Decision Making Dr Vasuprada Kartic NAC Batch IX PGDCPM

What is decision-making? The word decision is defined as: “A choice between two or more alternatives”. Thus decision-making can be defined as: “the selection of a course of action from among alternatives ”.

Decision-making Process  Identifying a problem  Identifying decision criteria  Allocating weights to criteria (prioritizing)  Developing alternatives  Analyzing alternatives  Selecting an alternative  Implementing the alternative  Evaluation (of decision effectiveness)

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.

Decision Criteria: Example In the above-cited scenario, the decision criteria may include the following factors:  Relevant qualifications  Leadership skills  Communication skills  Planning and analytical skills  Professional experience

Allocating Weights to Criteria  The next step in the decision making process is prioritization.  Prioritization is achieved by assigning quantitative weights to each criteria element.  The weightage defines the relative significance of each element.  An area of higher importance and significance to the desired state is given a higher weight

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 a rational and practical study 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

Decision-making Models Model “A simplified representation or description of a system or complex entity” Examples  A model of a building  A globe (Earth model)

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

Intuition An unconscious process of making decisions on the basis of experience and judgment  Involves gut feeling  May also have rational basis  The “feeling” arises from past experience and knowledge  Involves quicker response  Does not involve systematic analysis

Decision Types In general, there are two kinds of decisions. these are either  Programmed decisions  Non-programmed 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:

Non-programmed 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  It is based on individual’s ability.

Non-programmed Decisions Organizational Levels Nature of Problems Nature of Decision-making

Decision Styles  Decision-making, though a rational process does include some subjective elements  Thus in real organizational settings, the quality of decision does depend on the ability, style and approach of the manager

Decision Styles: Directive Directive  Represents low tolerance for ambiguity and uncertainty  Reflects rational thinking of the manager  Such decision styles are more suitable for routine procedural tasks

Decision Styles: Analytic Analytic  Analytical style is also a rational style of thinking  Involves a very high tolerance for ambiguity and uncertainty  Such managers generally seek detailed information before making a decision

Decision Styles: Behavioural Behavioural  Represents a creative way of thinking  Involves a low tolerance for ambiguity or uncertainty  Managers with a behavioural style introduce “new” ways of doing things

Decision Styles: Conceptual Conceptual  Conceptual style also reflects a creative and intuitive way of thinking  Conceptual style managers have a very broad vision and generally look at numerous alternatives for decision-making  Focused on the long run and often result in creative outcomes or alternatives

Vroom and Yetton Model Vroom and Yetton have identified five decision styles for managers, and are classified as follows: Autocratic AI The decision is made individually, using the information available to the individual only

Vroom and Yetton Model AII  The manager obtains information from subordinates and himself makes the decision  May or may not share with subordinates, the purpose of questions or the nature of problem  Subordinates do not play any role in problem definition or selection of alternatives

Vroom and Yetton Model Consultative CI  The manager shares the problem with relevant subordinates individually  Getting their input individually and not as a group. The manager then makes the decision independently, and may or may not be influenced by the subordinates’ suggestions

Vroom and Yetton Model  The problem is shared to subordinates in a group  Their ideas and suggestions are sought in a group meeting  The decision is then made by the manager which  May or may not reflect the subordinates’ influence

Group decision  The problem is shared to subordinates as a group  Alternatives are generated and evaluated collectively  Effort is made to reach a consensus

GI (Contd.)  The decision is made collectively and the manager functions as a coordinator  Does not “press” the group in adopting the manager’s “solution”  The manager is willing to accept and implement the decision of the group

Group Decision-making The factors requiring group decisions include:  Involving sensitive issues  High cost alternatives  Involving very high risk factor  Strategic impact

Group Decisions: Advantages  Acceptance of group members  Coordination is easier  Communication is easier  Existence of large alternatives  More information can be processed  Diversity of experience and perspectives

Group Decisions: Disadvantages  Take longer time  Group can be indecisive  Groups can compromise  Groups can be dominated  Groups can “play games”  Victim to Groupthink

Situational Factors for Individual Decision-making  Short time  Unimportant to group  Dominate the decision  Destructive conflict  Members hesitant

Situational Factors for Individual Decision-making  Confidential data  Incapability of members  Manager’s dominance  Indirect effect on group members

Situational Factors for Group Decision-making  Need for innovation and creativity  Data collection  Importance of acceptance  Importance of solution  Complex problem  Democratic process

Improving Group Decision-making  Brainstorming  Nominal group techniques  Electronic meeting

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