By Sir Omer Ikram

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DECISION
MAKING
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A key to success in management

and in your career is knowing
how to be an effective problem-
solver.
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PROBLEM SOLVING

Every day you’re faced with problems to solve— what class

assignment should I focus on first? What am I going to eat for dinner?
What’s the quickest way for me to get to work (or school) today since
I’m running behind schedule? And when you’re done with school and
employed by an organization, you are going to be expected to show
that you’re a good problem solver. And having good problem-solving
skills is important if you’re going to be successful in your career.
What can you do to develop and improve your problem-solving skills?
Let’s look at some suggestions. CONT…..
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PROBLEM SOLVING

1. Define the problem:

This might seem self-evident but you’d be surprised at how many
people try to jump in with a quick and easy solution without having
spent time to first understand and then define the problem. When you
do that, you might come up with a solution . . . To the wrong problem!
Instead, spend some time in asking questions. Lots of questions! But
don’t get so caught up in defining the problem that you ignore solving
the problem.
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PROBLEM SOLVING
1. Define the problem:
Another precautionary note when defining the problem

is, as we describe in the chapter, making sure you don’t confuse problems

with symptoms of problems. For instance, supposed you’ve applied for

several jobs, but have not received any interview invites. The problem isn’t

the lack of interview invites . . . that’s only a symptom of a problem. There’s

some reason you’re not getting asked in for an interview. Before you can

“solve” this situation, you need to define the problem. So, ask questions. Is

it your résumé? Is it your cover letter? Are you applying for jobs you’re not

suited for? CONT…..

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PROBLEM SOLVING

2. Look at the problem from different perspectives

and generate multiple solutions.
 A good problem-solver (and a good decision-maker)
has an open mind and attempts to be as creative as
possible in coming up with solutions to a problem.
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PROBLEM SOLVING

3. Evaluate the ideas or possible solutions.

 Evaluate your ideas carefully and thoroughly by how
they would impact the problem. But it’s also critical to
look at the constraints of time and money. Can your
solutions lead to successful results in the time frame
and the budget constraints you face?
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PROBLEM SOLVING

4. Implement your solution.

A problem doesn’t get solved without implementing your
solution. Think through the “how’s” of your solution. If
you don’t execute this step well, the problem is likely to
still be there or even get worse.
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PROBLEM SOLVING

5. Re-examine your solution.

 Has the problem been resolved or at least gotten
better? If not, you’ll have to determine if it is still the
right solution or what additional actions might be
needed.
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DECISION

What is decision?

 A choice among two or more alternatives

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DECISION
Decision making process:
 Decision making process is consisting of 8 steps:
1. Identify a problem.

2. Identifying decision criteria

3. Allocate weights to the criteria

4. Develop alternatives

5. Analyze alternatives

6. Select an alternative

7. Implement the alternative

8. Evaluate decision effectiveness

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8 steps of
decision
making
process
with
examples
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COMMON DECISION MAKING BIASES
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DECISION MAKING APPROACH
Although everyone in an organization takes part in decisions, decision making is particularly
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important to managers. It’s part of all four managerial functions (plan, organize,
Influencing/leading, and control). That’s why managers are called decision makers.
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DECISION MAKING APPROACH

There are three approaches to decision making:

1. Rational Decision Making

2. Bounded Rationality

3. Role of Intuition
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DECISION MAKING APPROACH

There are three approaches to decision making:

1. Rational Decision Making:
We assume that managers will use rational decision making; that is, they’ll make
logical and consistent choices to maximize value. After all, managers have all sorts of
tools and techniques to help them be rational decision makers.
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DECISION MAKING APPROACH

There are three approaches to decision making:

2. Bounded Rationality:
A more realistic approach to describing how managers make decisions is the concept of
bounded rationality, which says that managers make decisions rationally, but are limited
(bounded) by their ability to process information. Because they can’t possibly analyze all
information on all alternatives, managers satisfice, rather than maximize. That is, they
accept solutions that are “good enough.” They’re being rational within the limits (bounds)
of their ability to process information.
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DECISION MAKING APPROACH

There are three approaches to decision making:

3. Role of Intuition:
Managers often use their intuition to help their decision making. What is intuitive
decision making? It’s making decisions on the basis of experience, feelings, and
accumulated judgment. Researchers studying managers’ use of intuitive decision making

have identified five different aspects of intuition. (Next slide)

How common is intuitive decision making? One survey found that almost half of the
executives surveyed “used intuition more often than formal analysis to run their
companies.” ….. Cont…
FIVE DIFFERENT ASPECTS OF INTUITION
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TYPES OF PROBLEMS AND DECISIONS

There are Two types of problems and decisions:

1. Structured Problem– Programmed Decision

2. Unstructured Problem– Non programmed Decision

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TYPES OF PROBLEMS AND DECISIONS
There are Two types of problems and decisions:
1. Structured Problem– Programmed Decision
 Structured Problem: Some problems are straightforward. The decision maker’s
goal is clear, the problem is familiar, and information about the problem is easily
defined and complete. Examples might include when a customer returns a purchase to
a store, when a supplier is late with an important delivery, a news team’s response to a
fast-breaking event, or a college’s handling of a student wanting to drop a class. Such
situations are called structured problems because they’re straightforward, familiar,
and easily defined.

 Programmed decision : A repetitive decision that can be handled by a routine

approach
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TYPES OF PROBLEMS AND DECISIONS

There are Two types of problems and decisions:

2. Unstructured Problem– Non programmed Decision
 Unstructured Problem: Many organizational situations involve unstructured
problems, new or unusual problems for which information is ambiguous or incomplete.
Problems are unique and vary from customer to customer.

 Nonprogrammed decision : When problems are unstructured, managers must

rely on nonprogrammed decision making in order to develop unique solutions.
Nonprogrammed decisions are unique and nonrepetitive and involve custom-made
solutions.
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DECISION MAKING CONDITIONS

When making decisions, managers may face

three different conditions:
1. Certainty

2. Risk

3. Uncertainty.
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DECISION MAKING CONDITIONS

When making decisions, managers may face

three different conditions:
1. Certainty: The ideal situation for making decisions is one of certainty, a
situation where a manager can make accurate decisions because the outcome of
every alternative is known.
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DECISION MAKING CONDITIONS

When making decisions, managers may face

three different conditions:
2. RISK: A far more common situation is one of risk, conditions in which the
decision maker is able to estimate the probability of certain outcomes. Under risk,
managers have historical data from past personal experiences or secondary
information that lets them assign probabilities to different alternatives.
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DECISION MAKING CONDITIONS

When making decisions, managers may face

three different conditions:
 Uncertainty: What happens if you face a decision where you’re not certain
about the outcomes and can’t even make reasonable probability estimates? We call
this condition uncertainty. Managers face decision-making situations of uncertainty.

 Uncertainty: A situation in which a decision maker has neither certainty nor reasonable
probability estimates available
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DECISION MAKING STYLES

 Linear thinking style :

Decision style characterized by a person’s preference for using

external data and facts and processing this information through
rational, logical thinking

 Nonlinear thinking style:

Decision style characterized by a person’s preference for

internal sources of information and processing this information
with internal insights, feelings, and hunches