Organizational Dynamics

Faculty : Dr. G. Revathi

Planning

Planning is
Defining goals, establishing strategies, developing
plans to coordinate activities
Its concerned with both ends (what has to be done)
and means (how it is to be done)

Why Plan ?
To provide direction
To reduce uncertainty
To minimize waste and redundancy
To set the standards to be used in controlling

Planning establishes the basis for all the other
managerial functions; in fact, without planning,
managers wouldnt know what to organize, lead or
control
Decision Making is
at the core of
planning
Decisions and Decision Making
A Decision is a choice from two or more
alternatives
Decision making is however, more complex
than just choosing from among alternatives; it
is a process
The Decision Making Process
1. Identification of a Problem (i.e. a discrepancy between an
existing and a desired state of affairs)
2. Identification of Decision Criteria (whats relevant in making
a decision)
3. Allocation of Weights to Criteria (give a weight of 10 to the
most important criterion)
4. Development of Alternatives (list the various choices)
5. Analysis of Alternatives (appraising against the criteria: give
a score of 10 for maximum favourableness)
6. Selection of An Alternative
7. Implementation of the Alternative
8. Evaluation of Decision Effectiveness
DM process - Example
Criteria
------------
Options
6 (Wt.)
Salary
7
Location
8
Job
Profile
7
Company
Brand

Total
Score

TCS
7(Score)

42
7

49
7

56
8

56


203
Cognizant 8

48
10

70
9

72
9

63


253
Infosys 9

54
9

63
8

64
9

63


244
Problem: To decide which company to join
Detailed steps of the Decision Making process
1. State the Problem
What are you trying to decide on?
2. Identify the Decision Criteria
What are the factors that you consider relevant in making this
decision?
List and explain 4 to 6 factors
3. Allocate Weights to these Criteria
Use a 10-point scale and give a weight of 10 to the most important
criterion, and so on
4. Explain these weights
Why are some of the factors more important to you (i.e. assigned
higher weights) than the others?
5. Develop Alternatives
List 4 to 6 possible options
Decision Making process (contd.):
6. Draw up a matrix with rows representing the alternatives and
columns representing the criteria
7. Considering one criterion at a time, appraise the favorableness
of each alternative with respect to that criterion, by giving it a
score on a 10-point scale
Give a score of 10 for maximum favorableness
Do the above for all the criteria
8. Explain the highest and lowest scores under each criterion
9. Calculate the total score for each alternative as follows:
a. Multiply the score in each cell by the weight previously assigned to the
corresponding criterion
b. For each alternative add all the products obtained above to get its total
score
10. Select the alternative with the highest total score
Types of Problems and Decisions
Structured problems straightforward,
familiar and easily defined
These are solved using
Programmed decisions repetitive decisions
using a routine approach;
these could be
Procedures (series of steps to follow)
Rules (statements on what to do or not to do)
Policies (guidelines)
Types of Problems and Decisions
(contd.)
Unstructured Problems new or unusual with
ambiguous or incomplete information
Have to be solved by making
Nonprogrammed decisions unique decisions that
require custom-made solutions

Most decisions fall in between these two extremes;
they are usually a mix of both kinds
How are Decisions made ?
A. Through Rationality

Assumptions of rationality:
The problem is clear and unambiguous
There is a single, well-defined goal
All alternatives and consequences are known
Preferences are clear, constant and stable
There are no time or cost constraints
The final choice will maximize payoff
How are Decisions made ? (contd.)
B. Through Bounded Rationality
Making rational decisions bounded (i.e.
limited) by ones ability to process information
Involves satisficing, rather than maximising,
i.e. choosing an alternative that is good
enough
How are Decisions made ? (contd.)
C. Through Intuition
Judgement based on feelings and
subconscious processing, as well as
experience, abilities, knowledge
Decision-making Styles
Tolerance for
Ambiguity

Way of Thinking
High
Low
Rational Intuitive
II.
Analytic

III.
Conceptual

I.
Directive

IV.
Behavioral
Decision Style Model (Rowe & Mason,1987)
Some Decision Making Errors and Biases
Overconfidence
Tendency to think we know more than we do
Immediate Gratification
Desire for immediate rewards or avoidance of
immediate costs
Anchoring Effect
Fixating on initial information and failing to adjust
for subsequent information
Availability
Remembering events that are most recent in our
memories
Some Decision Making Errors and Biases

Confirmation
Seeking information that reaffirms past choices
and discounting information that contradicts the
same
Representation
Seeing identical situations where they dont exist
Sunk costs
Fixating on past expenditures of time, money, or
effort rather than on future consequences
Escalation of Commitment
Increased commitment to a decision in spite of
evidence that it may be wrong, due to
unwillingness to admit this
Decision-making conditions
Certainty
Risk
Uncertainty
Decision Making under Certainty

The outcome of every alternative is known
E.g. Interest income on deposits
Decisions will be accurate
However such conditions do not always occur
Decision Making under Risk
The likelihood of certain outcomes can be
estimated
Example:

Event Expected
Demand
Mild
Summer
600
Moderate
Summer
1200
Severe
Summer
1800
Plain Average: 1200
Probability
0.2
0.3
0.5
Average Demand that can be
expected over time if the probabilities
hold: 1380
Times in last
10 years
2
3
5
Expected Value of
each alternative
120
360
900
Decision Making under Uncertainty

C1 C2 C3
S1 13 14 11
S2 9 15 18
S3 24 21 15
S4 18 14 28
Competitors Strategy
Our
Strategy
PAYOFF MATRIX
Neither certainty nor reasonable probability
estimates available
Example:
Decision Making under Uncertainty:
Maximax (optimistic) strategy

C1 C2 C3
S1 13 14

11

S2 9

15

18

S3 24

21

15

S4 18

14

28

Competitors Strategy
Our
Strategy
PAYOFF MATRIX
Maximax Strategy: S4
Decision Making under Uncertainty:
Maximin (pessimistic) strategy

C1 C2 C3
S1 13 14

11

S2 9

15

18

S3 24

21

15

S4 18

14

28

Competitors Strategy
Our
Strategy
PAYOFF MATRIX
Maximin Strategy: S3
Decision Making under Uncertainty:
Minimax strategy

C1 C2 C3
S1 13 14 11
S2 9 15 18
S3 24 21 15
S4 18 14 28
Competitors Strategy
Our
Strategy
C1 C2 C3
S1 24-13 = 11 21-14 = 7

28-11 = 17

S2 24-9 = 15

21-15 = 6 28-18 = 10

S3 24-24 = 0

21-21 = 0

28-15 = 13

S4 24-18 = 6

21-14 = 7

28-28 = 0

REGRET MATRIX

Decision Making under Uncertainty:
Minimax strategy

C1 C2 C3
S1 24-13 = 11 21-14 = 7

28-11 = 17

S2 24-9 = 15

21-15 = 6 28-18 = 10

S3 24-24 = 0

21-21 = 0

28-15 = 13

S4 24-18 = 6

21-14 = 7

28-28 = 0

Competitors Strategy
Our
Strategy
REGRET MATRIX
Minimax Strategy: S4 (minimise the maximum regret)