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Decision Making: The Essence of Managers

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Title: Decision Making: The Essence of Managers


1
Decision Making The Essence of Managers Job by
Muhammad Iqbal Malik
2
Key Topics
  • Introduction
  • The Decision-making process
  • Decision-making models
  • Decision Styles
  • A discussion on Group Decisions

3
Part I Introduction
4
Organizations
  • Organizations are systems
  • Involve people, structure and a common purpose
  • Have limited resources
  • Need to perform a series of functions to meet its
    objectives

5
Managers
  • Managers are responsible for effective and
    efficient execution of these organizational
    functions.
  • A typical manager performs a number of functions
    that are categorized as
  • Interpersonal
  • Informational
  • Decisional

6
Managers
  • One of the key traits that distinguish managers
    from operatives is the ability to make
    independent decisions.

7
Part II Decision-making
8
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 .

9
Decision-making Process
  • Identifying a problem
  • Identifying decision criteria
  • Allocating weights to criteria
  • Developing alternatives
  • Analyzing alternatives
  • Selecting an alternative
  • Implementing the alternative
  • Evaluation (of decision effectiveness)

10
Problem Definition
  • Problem is a discrepancy (difference) between an
    existing and a desired state.
  • Example
  • The manager has resigned, and we need another
    manager
  • Here the phrase manager has resigned reflects
    the current state while need another manager
    represents a desired state.

11
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.

12
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

13
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.

14
Allocating Weights Example
15
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.

16
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)

17
Criteria Rating Example
18
Analyzing Assessment Example
19
Selecting an alternative
  • Involves choosing the best alternative, based on
    the above rating and analysis
  • Generally implies selecting the alternative with
    the highest score.

20
Implementing the Alternative
  • Putting the decision into action
  • Involves clear communication of the decision to
    all concerned and obtaining their commitment

21
Evaluation
  • Evaluation forms an integral part of any process
  • Involves evaluation 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

22
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)

23
Rational/Bounded Rational
  • So Rational and Bounded Rational Models are
    cognitive models that describe how managers make
    rational decisions

24
The Rational Model
1. Define and diagnose the problem
  • 2. Set goals

7. Follow up and control
External and internal Environ. forces
3. Search for alternative solutions
6. Implement the solution selected
5. Choose among alternative solutions
4. Compare and evaluate solution
25
Rational Model Assumptions
  • Clear and unambiguous problem
  • Single, well-defined goal
  • All alternatives are known
  • Clear preferences (ranking criteria)
  • Constant/stable preferences
  • No time or cost constraints
  • Decision will maximize payoff

26
Rational Model Criticism
  • Not all decisions made on rational basis
  • Most problems, goals and preferences are not
    clear or well defined
  • Not practical to know all possible alternatives
  • Time and cost constraints exist in all practical
    problems
  • Result not maximized in most cases

27
Bounded Rational Assumptions
  • Limited set of criteria
  • Self-interest influences ratings
  • Limited no. of alternatives
  • Alternatives are assessed one at a time till a
    satisficing (or good enough) alternative is found
  • Politics influences acceptance and commitment of
    decision

28
Intuition
  • An unconscious process of making decisions on the
    basis of experience and judgment

29
Intuition
  • Involves gut feeling
  • May also have rational basis
  • The feeling arises from past experience and
    knowledge
  • Involves quicker response
  • Does not involve systematic analysis

30
Decision Types
  • Effective managers make various kinds of
    decisions. In general, these decisions are either
  • Programmed decisions
  • Non-programmed decisions

31
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 pricing standard customer orders,
    determining billing dates, recording office
    supplies etc.

32
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

33
Non-programmed Decisions
Organizational Levels
Nature of Problems
Nature of Decision-making
34
Non-programmed Decisions
  • Are tough decisions that involve risk and
    uncertainty and
  • call for entrepreneurial abilities
  • Such decisions draw heavily on the analytical
    abilities of the manager
  • Examples Moving into a new market, investing in
    a new unproven technology, changing strategic
    direction

35
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

36
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

37
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

38
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

39
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

40
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

41
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

42
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

43
Vroom and Yetton Model
  • CII
  • 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

44
Vroom and Yetton Model
  • Group Consensus
  • GI
  • The problem is shared to subordinates as a group
  • Alternatives are generated and evaluated
    collectively
  • Effort is made to reach a consensus

45
Vroom and Yetton Model
  • GI (Contd.)
  • The decision is made collectively and the manager
    functions as a coordinator
  • Does not press the group in adopting the
    managers solution
  • The manager is willing to accept and implement
    the decision of the group

46
Group Decision-making
  • The factors requiring group decisions include
  • Involving sensitive issues
  • High cost alternatives
  • Involving very high risk factor
  • Strategic impact

47
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

48
Group Decisions Disadvantages
  • Take longer time
  • Group can be indecisive
  • Groups can compromise
  • Groups can be dominated
  • Groups can play games
  • Victim to Groupthink

49
Situational Factors for Individual Decision-making
  • Short time
  • Unimportant to group
  • Manager can take decision
  • Dominate the decision
  • Destructive conflict
  • Members hesitant

50
Situational Factors for Individual Decision-making
  • Confidential data
  • Incapability of members
  • Managers dominance
  • Indirect effect on group members

51
Situational Factors for Group Decision-making
  • Need for innovation and creativity
  • Data collection
  • Importance of acceptance
  • Importance of solution
  • Complex problem
  • Democratic process

52
Situational Factors for Group Decision-making
  • Risk taking solution needed
  • Better understanding
  • Whole responsibility
  • Feedback required

53
Improving Group Decision-making
  • Brainstorming
  • Nominal group techniques
  • Electronic meeting
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