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Decision Making Styles

The document discusses decision making as the process of identifying problems and selecting courses of action, highlighting types of decisions such as programmed, non-programmed, adaptive, and innovative. It also outlines various decision-making models, including classical, behavioral, administrative, and political, along with conditions affecting decision making like certainty, risk, uncertainty, and ambiguity. Additionally, it addresses common biases in decision making and offers strategies for improving decision-making effectiveness.

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3 views

Decision Making Styles

The document discusses decision making as the process of identifying problems and selecting courses of action, highlighting types of decisions such as programmed, non-programmed, adaptive, and innovative. It also outlines various decision-making models, including classical, behavioral, administrative, and political, along with conditions affecting decision making like certainty, risk, uncertainty, and ambiguity. Additionally, it addresses common biases in decision making and offers strategies for improving decision-making effectiveness.

Uploaded by

madhusudanbarik228
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

Styles and Models


Decision
Decision
Decision refers to making up one’s
mind.
Or
Making a choice among available
alternatives.
Or
Choosing the best alternative to
achieve objectives.
Decision
Decision Making
Making
Decision Making
Decision making is the process of identifying
problems and opportunities and selecting a
course of action to resolve them.
Decision
Decision Making
Making
Problem

A problem arises when an actual state of affairs


differ from a desired state of affairs.

Opportunity

Situation that occurs when circumstances offer


an chance to exceed stated goals and
objectives.
Decision
Decision Making
Making

Example: The problem of customer


complaints about slow delivery of orders.

Solution: It is an opportunity to redesign


production processes and customer service.
Types
Types of
of Decisions
Decisions
1. Programmed Decisions
2. Non-programmed Decisions
3. Innovative Decisions
4. Adaptive Decisions
Types
Types of
of Decisions
Decisions
1. Programmed Decisions
These are also called routine and repetitive
decisions related to routine problems determined
by rule, procedure or habit.
Examples:
Placing orders online,
Processing payroll vouchers,
Packing and shipping customers’ orders.
Types
Types of
of Decisions
Decisions
2. Non-Programmed Decisions
These are one shot decisions made in response to
situations that are unique, poorly defined and
largely unstructured having significant
consequences for the organization. These requires
strategic thinking.
Example:
Development of new facility,
Launching a new product,
Merger or acquisition, etc.
Types
Types of
of Decisions
Decisions
3. Adaptive Decisions
These refers to choices made in response to a
combination of moderately unusual problems and
alternative solutions. Adaptive decisions typically
involve modifying and improving on past routine
decisions and practices reflecting the concept of
convergence.
Example:
Book store and internet book store are
complementary to each other.
Types
Types of
of Decisions
Decisions
4. Innovative Decisions
These are the decisions based on discovery,
identification, and diagnosis of unusual and
ambiguous problems and the development of
unique or creative alternative solutions.
Innovative decisions are often preceded by failures
should be celebrated as they are the genesis for
innovative decision making.
Decision
Decision Making
Making Conditions
Conditions

Certainty:

Decision making condition in which managers have


accurate, measurable, and reliable information about the
outcome of various alternatives under consideration.

Example: Director to present annual report to the board.


Decision
Decision Making
Making Conditions
Conditions

Risk and Probability

Decision-making condition in which managers know the


probability a given alternative will lead to a desired goal or
outcome.

Example: Flipping a coin to make a decision.


Decision
Decision Making
Making Conditions
Conditions

Uncertainty:
Little is known about the alternative solutions or outcomes.

Example: Impact of external conditions (Weather condition)


Decision
Decision Making
Making Conditions
Conditions
Ambiguity:

Goals not defined, problem not clear and alternatives are


difficult to identify and outcome is not clear.

Corporate Culture:

Most powerful ingredient in decision making. Authoritarian


caught by bureaucracy and dynamic decision is restricted.
Innovative decision makers need to be adventurous.
Decision Making Models
Decision
Decision Making
Making Models
Models
Classical Model: is based on economic
assumptions.
1.This approach tells the managers how they
should take decisions
2.Managers are logical and rational
3.Manager’s decision will be in the best
interest of the organisation
4.Conditions suggested by this model are rare
to exist
Decision
Decision Making
Making Models
Models

Behavioral Model:
1.The decisions are made under the
conditions of uncertainty and lack of
information means real life situations.
2.The manager has to take decisions under
different conditions and situations and
several alternatives is explored/selected to
solve a problem satisfactorily.
Decision
Decision Making
Making Models
Models

Administrative Model: describes how managers


actually made decisions in difficult situations such
as uncertainty and ambiguity. This model is based
on four important concepts.
Administrative
Administrative Model
Model

1. Bounded Rationality
Managers are bounded by certain
cognitive limitations like;
1.ability to interpret,
2.process and act on information to
take optimum decision.
Administrative
Administrative Model
Model
2. Lack of Information
Individuals not having adequate information
about the problem, obviously decisions can’t be
optimal.
3. Satisfying
Decision makers choose the first alternative
solution that satisfies minimal decision criteria,
may not be the best one.
4. Intuition
Represents a quick appreciation of a decision
based on past experience but without conscious
thought.
Decision
Decision Making
Making Models
Models

Political Model: represents the decision making


process in terms of self interests and goals of
powerful external and internal stakeholders.
Decision are the result of bargaining and
discussion among managers.
Decision
Decision Making
Making Process
Process

© 2005 Prentice Hall Inc. All rights reserved. 5–22


Decision
Decision Making
Making Styles
Styles
There are two styles of decision making:
Intuitive and Rational
These styles are determined depending on
which side of the brain is more dominant.
Left side of human brain is believed to be the
location of emotion, imagination, intuition and
creativity.
Right side is considered the side of logic,
language, mathematics and analysis.
Decision
Decision Making
Making Styles
Styles
Common
Common Biases
Biases in
in Decision
Decision Making
Making

 Overconfidence Bias
– Believing too much in our own decision
competencies.

 Anchoring Bias
– Fixating on early, first received information.

 Confirmation Bias
– Using only the facts that support our decision.
Common
Common Biases
Biases in
in Decision
Decision Making
Making

 Availability Bias
– Using information that is most readily available at
hand.

 Representative Bias
– Assessing the likelihood of an occurrence by
trying to match it with a pre-existing category.
Common
Common Biases
Biases in
in Decision
Decision Making
Making

 Escalation of Commitment
– Increasing commitment to a previous decision in
spite of negative information.

 Randomness Error
– Trying to create meaning out of random events
by falling prey to a false sense of control or
superstitions.
Common
Common Biases
Biases in
in Decision
Decision Making
Making

 Hindsight Bias
– Falsely believing to have accurately predicted
the outcome of an event, after that outcome is
actually known.

 Bandwagon Effect
– The tendency to believe certain outcomes (i.e.
the stock market will increase) because others
believe the same.
Common
Common Biases
Biases in
in Decision
Decision Making
Making

 Loss Aversion
– Characteristic of individuals who tend to more
strongly prefer avoiding losses rather than
acquiring gains.

 Unrealistic Optimism
– Individuals’ tendency to believe that they are
less susceptible to risky events (i.e.
earthquakes, disease transmission, etc.) than
others.
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 we’re smarter
than we actually are.
 Don’t try to create meaning out of random events.
– Don’t attempt to create meaning out of coincidence.
 Increase your options.
– The number and diversity of alternatives generated
increases the chance of finding an outstanding one.
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. Don’t 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.

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