DECISION MAKING

IN AN ORGANIZATION
RACHALLE J R AMORES
ASSISTANT SUPPLY PNCO
CN 1ST PMFC, CNPPO, PRO 5

R E G I S T R A T I O N L I N K : H T T P S : / / M E E T. G O O G L E . C O M / Y O N - C C Y Q - H X M
 Learning Outcomes
• Recognize the Importance of Decision-Making to
Organization
• Identify the Theories and types of Decision – making
• Describe the decision-making process
• Compare various biases and errors in decision
making
• Identify the Tools and Techniques to improve decision-
making
•
“To be or not to be: that is the
question.” Hamlet lamented.

“Should I stay or should I go

now?” The Clash asked.

“Two roads diverged in a

yellow wood,” Robert Frost
pointed out.
A decision is a choice made from
available alternatives.
 What is Decision-Making?
• Making choices from among two or
more alternatives.
• Making choices among alternative
courses of actions and inaction.
 Management Decisions

Programmed Decisions are

made in response to a
situation that has occurred
often enough to enable
managers to develop decision
and rules that can be applied
in the future.
 Management Decisions

Programmed Decisions
Straight-forward, mundane,
and less thoughtful
everyday decisions
 Management Decisions

Non Programmed Decisions

are related to strategic
planning because uncertainty
is great and decisions are
complex.
 Information and Failure
• Certainty- all the information the
decision maker needs is fully available.
• Risk- a decision has clear cut goals and
the good information is available, but
the future outcomes associated with
each alternative are subject to some
chance of loss or failure.
 Information and Failure
• Uncertainty- managers know which goals
they wish to achieve, but information
about alternatives and future events is
incomplete
• Ambiguity- the goals to be achieved or the
problem to be solved is unclear,
alternatives are difficult to define, and
information about outcomes is unavailable.
Good decision making is a vital part of
good management but decision making is
not easy.
 Importance of Decision -Making
Management theorists agree that decision making is one of the most
important—if not the most important—of all management activities
(Drucker, 2010; Mintzberg, 2008; Simon, 1997).

The late management consultant put it this way, “Most discussions of

decision making assume that only senior executives make decisions .
This is a dangerous mistake . Making sound decisions is a crucial skill at
every level in the organization.” (Drucker, 2009, p. 27).
Source: Lunenburg (2011)
 Importance of Decision -Making

Relating to our own

experience, for example, we
could make similar argument
that the political, social, and
economic problems we face
today as a nation and people
are results of bad decisions in
the past.
 Theories of Decision -Making

Rationale The
Mixed
Comprehensive Incremental
Model Scanning
Theory
The Rationale Comprehensive Model
It assumes that the decision maker can identify the
problem, that the decision maker's goals, values, and
objectives are clear and ranked in accord with their
importance, that alternative ways of addressing the
problem are considered, that the cost and benefits or
advantages and disadvantages of each alternative are
investigated, that alternatives and their consequences
can be compared with other alternatives, and that the
decision maker will choose the alternative that
maximizes the attainment of his or her goals, values, and
objectives.
Source: http://www.unc.edu/~wfarrell/SOWO
%20874/Readings/decisiontheory.pdf
 The Incremental Theory
Decisions are constructed by a mixture of
"intuition, experience, rules of thumb,
various techniques (rarely sophisticated )
known to individual planners, and an
endless series of consultations“
Lindblom calls it "the science of muddling
through.
 Mixed Scanning
Sociologist Amitai Etzioni found fault
with both the rational-comprehensive
model of decision-making and the
incremental model of decision-making.
His mixed scanning approach considers
both fundamental and incremental
decisions and is more realistic than the
rational model and less passive than the
incremental model
Source: Miclat (2004) Planning Models as cited by
Bitonio (2013)
 Types of Decision Making

Rational Bounded Intuitive Creative

Decision Rationality Decision Decision
 Bounded Rationality Decision- Helps managers in
their decision making process to limit their search in a
manageable way for alternatives.
Intuitive Decision Making- Arriving at decision
without conscious reasoning
Creative Decision-Making
Involves decisions surrounding
generation of new imaginative ideas.
Developed against the background of
organizations becoming flatter in
structures and competitive, leaders
and their organizations are obliged to
be creative and innovative in
decisions regarding cost-saving
strategies, and new ways of doing
business.
Decision Making Process
1. Identify the problem

2. Establish Decision Criteria

3. Generate Alternatives

4. Choose the best alternative

5. Implement the decision

6. Evaluation and feedback

 Tools & Techniques to Improve
Decision-Making

Robbins & Judge(2010) named two types:

 Brainstorming- Fosters creativity by encouraging
every member of the group to be part of the decision-
making process rather than conforming to the pressure
from it.
 Tools & Techniques to Improve
Decision-Making
Nominal Group Technique-Restricts discussion or
interpersonal communication during decision-making process.
It takes into account the following steps:
• Members meet as group, and before any discussion, each
member is asked to individually jolt down his or her points/ideas
• Each member presents his or her ideas or points until all ideas
or points have been presented and recorded
• Group then discusses ideas for clarity and evaluation
• Each group member silently and independently rank-order the
ideas or points until the points or ideas with the higher ranking
aggregate becomes the decision of group.
 Tools & Techniques to Improve
Decision-Making
Carpenter, Bauer, &
Erdogan(2010) suggested the
below listed techniques:
Delphi Technique- Group
provides written responses to
questionnaires instead of coming
together to take a particular
decision.
 Tools & Techniques to Improve
Decision-Making
Majority Rule Technique-
Refers to a decision-making
where each member of the group
is given a single vote, and the
option that receives the greatest
number of votes is selected.
 Tools & Techniques to Improve
Decision-Making
Group Decision Support
System -Is another form of
technique that utilizes
interactive computer-based
systems that combines
communication and decision
technologies to enable
groups make informed
decisions.
 Tools & Techniques to Improve
Decision-Making
Decision Trees- utilizes diagram in which
“yes or no” questions lead decision makers to
address additional questions until they reach
the end of the tree.
 Biases and Errors in Decision-Making
Since most decisions tend to be bias and error prone,
improving the process is very vital . Robbins &
Judge(2010) described some common biases and
errors that underlie decision-making:

Overconfidence Bias -A tendency

by which an individual feels
overconfident that their response
to a particular question is, for
example, 70% correct when in
reality the answer provided is just
50% correct.
Biases and Errors in Decision-Making

Anchoring Bias- Confirmation Bias

manager settle on first
information instead of allowing -Occurs when managers
subsequent information to be seek information that
factored into the decision- reaffirms their past choices
making exercise. Such biases and overlook those
often suffice in area of
information that provides
negotiation when one’s ability
to ignore a situation is counterviews.
compromised.
 Biases and Errors in Decision-Making
Availability Bias-Tendency for
manager to base judgment or
decision based on information
that is readily available.
 Biases and Errors in Decision-Making
Escalation of Commitment-A practice in
which a manager escalates a commitment when
making decision.
 Biases and Errors in Decision-Making
Hindsight Bias -An attitude that
suffices that managers tend to falsely
believe, even though the outcome of a
situation has already been known, but
act as if such outcome has been
accurately predicted by them.
 Conclusion
• Decision-making is making best choices among two or more
alternatives
• Sound decision-making is important since most decisions by
managers tend to fail.
• Problems are not always clearly defined. Problems have to be
formulated in a way which enables people to make decisions
about them. Decision makers must have vast amounts of
information in order to make use of the rational comprehensive
decision-making.
 Conclusion
• There are several models of decision making that are vital to
the understanding of managers.
• The decision-making process needs to be improved at all
times, thus, several tools and techniques are available to
managers.
• There are several biases and errors tat inhabit the decision-
making process, of which managers should be cognizant.