Decision Making PDF

DECISION MAKING DR. MAYANKA GUPTA ASST. PROFESSOR, DEPT. OF RMDA LADY IRWIN COLLEGE Rational decision-making when individuals use analytics, facts and a precise step-by-step process to come to a fact-based decision. They are linked with ends and objectives. Rationality...

DECISION MAKING DR. MAYANKA GUPTA ASST. PROFESSOR, DEPT. OF RMDA LADY IRWIN COLLEGE Rational decision-making when individuals use analytics, facts and a precise step-by-step process to come to a fact-based decision. They are linked with ends and objectives. Rationality assumes deliberation and the weighing of alternatives in order to choose the most effective means to achieve a goal or goals. When decisions are made under uncertainty and probabilities are not known, the decision taken is non-rational. However, a non-rational model can be used effectively only by people who are competent both in their relations with Others and in the subject matter at hand. Irrational decisions are those which are made without deliberation and without considering the consequences; they are motivated by individual's compulsions and strong urges. Rationality implies a value maximising the decision-maker's advantage by searching and evaluating all possible alternatives. Decision Defined Decision is a choice between two or more available alternatives Decision making is the process of choosing the best alternative for reaching objectives According to Gross and Crandall, decision making is that selection of one action from a number of course of action or the choosing of no action. TYPES OF DECISIONS  Kinds of Decisions Diesing has classified decisions into five types based on the area of activity to which each is appropriate 1. Technical decisions relate to the achievement of a single goal. They can help in achieving goals ranging from making food in the morning to establishing the first community in space. Work simplification decisions are usually technical decisions. 2. Economic decisions deal with multiple goals and scarce common resources: several different goals compete for the same resource which competing demands. An economic decision does not necessarily deal with money but with an economic resource. Dr. Mayanka Gupta Kinds of Decisions 3. Social decisions can be used to solve the problem when value conflicts within or between the roles exist. Social decisions differ with other decisions by virtue of their very nature whereby goals are not specific with a known number of alternative forms from which one can be selected. For developing the course of action, out of many alternatives dealing with the different aspects of the problem, one alternative is selected. For example a mother with young children can have conflicting alternatives when faced with the need to contribute to the family income along with his husband. 4. Legal decisions are those in which norm or standards are applied to practice situations to settle disputes Legal decisions are important because there are some clear and continuing differences of interest which cannot be resolved by social decisions, and hence seek involvement of legal decisions, which are universal. Kinds of Decisions 5. Political decisions deal with how decisions are made by the group or individuals involved. They are sometimes called procedural o r structural decisions, and often accompany other types of decisions.  Characteristics of Decision-Making GOAL ORIENTED Decision making is a goal-oriented process. Decision are usually made to achieve some purpose or goal. The intention is to move toward some desired state of affairs’. DYNAMIC PROCESS Characterized as a process, rather than as, one static entity. It is a process of using inputs effectively in the solution of selected problems and the creation of outputs that have utility. Depending on the situational requirements, managers take suitable decisions using discretion & judgement. PERVASIVE FUNCTION Permeates in all management and covers every part of an enterprise CONTINUOUS ACTIVITY The life of manager is a perpetual choice making activity. He decides things on a continual and regular bases. It is not a one shot deal. INTEGRAL PART OF PLANNING As Koontz indicated ‘decision making is the core of planning’. Both are intellectual processes, demanding dissection and judgment. Both aim at achieving goals. Both are situational in nature. Both involve choice among alternative course of action.  Taking decisions in groups is a Resolving slower process and also involve conflict between members. It is Conflicts important to recognise the various levels and ways of resolving them. There are different levels of adjustment In conflict situations.  Resolving Conflicts : different levels of INTEGRATION adjustments Satisfying solution obtained by discussions on mutual consent (eg. Joint family) Acceptance of differences Second best method of resolving conflict Both parties go halfway to meet the problem, resulting in satisfaction to both CONVERSION Dominant characters explain situation so convincingly while other person happily accepts it. (eg. Dominant husband & & wife regarding buying expensive gift, husband & explaining about loan repayment. Compromise and VOLUNTARY SUBMISSION Method of giving in to dominant person (eg. Wife dropping idea of buying necklace) less satisfaction STRUGGLE & VICTORY OF ONE SIDE RESULTING IN DOMINANCE One member dominates, regardless of others feelings Least desirable method (eg in rural india , wife wanting to educate her daughter) Dr. Mayanka Gupta Six Steps/Process in the Managerial Decision- Making Process ❻ ❶ Evaluation and Identifying the Feedback problem Converting ❷ Decision into Decision-Making Diagnosis action Process and analyzing the problems ❺ Selection the Developing best solution Alternatives ❸ ❹  Step 1: Identifying the Problem Problem – A discrepancy between an existing and desired state of affairs. Characteristics of Problems – A problem becomes a problem when a manager becomes aware of it. – There is pressure to solve the problem. – The manager must have the authority, information, or resources needed to solve the problem. Dr. Mayanka Gupta  Decision criteria are factors that are important (relevant) to resolving the problem. Step 2: Identifying – Costs that will be incurred (investments Decision Criteria/ required) – Risks likely to be Analyzing the encountered (chance of failure) problem – Outcomes that are desired (growth of the firm) Analyzing the problem Internal Information : Includes ones knowledge, values , standards and goals as well as past experiences which function as criteria in evaluating alternatives. Internal search occurs quickly and easily External Information : May include information on government policies and legislation, prices of infrequently purchased goods and services or resources available to needy people. For example, if a businessman has to set up new business, he may have to take cognizance of government policies and legislations.  Step 3: Developing Alternatives Identifying viable alternatives – Alternatives are listed (without evaluation) that can resolve the problem. – Take into account time and cost constraints and psychological barriers that will restrict number of alternatives  STEP 4: Selection the best solution Choosing the best alternative Appraising each alternative’s – The alternative strengths and weaknesses with the highest total weight is An alternative’s appraisal is based chosen. on its ability to resolve the issues identified in step 2. Evaluating Alternatives Is the possible course of action: Legal? Ethical Economical? Practical? Dr. Mayanka Gupta Step 5: Converting decision into action Putting the chosen alternative into action. Conveying the decision to and gaining commitment from those who will carry out the decision. Dr. Mayanka Gupta Step 6: Evaluation and Feedback The soundness of the decision is judged by its outcomes. ○ How effectively was the problem resolved by outcomes resulting from the chosen alternatives? ○ If the problem was not resolved, what went wrong? Dr. Mayanka Gupta