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FOUNDATIONS OF DECISION MAKING

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FOUNDATIONS OF DECISION MAKING BSM 12 Planning involves decision-making Analyzing alternatives and choosing the best one Examples of planning function decisions ... – PowerPoint PPT presentation

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Title: FOUNDATIONS OF DECISION MAKING


1
FOUNDATIONS OF DECISION MAKING
  • BSM 12

2
  • Planning involves decision-making
  • Analyzing alternatives and choosing the best one

3
Examples of planning function decisions
  • What are the organizations long and short-term
    objectives?
  • What strategies will best achieve these
    objectives?
  • What is the most efficient means of completing
    tasks?
  • What budgets are needed to complete tasks?

4
The Decision-Making Process
STEPS
EXAMPLE
  1. Identify the problemcompare existing state with
    desired state
  2. Choose criteria or factors that are relevant in
    the decision
  3. Prioritize criteria
  • Car doesnt work or needs to be replaced
  • Manufacturer, price, model, options, repair
    records, fuel efficiency, etc.
  • Price, fuel, options

5
The Decision-Making Process
  1. List alternatives that could resolve the problem
  2. Analyze the alternativesstrengths and
    weaknessesagainst the criteria
  3. Choose the best alternative
  1. Identify vehicle choices Toyota Camry, Honda
    Accord, Chev Malibu
  2. Compare vehicles against criteriatest drive,
    read reports
  3. Toyota Camry

6
The Decision-Making Process
  1. Implement the decisionput into action
    communicate with those affected and get their
    commitment
  2. Evaluate the effectiveness of the decision to see
    if the problem has been corrected
  1. Purchase the selected vehicle
  2. Drive vehicle and determine whether it satisfies
    needs

7
TYPES OF PROBLEMS
  • problems may be straightforward, familiar and
    easily defined or well-structured
  • example a supplier is late with an important
    delivery
  • OR
  • ill-structurednew or unusual problems where
    information is incomplete or ambiguous
  • example a decision to purchase a new technology

8
TYPES OF DECISIONS
  • programmed decisions a repetitive decision
    handled by a routine approach and based on
    previous solutions
  • Example If a mechanic breaks something during
    repair service the part is replaced at the
    companys expense

continue
9
How do managers make programmed decisions?
  • They use guidelines
  • procedures a series of steps a manager can use
    when responding to a well-structured problem.
    Decision-making is carrying out simple series of
    sequential steps.

example
10
How do managers make programmed decisions?
  • Guidelines
  • rule an explicit (clear) statement that tells a
    manager what he should or should not do.
  • Example the 7500 cut-off rule simplifies the
    managers decision about getting bids.
  • policy a general guide to channel a managers
    thinking in a specific direction. Ethical
    standards come into play when following a policy.
  • Example we promote from within

11
Example
  • A request to purchase software for computers has
    been received.
  • Procedure
  • fill in requisition and approval
  • cost is estimated
  • if total is over 7500, 3 bids must be obtained
  • if total is less than 7500, a vendor is chosen
    and the order placed

12
TYPES OF DECISIONS
  • non-programmed decisions decisions that must be
    custom-made to solve unique and non-recurring
    problems there is no cut-and-dried solution.
  • Example creating a new organizational
    strategy involves a different set of
    environmental factors and other conditions may
    have changed

13
How do you integrate problems, types of
decisions, and level in the organization?
  • Well-structured problems are responded to with
    programmed decision making
  • Ill-structured problems require non-programmed
    decision making
  • Lower level managers usually face familiar and
    repetitive problems and rely on procedures
  • Higher level managers usually deal with unique
    decisions
  • Top management creates the policies, procedures
    and rules to guide other managers in their
    decision making

14
How do you integrate problems, types of
decisions, and level in the organization?
TOP
ILL STRUCTURED
NONPROGRAMMED DECISIONS
PROGRAMMED DECISIONS
LEVEL IN ORGANI-ZATION
TYPE OF PROBLEM
WELL STRUCTURED
LOWER
15
DECISION-MAKING STYLES
  • Individuals differ in
  • the way they think
  • logical, rational, sequential
    or
  • creative, intuitive, big picture
    AND
  • tolerance of ambiguity (uncertainty)
  • high need for consistencyno ambiguity or
  • high levels of ambiguitycan process many
    thoughts at once

16
DECISION-MAKING STYLES
  • There are four decision-making styles, although
    managers will possess characteristics of more
    than one.
  • directive
  • analytic
  • conceptual
  • behavioural

17
STYLE THINKING AMBIGUITY CHARACTERISTICS
DIRECTIVE RATIONAL LOW logical, efficient, fast decisions, focused on short term
ANALYTIC RATIONAL HIGH prefers to have complete information, considers many alternatives
CONCEPTUAL CREATIVE HIGH very broad in outlook, looks at many alternatives, focuses on long run and creative solutions
BEHAVIOURAL CREATIVE LOW works well with others, open to suggestions, concerned about those who work with them
18
ANALYTIC CONCEPTUAL
DIRECTIVE BEHAVIOURAL
HIGH
Tolerance for Ambiguity
LOW
RATIONAL
INTUITIVE
WAY OF THINKING
19
GROUP DECISION-MAKING
  • Individual and group decisions have their own set
    of strengths.
  • Neither is ideal for all situations.

20
Advantages of Group Decision-Making
  • provide more complete information than individual
    ones two heads are better than one
  • a group brings diversity of experience and
    perspectives to the process and will come up with
    more alternatives
  • increases the likelihood that the solution will
    be accepted by all those concerned
  • makes decisions more legitimate and democratic

21
Disadvantages of Group Decision-making
  • more time-consuming to organize and reach a
    solution
  • a few members may have an undue influence on
    final decision
  • pressures to conform may result in groupthinkthe
    withholding by group members of different views
    in order to appear to be in agreement

22
When are groups most effective?
  • This depends on criteria
  • on average groups make better, more accurate
    decisions than individuals
  • groups are more creative but slower
  • higher degree of acceptance of solutions
  • size influences effectiveness
  • larger is more heterogeneous
  • larger means more coordination and time and
    therefore may be less efficient
  • minimum of five to maximum of 15 is best
  • having odd numbers prevents deadlocks
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