Submitted to: Submitted by:

Dr. Shipra Mittal Gupta Nikita Gupta

Mtech(2nd sem)

March 6, 2015 1

What is decision-making?

Decision-making is one of the central activities of

management and is a huge part of any process of

implementation

Good decision making is an essential skill to become an

effective leaders and for a successful career

“A decision is a judgment. It is a choice between alternatives.

It is rarely a choice between right and wrong. It is at best a

choice between “almost right” and “probably wrong”.-

Drucker.

wikipedia.org/wiki/Decision

www.merriam-webster.com/dictionary/decision

March 6, 2015 2

The Significance of Decision Making

Decision making is the one truly distinctive

characteristic of managers.

Decisions made by top managers commit the total

organization toward particular courses of action.

Decisions made by lower levels of management

implement the strategic decisions of top managers

in the operating areas of the organization.

Decisions invariably involve organizational

change and the commitment of scarce resources.www.mindtools.com

March 6, 2015 3

Decision-making Process

Identifying a problem

Identifying decision criteria

Allocating weights to criteria

Developing alternatives

Analyzing alternatives

Selecting an alternative

Implementing the alternative

Evaluation (of decision effectiveness)

Introduction to management by L.M. Prasad

March 6, 2015 4

The Decision-Making ProcessAllocation of Development of

Problem Identification of Weights to AlternativesIdentification Decision Criteria Criteria Acer

Compaq“My salespeople Price Reliability 10GatewayWeight Screen size 8need new computers” HPWarranty Warranty 5

MicromediaScreen type Weight 5NECReliability Price 4SonyScreen size Screen type 3

ToshibaAnalysis of Selection of an ImplementationAlternatives Alternative of an Alternative

Acer AcerCompaq Compaq Evaluation

GatewayGateway Gateway of DecisionHP HP EffectivenessMicromedia MicromediaNEC NECSony Sony

Toshiba ToshibaMarch 6, 2015 5

Categories of Decisions

Programmed Decisions:

A decision that is repetitive and routine

A definite method for its solution can be established

Does not have to be treated a new each time it occurs

Procedures are often already laid out

Examples: pricing standard customer orders, determining billingdates, recording office supplies etc.

www.slideshare.net

March 6, 2015 6

Categories of Decisions

Nonprogrammed Decisions:

A decision that is novel (new or unique) or Ill structured

No established methods exist, because it has never occurred before or because

It is too complex

Are “tough” decisions that involve risk and uncertainty and

call for entrepreneurial abilities

Such decisions draw heavily on the analytical abilities of the manager

Examples: Moving into a new market, investing in a new unproven technology,

changing strategic direction

www.slideshare.net

March 6, 2015 7

Programmed vs. Non-programmed Decisions

Characteristics Programmed decisions Non-programmed

decisions

Type of problem Structured Unstructured

Managerial level Lower level Upper level

Frequency Repetitive New,unusual

Information Readily available Ambiguous or incomplete

Time frame for solution Short Relatively long

Solution relies on Procedures,rules, and

policies

Judgment and creativity

Selecting a Decision Making Model

Depends on the manager’s personal

preference

Whether the decision is programmed or

non-programmed

Extent to which the decision is

characterized by risk, uncertainty, or

ambiguitywww.mindtools.com

March 6, 2015 9

Rational Model: Assumptions

Clear and unambiguous problem

Single, well-defined goal

All alternatives are known

Clear preferences (ranking criteria)

Constant/stable preferences

No time or cost constraints

Decision will maximize payoff

www.slideshare.net

March 6, 2015 10

Rational Model: Criticism

Not all decisions made on rational basis

Most problems, goals and preferences are not clear or

well defined

Not practical to know all possible alternatives

Time and cost constraints exist in all practical problems

Result not maximized in most cases

www.slideshare.net

March 6, 2015 11

Bounded Rational Model: Assumptions

Limited set of criteria

Self-interest influences ratings

Limited no. of alternatives

Alternatives are assessed one at a time till a satisficing

(or good enough) alternative is found

Politics influences acceptance and commitment of

decision

education-portal.com/.../bounded-rationality

March 6, 2015 12

1. NOMINAL GROUP THINK

The NGT is designed to help all team members participate and

express opinions while still building team consensus

The nominal group technique is a structured decision making

process in which group members are required to compose a

comprehensive list of their ideas or proposed alternatives in

writing

NGT is designed to help with group decision making by ensuring

that all members participate fully.http://www.slideshare.net/LouzelLinejan/decision-making-by-individual-and-group

NGT follows these steps:

7-10 individuals are brought together to participate in a

structured exercise that includes the following steps:

Team members are presented with a problem, challenge or

issue

Individual team members silently and independently write

down their ideas about how to tackle the problem.

Each team member (one at a time, in round-robin fashion)

presents an idea to the group.

Individuals silently and independently vote on each idea. http://www.slideshare.net/LouzelLinejan/decision-making-by-individual-and-group

2. DELPHI TECHNIQUE

Another technique which capitalises group's resources, while

avoiding several possible disadvantages of relying on group

decision-making processes

This approach, called the Delphi Technique, is similar to NGT in

several respects, but also differs significantly in that the

decision-makers never actually meet.

Its greatest advantage is that it avoids many of the biases and

obstacles associated with interacting groups (that is, groups

where the members meet face-to-face)http://www.slideshare.net/LouzelLinejan/decision-making-by-individual-and-group

DELPHI follows these steps:

Select a group of individuals who possess expertise in a

given problem area

Survey the experts for their opinions via a mailed

questionnaire.

Analyse and distil the experts' responses.

Mail the summarised results of the survey to the

experts and request that they respond once again to a

questionnaire.

If one expert's opinion sharply differs from the rest, he or

she may be asked to provide a rationale.

process is repeated several times, the experts usually

achieve a consensushttp://www.slideshare.net/LouzelLinejan/decision-making-by-individual-and-group

3. STEPLADDER TECHNIQUE

A problem-solving structure recently proposed as a solution to

the problem of unequal participation in groups.

The technique is intended to improve group decision-making

by structuring the entry of group members into a core group.

Encourages all members to contribute on an individual level

before being influenced by anyone else.

This results in a wider variety of ideas, it prevents people from

"hiding" within the group, and it helps people avoid being

"stepped on" or overpowered by stronger, louder group members.

http://www.slideshare.net/LouzelLinejan/decision-making-by-individual-and-group

3. STEPLADDER TECHNIQUE

Step 1: Before getting together as a group, present the task or

problem to all members. Give everyone sufficient time to

think about what needs to be done

Step 2: Form a core group of two members. Have them discuss

the problem.

Step 3: Add a third group member to the core group. The third

member presents ideas to the first two members BEFORE

hearing the ideas that have already been discussed.http://www.slideshare.net/LouzelLinejan/decision-making-by-individual-and-group

3. STEPLADDER TECHNIQUE

Step 4: Repeat the same process by adding a fourth member, and

so on, to the group. Allow time for discussion after each

additional member has presented his or her ideas.

Step 5: Reach a final decision only after all members have been

brought in and presented their ideas.

http://www.slideshare.net/LouzelLinejan/decision-making-by-individual-and-group

Group Decision-making

The factors requiring group decisions include:

Involving sensitive issues

High cost alternatives

Involving very high risk factor

Strategic impact

http://smallbusiness.chron.com/

March 6, 2015 20

Group Decision-making

Advantages

1. More information and

knowledge are available.

2. More alternatives are likely

to be generated.

3. More acceptance of the final

decision is likely.

4. Enhanced communication

of the decision may result.

5. Better decisions generally emerge.

Disadvantages1. The process takes longer than

individual decision making, so it is costlier.

2. Compromise decisions resulting from indecisiveness may emerge.

3. One person may dominate the group.

4. Groupthink may occur.

http://smallbusiness.chron.com/

March 6, 2015 21

Ethics into decision making

Ways to infuse ethics into decision making.

Develop a code of ethics and follow it.

Establish procedures for reporting violations.

Involve employees in identifying ethical issues.

Monitor ethical performance.

Reward ethical behavior.

Publicize ethical efforts.

http://en.wikipedia.org/wiki/Decision-making

Ethics into decision making

Morality is involved in:

Choosing problems.

Deciding who should be involved in making

decisions.

Estimating the impacts of decision alternatives.

Selecting an alternative for implementation.

An effective decision needs to solve a problem as well

as match moral values and help othershttp://en.wikipedia.org/wiki/Decision-making

REFERENCES

http://www.tutorialspoint.com/management_concepts/decision_making_process.htm

http://www.slideshare.net

http://www.authorstream.com/

http://en.wikipedia.org/wiki/Decision-making

http://smallbusiness.chron.com/

education-portal.com/.../bounded-rationality

Books:

1. Introduction to management by L.M. Prasad

2. Handbook on Decision making by Lakhmi C Jain Vol 4

March 6, 2015 24

THANK YOU!!!

March 6, 2015 25