DECISION is a choice made between two or more available alternatives.A DECISION may be defined, in terms of, commitment of resources-raw-materials, machinery, time, efforts etc. in a particular channel of thinking and action. CONCEPT OF DECISION MAKING:DECISION MAKING is a process of selecting the best alternative course of action; from among a number of alternatives given to 1.Management or developed by it after carefully and critically examining each alternative.DECISION MAKING is the process of choosing the best alternatives for reaching objectives.Decision making is the selection based or some criteria from two or more possible alternatives. G.R.TerryDecision making is a course of action chosen by a manager as the most effective means at his disposal for achieving goals and solving problems. Theo HaimannFEATURES OF DECISION-MAKING1. Decision Making Is a Selective ProcessDecision making is the process of selecting a course of action from among many alternatives to solve problems. Managers have to consider the various factors before selecting a course of action. These factors involve nature of organization, existing working environment, objectives of the organization, time factors and so on.

2. Decision Making Is Human and Rational ProcessDecision making is mental or human process and is needed in all types of organizations. A manager has to make mental exercise to study the impact of course of action before taking a decision. He/she has to invest personal skills, experience, knowledge and capability to study the course of action from various angles. Hence, decision making is common in all types of organizations.2.

Therefore, it is known as human and rational process.3. Decision Making Is a Dynamic ProcessIt is essential to consider time factor and existing environment, whenever any course of action is taken for implementation. Managers have to take decisions at the right time for its effectiveness. Besides, they have to consider future environments, which may affect future activities. Thus, decision making process is not static but dynamic process.

4. Decision Making Is Goal Oriented ProcessDecision making focuses on the organizational objectives. In course of functioning many problems may arise in the organization. The management has to solve all the problems in proper time and also in a systematic manner by considering organizational goals. Thus, right decision at the right time contributes to achieve predetermined objectives within the defined time and standard.

5. Decision Making Is a Continuous ProcessDecision making is a continuous process till the existence of the organization. In the course of regular performance, many problems may arise in different time and situation. Managers have to solve those problems in proper time so that the organizational performance is smooth.

6. Freedom to Decision-MakerManagers have freedom to take any kind of decision. As a chief of organization, a manager may take any course of action to solve a problem by using his/her own logic, knowledge and experience.

7. Positive or Negative ImpactA course of action may either have positive or negative impact on3. Organizational performance. Managers have to consider, as far as possible, the positive impact of the action before coming to a decision.8. Decision-Making is pervasive There are three dimensions of the pervasiveness of decision making; viz,a. All managers in the management hierarchy take decisions, within the limits of their authority, pertaining to their areas of functioning.b. Decision making is done is all functional areas of management e.g. production, marketing, finance, personnel, research and development etc.c. Decision making is inherent in all functions of management i.e. planning, organizing, staffing, directing and controlling.

ELEMENTS OF DECISION-MAKING1. DECISION MAKERS: They are the individuals or groups that actually make the choice among alternatives.Weak decision makers usually have one of the following orientations:a. Receptionb. Exploitivec. Hoardingd. Marketing-Oriented2. GOALS TO BE SERVED: The goals that decision makers seek to attain. These should often be organizational objectives.3. RELEVENT ALTERNATIVES: A relevant alternative is one that is considered feasible for solving an existing problem and for implementation.4. 5. ORDERING OF ALTERNATIVES: The decision situation requires a process or mechanism for ranking alternatives from most desirable.6. CHOICE OF ALTERNATIVES: This is the actual choice between available alternatives. This choice establishes what we call decisions.RATIONALITY IN DECISION-MAKING Rational decision making favors objective data and a formal process of analysis over subjectivity and intuition. the model of rational decision making assumes that the decision maker has full or perfect information about alternatives; it also assumes they have the time, cognitive ability, and resources to evaluate each choice against the others. This model assumes that people will make choices that will maximize benefits for themselves and minimize any cost.ASSUMPTIONS OF THE RATIONAL DECISION-MAKING MODEL:The rational model of decision making assumes that people will make choices that maximize benefits and minimize any costs. The idea of rational choice is easy to see in economic theory. For example, most people want to get the most useful products at the lowest price; because of this, they will judge the benefits of a certain object (for example, how useful is it or how attractive is it) compared to those of similar objects. They will then compare prices (or costs). In general, people will choose the object that provides the greatest reward at the lowest cost.5.The rational model also assumes: An individual has full and perfect information on which to base a choice. Measurable criteria exist for which data can be collected and analyzed. An individual has the cognitive ability, time, and resources to evaluate each alternative against the others.The rational-decision-making model does not consider factors that cannot be quantified, such as ethical concerns or the value of altruism. It leaves out consideration of personal feelings, loyalties, or sense of obligation. Its objectivity creates a bias toward the preference for facts, data and analysis over intuition or desires

TYPES OF DECISION-MAKING1. Programmed and non-programmed decisions:Programmed decisions are concerned with the problems of repetitive nature or routine type matters.A standard procedure is followed for tackling such problems. These decisions are taken generally by lower level managers. Decisions of this type may pertain to e.g. purchase of raw material, granting leave to an employee and supply of goods and implements to the employees, etc. Non-programmed decisions relate to difficult situations for which there is no easy solution.These matters are very important for the organisation. For example, opening of a new branch of the organisation or a large number of employees absenting from the organisation or introducing new product in the market, etc., are the decisions6. which are normally taken at the higher level.2. Routine and strategic decisions: Routine decisions are related to the general functioning of the organisation. They do not require much evaluation and analysis and can be taken quickly. Ample powers are delegated to lower ranks to take these decisions within the broad policy structure of the organisation.Strategic decisions are important which affect objectives, organisational goals and other important policy matters. These decisions usually involve huge investments or funds. These are non-repetitive in nature and are taken after careful analysis and evaluation of many alternatives. These decisions are taken at the higher level of management.3. Tactical (Policy) and operational decisions: Decisions pertaining to various policy matters of the organisation are policy decisions. These are taken by the top management and have long term impact on the functioning of the concern. For example, decisions regarding location of plant, volume of production and channels of distribution (Tactical) policies, etc. are policy decisions. Operating decisions relate to day-to-day functioning or operations of business. Middle and lower level managers take these decisions.An example may be taken to distinguish these decisions. Decisions concerning payment of bonus to employees are a policy decision. On the other hand if bonus is to be given to the employees, calculation of bonus in respect of each


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