Chapter 3 - Decision Making PDF

Chapter 3 The Nature of Decision Making FUNDAMENTALS OF MANAGEMENT (MGT162)  Topic Outlines  Definition of decision making  Types of decision making i. Programmed decision ii.Non-programmed decision  Characteristics of decision making  Decision making process  Group decisi...

Chapter 3 The Nature of Decision Making FUNDAMENTALS OF MANAGEMENT (MGT162)  Topic Outlines  Definition of decision making  Types of decision making i. Programmed decision ii.Non-programmed decision  Characteristics of decision making  Decision making process  Group decision making  Definition of Decision Making  “The process through which managers identify and resolve problems and capitalize on opportunities”  The process by which a course of action is selected as the way to deal with a specific problem  Types of decision making Types of Decision Making Non- Program Program  It is structured. Decisions that have  It is unstructured and requires been made so many times in the past higher level management. Deals that managers have developed rules with unique, unusual or or guideline to be applied when exceptional problem. certain situation are expected to occur.  Non-routine decision making that occurs in response to unusual,  A repetitive decision that can unpredictable opportunities and be handled by a routine approach. treat  Example: Rules & regulations.  Example: Government’s decision to prevent H1N1 by stopped all the travelling outside country Types of condition under decision making The manager has enough information to know the outcome of the decision before it is made and able to predict it precisely. When the decision maker knows with reasonable certainty what the alternatives are and what Certainty conditions are associated with each alternative, a state of certainty exists. The information is available and considered to be reliable, and the cause and effect relationship is known. A condition under which there is not full knowledge of the problem and reasonable probabilities for alternative outcomes cannot be determined. The manager feels unable to assign estimates to any Uncertainty of the alternatives. A situation in which a decision maker has neither certainty nor reasonable probability about the outcome.  Cont… Refer to future conditions that are not always known in advance. Decision maker is able to estimate the likelihood of Risk certain outcome based on personal experience or secondary information. Some information is available, but it is not enough to answer all questions about the outcomes. Means the goals to be achieved or problem to be solved is unclear, alternatives are difficult to define and information about outcomes is not available. Ambiguity People to subjectively add probability of the outcome in decision making, and it is difficult to be described by the theoretical models accurately. Id e n ti fy Decision making in & g process Managers regularly review data related to their areas of di responsibility, including both outside information and reports and a information from within the organization. g Recognize that a problem exist and must be solved. n o Id si e n n Reflect the results the organization want to attain. Both the quantity g ti p & quality of the desired results should be specified because these fy objectives will ultimately guide the decision maker in selecting the r in G o appropriate course of action. g e Objectives can be short range or long range. bl o n e bj e me r s ct a Alternatives – Strategies that might be implemented in the decision- iv ti making situation. e n Creativity and imagination are often required in this step. s g May follow the advice of others who have faced similar problems. al t e r  Cont… Assess the value or relative advantages or disadvantages of Eva each alternative under consideration. lua Predict the consequences that will occur if the various options tin are put into effect. g alt ern ativ es Making a final choice. The best decisions are often based on careful judgments, Rea making a good decision involves carefully examining all the chin facts, determining whether sufficient information is available, g and finally selecting the best alternatives. deci sion s  Cont… When decisions involve taking action or making changes, choosing ways to put these actions or changes into effect become an essential managerial task Choo The key to effective implementation are: sing imple a) Sensitivity to those who will be affected by the decision ment b) Proper planning and consideration of the resources ation necessary to carry out the decision strat egies Collecting information on how well the decision is working. Managers must observe the impact of the decision & take Monit further action if it becomes necessary. oring No decision-making process is complete until the impact has & been evaluated. evalu If the decision appears inappropriate, the process cycles back to ating the first stage. feedb ack  Group decision making technique 1) Brainstorming  This technique involves a group of people, usually between five and ten, sitting around a table, generating ideas in the form of free association.  The primary focus is on generating ideas rather than on evaluating or choosing an idea.  A technique used to enhance creativity that encourages group members to generate as many novel ideas as possible on a given topic without evaluating them.  Can enhance creativity by overcoming pressures for conformity that can retard the development of creative decision-making.  Brainstorming technique is very effective when the problem is comparatively specific and can be simply defined.  A complex problem can be broken up into parts and each part can be taken separately at a time.  Cont… 2) Nominal group technique (NGT)  A structured process designed to stimulate creative group decision-making in which agreement is lacking or the members have incomplete knowledge concerning the nature of the problem.  It's helpful when decisions need to be rendered in a timely manner, yet the company wants all of the opinions of the individuals in a group to factor within the decision in a bigger way than a simple "majority rules" voter pool.  Individual members list their ideas on the specific problem and present the ideas at one time, without discussion.  Members’ ideas are recorded so that everyone can see them.  After all members’ ideas are presented, the group discusses the ideas to clarify and evaluate them.  Duplicate solutions are then eliminated from the pool, leaving only original solutions behind.  Cont… 3) Delphi technique  An approach that uses the experts to make predictions and forecasts about future events without meeting face-to-face.  Using survey instruments or questionnaires, a group leader collects written expert opinions on a topic.  It uses the opinions of a limited group of experts or people who have knowledge of the subject from their experience.  The subjects that an organisation wants to understand through the Delphi method are obtained by subjective means; the opinions of the group of experts are therefore very important.  The group of experts works towards a consensus, through step-by-step feedback of information, by repeating the question and providing feedback on each other’s answers.  Group Decision Making Advantages & Disadvantages Advantages Disadvantages  More information and  The process takes longer knowledge are available. than individual decision  More alternatives are likely to making, so it is costlier. be generated.  Compromise decisions  resulting from More acceptance of the final indecisiveness may decision is likely. emerge.  Enhanced communication of  One person may dominate the decision may result. the group.  Better decisions generally  Groupthink* may occur. emerge. * a process in which bad decisions are made because the different members of a group do not express their individual opinions about a plan, proposal, etc. but only say what they think the rest of the group would agree with “Inability to make decisions is one of the principal reasons executives fail. Deficiency in decision-making ranks much higher than lack of specific knowledge or technical know-how as an indicator of leadership failure.” ~ John C. Maxwell ~