1. CSC350: Learning Management Systems COMSATS Institute of Information Technology (Virtual Campus)

2. Lecture # 6 Making Decisions 2

3. 1.General characteristics of planning 2.Different types of plans 3.Major steps of the planning process 4.Relationship between planning and organizational objectives 5.Management by objectives (MBO) program 6.Types of planning tools Review of the Previous Lecture 3

4. 1.Understanding the term decision 2.Understanding rational decision-making process 3.Role of intuition in decision making 4.Various tools used to make decisions 5.Understanding how groups make decisions Topics of Discussion 4

5. Definition of a Decision – Choice between two or more available alternatives Definition of Decision Making – Process of choosing the best alternative for reaching objectives FUNDAMENTALS OF DECISIONS 5

6. Types of Decisions 6

7. Programmed Decision – Routine and repetitive – Structured, planned – Made according to established guidelines Nonprogrammed Decision – One-time, nonroutine, unique – Less structured than programmed decisions Types of Decisions 7

8. 8

9. Responsibility for Making Organizational Decisions 9

10. Decision Makers – Individuals or Groups who actually make the choice among the alternatives – Orientations Receptive Exploitative Hoarding Marketing-Oriented Elements of the Decision Situation 10

11. Goals to be Served – Should be organization’s objectives Relevant Alternatives – Feasible for solving existing problem & implementation Ordering of Alternatives – Ranking most desirable to least desirable Choice of Alternatives – Actual choice among available alternatives Elements of the Decision Situation 11

12. RATIONAL DECISION-MAKING PROCESS 12

13. Step 1 – Identifying an Existing Problem – Only after identifying the barriers is management able to take the steps necessary to eliminate them – Barnard’s sources of input for identifying problems: Orders issued by supervisors Situations relayed by employees Normal activity of managers themselves RATIONAL DECISION-MAKING PROCESS 13

14. RATIONAL DECISION-MAKING PROCESS Step 2 – Listing Alternative Solutions 14

15. Step 3 – Selecting the Most Beneficial Alternative – List as accurately as possible potential effects and impact of each alternative – Assign probability factor to each potential effect – Compare each alternative's expected effects and respective probabilities of those effects RATIONAL DECISION-MAKING PROCESS 15

16. Step 4 – Implementing the Chosen Alternative – Put the chosen alternative into action RATIONAL DECISION-MAKING PROCESS 16

17. Step 5 – Gathering Problem-Related Feedback – Gather the feedback to determine the effect of the implemented alternative on the problem – If problem is not solved, managers need to seek out and implement another alternative RATIONAL DECISION-MAKING PROCESS 17

18. Herbert Simon Theory: – Managers are bounded in terms of time, computational power, and knowledge when making decisions – Managers often “satisfice,” meaning they make a decision that is just “good enough” Bounded Rationality 18

19. Intuition: – An individual’s inborn ability to synthesize information quickly and effectively Decision-Making Heuristics and Biases: – Heuristics – Simple rules of thumb to make decisions – Biases – Making decisions based on rules of thumb and in so doing introducing flaws/decision- making biases DECISION MAKING & INTUITION 19

20. Decision-Making Biases 20

21. Probability Theory EV = I x P – Expected Value of an alternative is the Income the alternative will produce, multiplied by its Probability of producing that income Decision Trees – Graphic decision-making tool used to evaluate decisions involving a series of steps DECISION-MAKING TOOLS 21

22. Decision Trees 22

23. Advantages: – More and better alternatives – Draw on collective experiences and knowledge – Individuals tend to buy in to decisions when they have had input to the decision – Group members tend to identify decisions as their own and have a feeling of ownership GROUP DECISION MAKING 23

24. Disadvantages: – Takes longer for groups to make decisions – Costs increase because of the additional time of people involved in the group – Lower-quality decisions if group members’ focus is on relationships and friendships among themselves – Groupthink – negative impact of group decision making GROUP DECISION MAKING 24

25. Group Decision-Making Processes Brainstorming: 25

26. Nominal Group Technique: – Each group member writes down ideas on decision or problem being discussed – Each member presents his/her ideas orally – Entire group discusses ideas simultaneously – Secret ballot vote is taken – Idea with most votes is adopted and implemented Group Decision-Making Processes 26

27. Delphi Technique: – Problem is identified – Group members offer solutions through anonymous questionnaire responses – Responses are compiled and sent out to all group members – Individual group members select solution – Process repeats until consensus solution is reached Group Decision-Making Processes 27

28. Advantages: – Brainstorming Many useful ideas are possible – Nominal Group Technique Input can be offered without fear of retribution – Delphi Technique Ideas gathered from individuals geographically separated from one another Evaluation of Group Decision-Making Processes 28

29. Disadvantages: – Brainstorming Time wasted on impractical ideas – Nominal Group Technique Cannot discern why individuals voted the way they did – Delphi Technique Unable to ask questions of one another Evaluation of Group Decision-Making Processes 29

30. Conclusions  Think of the sum-up and listen to me carefully. 30

31. Thank You 31