DECISION MAKING

DECISION MAKING: Choosing one alternative from

more than one.

RATIONAL DECISION MAKING

STYLES OF THINKING AND DECISION MAKING

UNTESTED OPINION

Form of knowing and believing without any

observation or factual ground. For example general
perception that women are not capable or they cannot
do anything important.

SELF EVIDENT TRUTH

Based on a person’s or a group’s fact finding. But this

can later on prove to be wrong.

AUTHORITY

A person, a senior an expert is sometimes made to be

the authority and his opinion or idea is generally
accepted, which can later on prove to be wrong.

INTUTION
This means gut feeling, having no explicit evidence of
being correct. It may or may not be correct.

LITERARY STYLE

Based on literature and case studies or the theories

and discussions in the books and journals.

IDEALISM
Living in an imaginary world and believing the facts
as per ideal situations.
POSTULATION
Putting forward something as a fact or accept true as
a basis for reasoning or argument. This is based on
mathematical and statistical calculations. Studies in
operations research ad mathematical modeling tend
to be postulational.

RELIGIOUS

Based on religious injunctions or the teachings of the

scriptures and prophets.

SATISFICING: Acceptances of solutions that are

good enough.
EMPRICISM

To denote observations and propositions based on

sense, logic or experience. This is close to scientific
style of thinking.

RATIONAL

Rational decision making is based on true facts and

figures, research and investigation, after studying all
aspects of the available options and alternatives and
then choosing the alternative, which may be solve the
problem and help in the achievement of goals.
DECSION MAKING FRAMEWORK
Means the situations under which managers make
decisions.

1. Certainty:
2. Uncertainty
3. Risk
4. Conflict
5. Pressure
6. Lack of Structure

1. Certainty: When there is no risk.

2. Uncertainty: When there is risk.

3. Risk: The situation where the probability of
success is less than 100%

4. Conflict: Lack of convergence or disagreement

about ideas and opinions.

5. Pressure: Stress from the upper management,

internal or external factors.

6. Lack of Structure: How much structured are

the problems. There are two types of problems with
regard to structure.
a. Structured Problems: The problems that have
objectively correct answers. For example computing
the salary or commission of employees.

b. Unstructured Problems: Which may have no

proven answers. May lead to a number of solutions
all of which may have merits and demerits. Suppose
hiring the key person of your competing company.
 FACTORS WHICH HINDER
RATIONAL DECISION MAKING
1. Pressure of time, resources, situation and
management.
2. Lack of proper Information which is needed for
decision making.
3. Organizational Policies sometimes forbid you
from rational DM.
4. Organizational Politics are also a factor.
5. Overconfidence of the manager that he is right.
6. Lack of Confidence or fear also becomes a
factor of avoiding RDM
7. Perceptions, biases or self-interest of the
managers about certain things.
DECISION MAKING PROCESS
STEPS OF RATIONAL DECISION MAKING

1. Identification of Problem
2. Identification of Decision Criteria
3. Allocation of Weights to Criteria
4. Development of Alternatives
5. Analysis of Alternatives
6. Selection of an Alternative
7. Implementation of Alternative
8. Follow up
Explanation

1. Identification of Problem: First of all you

have to define the problem. Otherwise you may go to
a wrong direction.

2. Identification of Decision Criteria: Suppose if

you want to purchase computers for your company,
you will decide about the following things like

1. Quality and Reliability

2. Price
3. After Sales Services (Warranty, Guaranty
4. Accessibility
5. Social Acceptability
3. Allocation of Weights to Criteria: This means
that you will allocate weightage or points to different
aspects of decision criteria
For example you allocate the points in the following
way

1. Quality and Reliability 30

Price 30
2. After Sales Services (Warranty, Guaranty 20
3. Accessibility 10
4. Social Acceptability 10
4. Development of Alternatives: You will
consider various options or companies selling the
computers like

1. Compaq
2. IBM
3. Dell
4. Acer
5. Sony
5. Analysis of Alternatives: You will compare
the options as per decision criteria.

Quality Price Services Access Social

Compaq
IBM
Dell
Acer
Sony
6. Selection of an Alternative: After the
comparison, you will select a particular option or
alternative

7. Implementation of Alternative: Implementing

the alternative means to put the decision into
practice. In this case you will purchase the
computers.

8. Follow up: This means to see after some time

as to the decision proved right or wrong.
 TYPES OF DECISIONS
1. PROGRAMMED DECISIONS
2. NONPROGRAMMED DECISIONS
3. INNOVATIVE DECISIONS

1. PROGRAMMED DECISIONS: A simple

decision which may be based on structured problem
and may be handled with a routine approach or
previous solution. Like hiring of a new sales person.
2. NONPROGRAMMED DECISIONS: An
unusual decision based on unstructured or new
problem, which may be resolved through some
different approach by studying and investigating the
 entire situation. Like launching of a new product,
changing manufacturing procedures and techniques.

3. INNOVATIVE DECISIONS: A decision

based on highly unusual, complex and ambiguous
problems, which may need a creative and
imaginative solution. For example, merger of some
other company, selling of a unit or division to some
other company etc.

TYPES OF DECISIONS
1. Directive
2. Analytic
3. Conceptual
4. Participative
1. Directive: Quick and speedy decision maker,
who makes decisions with minimum information
gathering and focusing on short run.

2. Analytic: Careful decision makers who make

decisions with analysis of the situation.
3. Conceptual: They are characterized as
creative decision makers, who have the capability to
cope up with unique situations with the use of the
power of intuition and imagination.
4. Participative: They make the decisions with
the involvement of the concerned team members.
 ADVANTAGES OF PARTICIPATIVE
DECISION MAKING
1. More information or input
2. More Alternatives
3. Acceptance from the others
4. Legitimacy
5. Cooperation in Implementation

DISADVANTAGES
1. Time Consuming
2. Group Dominance
3. Affecting
4. Conflicts
 CREATIVITY

Creativity: Creativity means deciding what do you

want to do? How can you do it and how can you do it
better?

Three forms of creativity

1. Creating something out of nothing
2. Synthesizing or combining
3. Changing or modifying
 HOW TO DEVELOP CREATIVITY
1. Be relaxed
2. Exercise your mind
3. Determine what do you want to do?
4. Look for ways to tackle the problem
5. Look for ways to do better
6. Read books
7. See different people, places, systems,
procedures
8. Good and peaceful life in terms of political,
social and economic circumstances.