Key Topics

Introduction

The Decision-making process

Decision making stages

Decision-making models

Decision Styles

Decision Implementation

A discussion on Group Decisions

“No sensible decision can be made any longer without taking into account not only the world

as it is, but the world as it will be. . .”

-Isaac Asimov

What is Decision Making?

What is Decision Making?

Decision making is the cognitive process leading to the selection of a course of action among alternatives.

Every decision making process produces a final choice . It can be an action or an opinion .

It begins when we need to do something but we do not know what.

Therefore, decision making is a reasoning process which can be rational or irrational, and can be based on explicit assumptions or tacit assumptions.

Examples: Shopping, deciding what to eat, What to wear, when to sleep, etc..

Decision-making Process

1. Identifying a problem

2. Identifying decision criteria

3. Allocating weights to criteria

4. Developing alternatives

5. Analyzing alternatives

6. Selecting an alternative

7. Implementing the alternative

8. Evaluation (of decision effectiveness)

Problem Definition

Problem is a discrepancy (difference) between an existing and a desired state.

Example: “ The manager has resigned, and we need another manager” Here the phrase “manager has resigned” reflects the current state while “need another manager” represents a desired state .

Identifying Decision Criteria

The word criteria, is defined as “ a standard by which something can be judged ”. A decision criteria therefore, is the basis of a decision, which outlines the relevant and important factors for a decision. And implicitly, it also defines what is not important.

Developing Alternatives

Involves defining the possible alternatives (or choices) that would resolve the problem.

In our case, the alternatives would be a list of candidates or job applicants.

Analyzing Alternatives

Alternatives are rated and analyzed on the basis of the criteria

The rating can be based on a specified scale , say 1 – 5 etc.

Rating may be subjective in nature and thus, may depend on the judgment of the individual(s)

Selecting an alternative

Involves choosing the best alternative, based on the above rating and analysis

Generally implies selecting the alternative with the highest score.

Implementing the Alternative

Putting the decision into action

Involves clear communication of the decision to all concerned and obtaining their commitment

Evaluation

Evaluation forms an integral part of any process

Involves evaluation of the outcome based on the desired goal and criteria

Involves assessing the effectiveness and efficiency of the outcome (or the entire process)

In case of any undesired results, each step of the process is carefully reviewed to trace the root causes

6 C's of Decision Making

1. Construct.

2. Compile.

3. Collect.

4. Compare.

5. Consider.

6. Commit.

Construct a clear picture of precisely what must be decided.

Compile a list of requirements that must be met.

Collect information on alternatives that meet the requirements.

Compare alternatives that meet the requirements.

Consider the “what might go wrong” factor with each alternative.

Commit to a decision and follow through with it.

Problem Analysis vs Decision Making

It is important to differentiate between problem analysis and decision making. The concepts are completely separate from one another. Problem analysis must be done first, then the information gathered in that process may be used towards decision making.

Problem Analysis

• Analyze performance, what should the results be against what they actually are

• Problems are merely deviations from performance standards

• Problem must be precisely identified and described

• Problems are caused by some change from a distinctive feature

• Something can always be used to distinguish between what has and hasn't been effected by a cause

• Causes to problems can be deducted from relevant changes found in analyzing the problem

• Most likely cause to a problem is the one that exactly explains all the facts

Decision Making

• Objectives must first be established

• Objectives must be classified and placed in order of importance

• Alternative actions must be developed

• The alternative must be evaluated against all the objectives

• The alternative that is able to achieve all the objectives is the tentative decision

• The tentative decision is evaluated for more possible consequences

• The decisive actions are taken, and additional actions are taken to prevent any adverse consequences from becoming problems and starting both systems (problem analysis and decision making) all over again

• There are steps that are generally followed that result in a decision model that can be used to determine an optimal production plan

Decision-Making StagesThere are four stages that should be involved in all group decision making. These stages, or sometimes called phases, are important for the decision-making process to begin

1. Orientation stage- This phase is where members meet for the first time and start to get to know each other.

2. Conflict stage- Once group members become familiar with each other, disputes, little fights and arguments occur. Group members eventually work it out.

3. Emergence stage- The group begins to clear up vague opinions by talking about them.

4. Reinforcement stage- Members finally make a decision, while justifying themselves that it was the right decision.

The Decision making modelClassify and define

problem or opportunity

Set objectives and criteria

Generate creative and innovative

alternative

Analyze alternatives and select the most

feasible

Plan and implement the

decision

Control the decision

Decision-making Models

Model : “ A simplified representation or description of a system or complex entity ”

Examples :

1. Rational Model (Classical Model) • The decision maker attempts to use optimizing—

selecting the best possible alternative.

2. Bounded Rationality Model • The decision maker uses satisficing —selecting

the first alternative that meets the minimal criteria for solving the problem.

Rational/Bounded Rational

So Rational and Bounded Rational Models are cognitive models that describe how managers make rational decisions

1. Define and

diagnose the

problem

2. Set goals

3. Search for

alternative solutions

External and internal Environ. forces

4. Compare and

evaluate

solution

5. Choose among

alternative

solutions

7. Follow up and control

6. Implement the solution

selected

Decision-Making Styles

Reflexive Style Makes quick decisions without taking the time to get all the information that may be needed and without considering all the alternatives.

Reflective Style Takes plenty of time to make decisions, gathering considerable information and analyzing several alternatives.

Consistent Style Tends to make decisions without either rushing or wasting time.

Decision-Making Steps

When in an organization and faced with a difficult decision, there are several steps one can take to ensure the best possible solutions will be decided. These steps are put into seven effective ways to go about this decision making process .

The first step - Outline your goal and outcome. This will enable decision makers to see exactly what they are trying to accomplish and keep them on a specific path.

The second step - Gather data. This will help decision makers have actual evidence to help them come up with a solution.

The third step - Brainstorm to develop alternatives. Coming up with more than one solution enables you to see which one can actually work.

The fourth step - List pros and cons of each alternative. With the list of pros and cons, you can eliminate the solutions that have more cons than pros, making your decision easier.

The fifth step - Make the decision. Once you analyze each solution, you should pick the one that has many pros (or the pros that are most significant), and is a solution that everyone can agree with.

The sixth step - Immediately take action. Once the decision is picked, you should implement it right away.

The seventh step - Learn from, and reflect on the decision making. This step allows you to see what you did right and wrong when coming up, and putting the decision to use.

Pareto analysis

This is the idea that 80% of tasks can be completed in 20% of the disposable time. The remaining 20% of tasks will take up 80% of the time. This principle is used to sort tasks into two parts.

The 80-20-rule can also be applied to increase productivity: it is assumed that 80% of the productivity can be achieved by doing 20% of the tasks. Similarly, 80% of results can be attributed to 20% of activity. If productivity is the aim of time management, then these tasks should be prioritized higher.

Pareto's Principle, the 80/20 Rule, should serve as a daily reminder to focus 80 percent of your time and energy on the 20 percent of you work that is really important. Don't just "work smart", work smart on the right things

SWOT analysis (alternately SLOT analysis) is a strategic planning method used to evaluate the Strengths, Weaknesses/Limitations, Opportunities, and Threats involved in a project or in a business venture.

It is also a powerful strategic planning tool used to evaluate a project or in a business venture or in any other situation of an organization or individual requiring a decision in pursuit of an objective.

It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieve that objective.

1. Internal factors – The strengths and weaknesses internal to the organization.

2. External factors – The opportunities and threats presented by the external environment to the organization.

SWOT Analysis – Strategic Use

Orienting SWOTs to An Objective - If SWOT analysis does not start with defining a desired end state or objective, it runs the risk of being useless.

If a clear objective has been identified, SWOT analysis can be used to help in the pursuit of that objective. In this case, SWOTs are:

Strengths Attributes of the

organization that are helpful to achieving

the objective.

Weaknesses Attributes of the

organization that are harmful to achieving

the objective.

Opportunities External conditions that are helpful to achieving

the objective.

Threats External conditions that are harmful to achieving

the objective.

Strengths How can we use each Strength?

Weaknesses

How can we Stop each

Weakness?

Opportunities How can we Exploit each

Opportunity?

Threats How can we

Defend against each Threat?

SWOT Analysis – Creative Use

Creative Use of SWOTs – If the objective seems attainable, the SWOTs are used as inputs to the creative generation of possible strategies, by asking (usually in groups) and answering each of the following four questions, many times:

SWOT Analysis – Errors to Be Avoided

• Conducting a SWOT analysis before defining and agreeing upon an objective (a desired end state). SWOTs should not exist in the abstract. They can exist only with reference to an objective.

• Opportunities external to the company are often confused with strengths internal to the company. They should be kept separate.

• SWOTs are sometimes confused with possible strategies. SWOTs are descriptions of conditions, while possible strategies define actions.

Plan, Implement the Decision, and Control

Plan Develop a plan of action and a schedule of implementation.

Implement the Plan Communicate and delegate for direct action.

Control Use checkpoints to determine whether the alternative is solving the problem.

Avoid escalation of commitment to a bad alternative.

Implement and Monitor Your Solution or Course of Action

Sometimes corrections need to be made A choice doesn’t mean that it is the only way to

go

Remember, you need to monitor and evaluate your solution throughout its progress to see how it’s working out

Circumstances change, and a good decision today may not be the best for the future

Sometimes a “self-destruct” deadline may be a good option

It can help you to monitor what you’re doing and you can make a better decision once you begin nearing your deadline

Group Decision-making

The factors requiring group decisions include:

1. Involving sensitive issues

2. High cost alternatives

3. Involving very high risk factor

4. Strategic impact

Group Decisions: Advantages

1. Acceptance of group members

2. Coordination is easier

3. Communication is easier

4. Existence of large alternatives

5. More information can be processed

6. Diversity of experience and perspectives

Group Decisions: Disadvantages

1. Take longer time

2. Group can be indecisive

3. Groups can compromise

4. Groups can be dominated

5. Groups can “ play games ”

6. Victim to Groupthink

Situational Factors for Group Decision

Data collection

Importance of acceptance

Importance of solution

Complex problem

Democratic process

Making Risk taking solution needed

Better understanding

Whole responsibility

Feedback required

Making Need for innovation and creativity

Improving Group Decision-

Making Brainstorming

Nominal group techniques

Electronic meeting

Barriers to good decision making

“ Successful leaders have the courage to take action while others hesitate.” - John C. Maxwell

Barriers to Good Decision Making

1. Hasty - Making quick decisions without having much thought.

2. Narrow - Decision making is based on very limited information.

3. Scattered - Our thoughts in making decisions are disconnected or disorganized.

4. Fuzzy - Sometimes, the lack of clarity on important aspects of a decision causes us to overlook certain important considerations.