1. DECISION MAKING

2. Decision Making
Perceptions
Perceptions
of the
of the
decision
decision
maker
maker
Outcomes

3. Decision Making
 Decision making is the process of choosing a
course of action for dealing with a problem or
opportunity.
 Steps in systematic decision making.
Recognize and define the problem or opportunity.
Identify and analyze alternative courses of action,
and estimate their effects on the problem or
opportunity.
Choose a preferred course of action.
Implement the preferred course of action.
Evaluate the results and follow up as necessary.

4. Phases of Decision making
Process
Intelligence activity
Design activity
Choice activity

5. Stages of decision making
Process
The identification phase
The development phase
The selection phase

6. Decision making Process
 Certain decision environments.
Exist when information is sufficient to predict the
results of each alternative in advance of
implementation.
 Risk decision environments.
Exist when decision makers lack complete
certainty regarding the outcomes of various
courses of action, but they are aware of the
probabilities associated with their occurrence.

7. Decision making Process
 Uncertain decision environments.
Exist when managers have so little information on
hand that they cannot even assign probabilities to
various alternatives and their possible outcomes.
Described as a rapidly changing setting in terms
of:
External conditions.
The information technology requirements needed for
analyzing and making decisions.
The people who influence problem and choice
definitions.

8. Types of decisions.
Programmed decisions.
Involve routine problems that arise regularly
and can be addressed through standard
responses.
Nonprogrammed decisions.
Involve nonroutine problems that require
solutions specifically tailored to the situation at
hand.

9. Decision-making model

10. Classical decision theory
 Classical decision theory assumes the
manager faces a clearly defined
problem, knows all possible action
alternatives and their consequences,
and then chooses the optimum solution.

11. Behavioral decision theory
 Behavioral decision theory accepts the
notion of bounded rationality. It
assumes the manager acts only in
terms of what is perceived about a
given situation, and then chooses a
satisficing solution.

12. Assumptions of the Rational
Assumptions of the Rational
Decision-Making Model
Decision-Making Model
1.
1. Problem clarity
Problem clarity
2.
2. Known options
Known options
3.
3. Clear preferences
Clear preferences
4.
4. Constant
Constant
preferences
preferences
5.
5. No time or cost
No time or cost
constraints
constraints
6.
6. Maximum payoff
Maximum payoff

13. Steps in the Rational
Steps in the Rational
Decision-Making Model
Decision-Making Model
EXHIBIT 5-3

14. Social Model
Social model is drawn from psychology,
which explain as human behavior being
guided largely by their unconscious
desires. Social pressures and influence
may cause the manager to make
irrational decision.

15. Making Choices
Making Choices

16. Four reason for escalation of
commitment
Project characteristics
Psychological determinants
Social forces
Organizational determinants

17. Intuition.
The ability to know or recognize quickly
and readily the possibilities of a given
situation.
A key element of decision making under
risk and uncertainty.

18. Escalation of Commitment
11-9
Figure 11-4
Psychological and Social
Determinants
* Ego defense
* Individual motivators
* Peer pressure
* Saving face
Organizational Determinants
* Breakdown in communication
* Politics Escalation Poor results
* Organizational inertia of or
commitment outcomes
Project Characteristics
* A delayed return on the investment
* Setbacks attributed to temporary
causes
Contextual Determinants
* External political pressure

19. Simon’s Normative Model of
Decision Making
Based on premise that decision making is
not rational
Decision making is characterized by
* limited information processing
* use of judgmental heuristics
* sacrificing

20. Making Choices
Making Choices

21. Judgmental Heuristics
Availability Heuristic: A decision maker’s tendency
to base decisions on information that is readily
available in memory.
Representativeness Heuristic: The tendency to
assess the likelihood of an event occurring based on
one’s impressions about similar occurrences.
The Adjustment Heuristic: In this heuristic, the
decision maker makes a judgment by starting from an
initial value and the adjust to make the final decision.

22. Decision-Style Model
Decision-Style Model
EXHIBIT 5-5

23. Participative Decision Making
Techniques

24. The Three Components of
The Three Components of
Creativity
Creativity
EXHIBIT 5-4

25. 11-15
Figure 11-7
A Model of Organizational
Creativity and Innovation
Individual Characteristics
Intellectual abilities
Tacit (implied) and explicit knowledge Individual creative
Styles of thinking behavior/performance
Personality traits
Intrinsic task motivation
Group Characteristics
- Norms - Diversity Group creative
- Cohesiveness - Roles
- Size - Problem-solving approaches behavior/performance
Organizational Characteristics Organizational
- Culture - Strategy
- Resources - Structure creativity and
- Rewards - Technology innovation

26. 11-11
A Model of Participative Management
Acceptance
Participation in Autonomy and Commitment
Goal Setting Increased
Participation in control over work
Decision Making behavior
Security
Contingency
Factors
Performance
* Design of work
and Innovation
* Trust
* Readiness to Participate
Challenge
Participation in
Completion of
Problem Solving
Meaningful
Participation in
Tasks
Change
Satisfaction

27. 11-12
Management Decision Styles
 You solve the problem or make the decision yourself, using
information available to you at that time.
 You obtain the necessary information from your subordinate(s),
then decide on the solution to the problem yourself.
 You share the problem with relevant subordinates individually,
getting their ideas and suggestions without bringing them together
as a group. Then you make the decision that may or may not reflect
your subordinates’ influence.
 You share the problem with your subordinates as a group,
collectively obtaining their ideas and suggestions. Then you make
the decision that may or may not reflect your subordinates’ influence.
 You share a problem with your subordinates as a group. Together you
generate and evaluate alternatives and attempt to reach agreement
(consensus) on a solution.

28. Advantages and Disadvantages of
11-10a
Table 11-3a
Group-Aided Decision Making
Advantages Disadvantages
1. Greater pool of knowledge
1. Social pressure
2. Different perspectives 2. Minority domination
3. Greater comprehension 3. Logrolling
4. Increased acceptance 4. Goal displacement
5. Training ground 5. “Groupthink”

29. 11-14b
Group Problem-Solving
Techniques (continued)
Nominal Group Technique: Process to
generate ideas and evaluate solutions
 This technique reduces roadblocks to
group decision making by
* separating brainstorming from evaluation
* promoting balanced participation
* incorporating mathematical voting
techniques

30. Group Problem-Solving
11-14c
Techniques (continued)
The Delphi Technique: Process to
generate ideas from physically
dispersed experts
Computer-Aided Decision Making:
Computers are used to reduce
consensus roadblocks while collecting
more information faster

31. Organizational Constraints on
Organizational Constraints on
Decision Makers
Decision Makers
Performance Evaluation
Evaluation criteria influence the choice of actions.
Reward Systems
Decision makers make action choices that are
favored by the organization.
Formal Regulations
Organizational rules and policies limit the
alternative choices of decision makers.
System-imposed Time Constraints
Organizations require decisions by specific
deadlines.
Historical Precedents
Past decisions influence current decisions.

32. Choosing problems
 In choosing problems to address, ask and
answer the following questions:
Is the problem easy to deal with?
Might the problem resolve itself?
Is this my decision to make?
Is this a solvable problem within the context of the
organization?

33. Reasons for decision
making failure.
Managers too often copy others’ choices and try to
sell them to subordinates.
Subordinates may believe the manager is
imposing his or her will rather than working for
everyone’s interests.
Managers may focus on the problems they see
rather than the outcomes they want.
Managers use participation too infrequently.

34. Decision making framework
Manager or team leader uses information that he
or she possesses and decides what to do without
involving others.
Variant 1  manager solves the problem or
makes the decision alone.
Variant 2  manager obtains the necessary
information from others and then decides
Manager or team leader consults with others and
allows them to help make the final choice

35. 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.

36. 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 others