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@decision Making

The document discusses different types and models of decision making including strategic, management control, and operational control decisions. It covers rational, bounded rationality, garbage can, and other models. It also discusses biases and ways to improve decision making.

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Atin Mehra
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48 views

@decision Making

The document discusses different types and models of decision making including strategic, management control, and operational control decisions. It covers rational, bounded rationality, garbage can, and other models. It also discusses biases and ways to improve decision making.

Uploaded by

Atin Mehra
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Decision

Making

Three
Three Types
Types of
of Decisions:Decisions:1.
1. Strategic
Strategic Planning
Planning Decisions
Decisions
-Top level makes them, they are long-term and most
important
-They involve high level of uncertainty and risks
-Involve situations that do not necessarily reoccur
-Deal with complex issues
Strategic Decisions involve a process of:

Formulating Plans

Deciding on Objectives of the Organisation

On resources used to attain them

Three
Three Types
Types of
of Decisions
Decisions (contd)
(contd)::2.
2. Management
Management Control
Control Decisions
Decisions
-They are taken within the Framework of Strategic Plans and
Objectives which have been made e.g., pricing a product

3.
3. Operational
Operational Control
Control Decisions
Decisions
-They ensure that specific tasks are carried out effectively and
efficiently everyday.
-Many of these can be automated or programmed
-They focus on individual tasks within the guidelines issued by
Strategic Planning and Management Control Decisions

Rational
Rational Model
Model

Stages
Stagesin
inDecision
DecisionMaking:Making:-

1-Problem recognition fall in sale or revenue


2-Problem definition & structuring

to identify the relationship between

diff. factors

Definition sale in area Y of Product X


Structure Problem Is simple or structured

3-Identifying alternative courses of action


4-Making or communicating the Decision Advertising / Mktg.
5-Implementation of Decision
6-Monitoring the effects of Decision

Decision Making is made


easier if Information is:Accurate
Complete

Decision Making is a matter


of
Intuition & Judgement
if Information is:Inaccurate
Incomplete

Available

Too late to help

Clear

Unclear

Concise / to the point

Rambling

Quantified

Qualitative

Is given to the person who makes


the
Decision

Is given to the person other than the


one who is making the Decision the
information is thus altered

Decision Making will be limited by inadequate information and by the Style of


Management in the Organisation. Qualitative Decisions often call for a Manager
to use his intuition and experience or even replace the tangible facts.

Carnegie
Carnegie Model
Model
Organisational Politics is another reason why
Rational
Model Fails. In practice Decisions are made by
coalitions
of Managers (which is an alliance among several
managers) who agree about organisational
goals and
problem priorities.

*Mintzberg expanded coalition to also include anyone who has


the power

to influence Decision Making


External Coalition consists of:Owners
Associates Customers, suppliers, trading partners
Employee Associations Unions, professional bodies
Public Govt., Media

Internal Coalition consists of:CEO & Board at the Strategic Apex


Line managers
Techno Structure
Support Staff
Ideology culture / values

* Mintzberg:

Power in and around Organisations

Simons
Simons Model
Model of
of Bounded
Bounded
Rationality
Rationality

Managers are bound by constraints Personal / Environmental

Decision Making is bounded by:


Limited information Processing
Rule of the thumb
Heuristics (Short-cut) and

satisficing

(good-enough)

Hence individuals make decisions by constructing


simplified models that extract the essential features
from
problems without capturing all their complexity.

A theory that contends that


decisions in
organizations are random and
unsystematic and solutions emerge
Solutions
Problems
from a complex interaction
of stream
of
Choice
events i.e.
Participants

Garbage Can Model


for Organisations
experiencing high uncertainty
and also for extreme Organic Organisations.

Opportunities

Hofstedes
Hofstedes Dimensions
Dimensions
1. Styles of decision
making vary by
culture
2. Many of
Hofstedes
dimensions have
implication for
how people
deploy the
decision-making
process

Common
Common Biases
Biases and
and Errors
Errors in
in Decision
Decision
Making
Making
Overconfidence Bias
Believing too much in our own ability to make good
decisions, especially when outside of own expertise

Anchoring Bias
Using early, first received information as the basis
for making subsequent judgments

Confirmation Bias
Selecting and using only facts that support our
decision

Availability Bias
Emphasizing information that is most readily at
hand
Recent
Vivid

More
More Biases
Biases and
and Errors
Errors in
in Decision
Decision
Making
Making

Escalation of Commitment

Increasing commitment to a decision in spite of


evidence that it is wrong especially if responsible for
the decision!

Randomness Error
Creating meaning out of random events superstitions

Risk Aversion
The tendency to prefer a sure gain of a moderate
amount over a riskier outcome, even if the riskier
outcome might have a higher expected payoff

Hindsight Bias
Looking back, once the outcome has occurred, and
believing that you accurately predicted the outcome of
an event

Ways
Ways to
to Improve
Improve Decision
Decision Making
Making
1. Analyze the situation and adjust your decision
making style to fit the situation.
2. Be aware of biases and try to limit their
impact.
3. Combine rational analysis with intuition to
increase decision-making effectiveness.
4. Dont assume that your specific decision style
is appropriate to every situation.
5. Enhance personal creativity by looking for
novel solutions or seeing problems in new
ways, and using analogies.

Reducing
Reducing Biases
Biases and
and Errors
Errors
Focus on goals.
Clear goals make decision making easier and help to
eliminate options inconsistent with your interests.

Look for information that disconfirms beliefs.


Overtly considering ways we could be wrong
challenges our tendencies to think were smarter
than we actually are.

Dont try to create meaning out of random events.


Dont attempt to create meaning out of coincidence.

Increase your options.


The number and diversity of alternatives generated
increase the chance of finding an outstanding one.

Intuition
Intuition
Intuitive Decision Making
An unconscious process created out of distilled
experience

Conditions Favoring Intuitive Decision Making

A high level of uncertainty exists


There is little precedent to draw on
Variables are less scientifically predictable
Facts are limited
Facts dont clearly point the way
Analytical data are of little use
Several plausible alternative solutions exist
Time is limited and pressing for the right decision

Organizational
Organizational Constraints
Constraints on
on Decision
Decision
Makers
Makers
Performance Evaluation
Evaluation criteria influence the choice of actions

Reward Systems
Decision makers make action choices that are
favored by the organization

Formal Regulations
Organizational rules and policies limit the
alternative choices of decision makers

System-imposed Time Constraints


Organizations require decisions by specific
deadlines

Historical Precedents
Past decisions influence current decisions

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