Decision making
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This document discusses decision making and the decision making process. It describes two main types of decisions - programmed decisions which are routine and non-programmed decisions which are unique. The decision making process involves 8 steps - defining the problem, identifying criteria, allocating weights, developing alternatives, analyzing alternatives, selecting an alternative, implementing it, and evaluating its effectiveness. Various factors that influence decision making are also outlined such as types of problems, decision conditions involving certainty, risk and uncertainty, and types of decision makers.
Decision making
- 1. Decision Making An essence to problem solving Page 1
- 2. Decision Making • ― the process of responding to a problem by searching and selecting a solution or course of action‖. • There are basically two kinds of decision that are called upon to make: Programmed and non-programmed Page 2
- 3. Types of Problems and Decisions • Structured problems * Involve clear goals. *Are familiar (have occurred before) *Are easily and completely defined- information about the problem is available and complete. • Programmed decision *A repetitive decision the can be handled by a routine approach. Page 3
- 4. • Unstructured problems * Problems that are new or unusual and for which information is ambiguous or incomplete. * Problems that will require custom-made solutions. • Non-programmed decisions * Decision that are unique and non-recurring. * Decision that generate unique responses. Page 4
- 5. Vitals of Decision making process • Policy • a general guideline for making a decision about a problem. • Procedure * A series of interrelated steps that decision maker can use to respond ( applying a policy) to a problem. • Rule * an explicit statement that limits what can or cannot be done. Page 5
- 6. The Decision- Making Process Define the Evaluate Implement the Problem Alternatives chosen Alternative Gather facts and Select the best Follow up and develop alternative. evaluate the chosen alternatives. alternative. Page 6
- 7. Decision Making Process • Identifying Problem • Identifying Decision Criteria • Allocating Weights to the Criteria • Developing Alternatives • Analyzing Alternatives • Select Alternatives. • Implement Alternatives. • Evaluating decision’s effectiveness. Page 7
- 8. Step 1: Identifying the Problem * A problem becomes a problem when someone becomes aware of it. * there is always a pressure to solve the problem. * the person must have the authority, information, or resources needed to solve the problem. Page 8
- 9. Step 2: Identify the Decision Criteria • Decision criteria are factors that are important ( relevant) to resolving the problem. * Costs that will be incurred (investment required). * Risks likely to be encountered ( chance of failure). * Outcomes that are desired ( growth of the firm). Page 9
- 10. Step 3: Allocating Weights to the Criteria • Decision criteria is of equal importance: * Assigning a weight to each item. * Places the items in the correct priority order of their importance in the decision making process. Page 10
- 11. Step 4: Developing Alternatives • Identifying viable alternatives. * Alternatives are listed ( without evaluation) that can resolve the problem. Page 11
- 12. Step 5 :Analyzing alternatives • Appraising each alternative’s strengths and weaknesses * An alternative’s appraisal is based on its ability to resolve the issues identified Page 12
- 13. Step 6: Selecting the alternative • Choosing the best alternative * The alternative with the highest total weight is chosen. Page 13
- 14. Step 7: Implementing the Alternative • Putting the decision to and gaining comment from those whose will carry out the decision. Page 14
- 15. Step 8: Evaluating the decision’s effectiveness • 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 resolve, what went wrong? Page 15
- 16. Intuition * It is making decisions on the basis of experience, feelings, and accumulated judgment. Page 16
- 17. Decision Making Conditions • Certainty * A situation in which someone can make an accurate decision because the outcome of every alternative choice is known. • Risk * A situation in which the someone is able to estimate the likelihood (probability) of outcomes that result from the choice of particular alternatives. Page 17
- 18. • Uncertainty * limited information prevents estimation of outcome probabilities for alternatives associated with the problem and may force to rely on intuition, hunches, and ―gut feelings‖. # Maximax: The optimistic person’s choice to maximize the maximum outcome. # Maximin: The pessimistic person’s choice to maximize the minimum outcome. # Minimax: The choice to minimize maximum regret. Page 18
- 19. Types of Decision Makers * Directive # Use minimal information and consider few alternatives. * Analytic # Make careful decisions in unique situations. * Conceptual # Maintain a broad outlook and consider many alternatives in making decisions. * Behavioral # Avoid conflict by working well with others and being receptive to suggestions. Page 19
- 20. Rational (Logical) Decision Model Steps Scanning the situation—identifying a signal that a decision should be made. Classify the decision as routine, apply the appropriate decision rule; as non- programmed, begin comprehensive problem solving. Monitor and follow-up as necessary. Page 20
- 21. Trends in Decision Making – The pace of decision making is accelerating: more decisions to make and have less time to make them. • Complex streams of decisions • Sources of decision complexity • Perceptual and behavioral decision traps Page 21
- 22. Dealing with Complex Streams of Decisions – Multiple criteria to be satisfied by a decision. – Intangibles that often determine decision alternatives. – Risk and uncertainty about decision alternatives. – Long-term implications of the effects of the choice of a particular alternative. – Interdisciplinary input increases the number of persons to be consulted before a decision is made. Page 22
- 23. – Pooled decision making increases the number of persons playing a part in the decision process. – Value judgments by differing participants in the process create disagreement over whether a decision is right or wrong, good or bad, and ethical or unethical. – Unintended consequences occur because the results of purposeful actions cannot always be predicted. Page 23
- 24. Guidelines for effective decision making Categorical interpretation- the problem should be defined properly. Application of limiting factor- limiting factor should be taken into account in order to analyze Adequate information- more quantity of reliable information leads to effective decision making. Considering other views- various views at the same point are taken into account for quality decision. Timeliness- decision should be ,made at proper time to meet the competitive advantages. Page 24
- 25. Techniques improving decision making Brainstorming – idea generation for decision making. Nominal group technique (NGT)- problem outlined, presentation of solution in written form, discussion over written solutions, and final decision. Delphi technique- decision made on the basis of questionnaire filled by the respondents. Consensus mapping- decision made on the basis of the report presented by the representative of each group after Page 25
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