Chapter 09 Managing Decision Making and Problem Solving.ppt

Managing Decision Making and Problem SolvingChapter 09

Chapter 09City University of Science and Information TechnologyFaisal Ghani

The Nature of Decision MakingDecision MakingThe act of choosing one alternative from among a set of alternatives.


The Nature of Decision MakingDecision Making ProcessRecognizing and defining the nature of decision situation, identifying alternatives, choosing the best alternative and putting it into practice.


The Nature of Decision MakingTypes of DecisionsProgrammed Decision A decision that is fairly structured or recurs with some frequency or both.Non-Programmed DecisionA Decision that is relatively unstructured and occurs much less often than a programmed decision.


The Nature of Decision MakingDecision Making Under CertaintyState of Certainty: A Condition in which the decision maker knows with reasonable certainty what the alternatives are and what conditions are associated with each alternative.Decision Making Under RiskState of Risk: A condition in which the availability of each alternative and its potential payoffs and costs are all associated with probability estimates. Decision Making Under UncertaintyState of Uncertainty: A Condition in which decision maker does not know all the alternatives, the risk associated with each, or the consequences each alternative is likely to have.


The Nature of Decision MakingThe decisionmaker facesconditions ofCertaintyRiskUncertaintyLevel of ambiguity and chances of making a bad decision.LowerModerateHigherDecision-making Conditions


Rational Perspective on Decision MakingMost managers like to think of themselves as rational decision makers. And indeed, many experts argue that mangers should try to be as rational as possible in making decisions.


Rational Perspective on Decision MakingThe Classical Model of Decision MakingA prescriptive approach that tells managers how they should make decisions. It assumes that managers are logical and rational and that they always make decisions that are in the best interest of the organization.Decisions makers have complete information about the decision situation and possible alternatives.They can effectively eliminate uncertainty to achieve a decision condition of uncertainty.They evaluate all aspects of the decision situation logically and rationally.


Rational Perspective on Decision MakingThe Classical Model of Decision MakingObtain complete andperfect informationEliminate uncertaintyEvaluate everythingrationally and logically.When faced witha decision situation,managers should

and end up with a decision that bestserve the interest of the organization.


Rational Perspective on Decision MakingSteps in Rational Decision MakingRecognize and define the decision situation;Identify appropriate alternatives;Evaluate each alternative in terms of its feasibility, satisfactoriness, and consequences;Select the best alternative;Implement the chosen alternative;Follow-up and evaluate the results of the chosen alternative.


Rational Perspective on Decision MakingSteps in Rational Decision Making




Rational Perspective on Decision MakingSteps in Rational Decision MakingEvaluate Alternatives in the Decision Making ProcessIs the alternativefeasible?Is the alternativesatisfactory?Are the alternativesconsequencesaffordable?Retain the furtherconsideration.Eliminate fromconsideration.Eliminate fromconsideration.Eliminate fromconsideration.NoNoNoYesYesYes




Behavioral Perspective on Decision MakingThe Administrative ModelA decision making model that argues that decision makers (1) have incomplete and imperfect information, (2) are constraint by bounded rationality, and (3) tend to satisfice when making decisions.


Behavioral Perspective on Decision MakingThe Administrative ModelBounded Rationality A concept suggesting that decision makers are limited by their values and unconscious reflexes, skills and habits.Satisficing The tendency to search for alternatives only until one is found that meets some minimum standard of sufficiency.


Behavioral Perspective on Decision MakingThe Administrative ModelWhen faced with a decision situationmanagers actually use incomplete andimperfect informationare constrained bybounded rationalitytend to satisfice and end up with adecision that mayor may not serve theinterests of theorganization.The Administrative Model of Decision Making


Behavioral Perspective on Decision MakingOther behavioral forces that can influence decisionsPolitical Forces in Decision MakingCoalition: An informal alliance of individuals or groups formed to achieve a common goal.Intuition and Escalation of CommitmentIntuition: An innate belief about something, without concision consideration.Escalation of Commitment: A decision makers staying with a decision even when it appears to be wrong.Risk Propensity and Decision MakingRisk Propensity: The extent to which a decision maker is willing to gamble when making a decision.Ethics and Decision Makings


Group and Team Decision Making in OrganizationsForms of Groups and Team Decision MakingInteracting Group A decision-making group in which members openly discuss, argues about, and agree on the best alternatives.Delphi Group A form of group decision making in which a group is used to achieve a consensus of expert opinion.Nominal Group A structured technique used to generate creative and innovative alternatives and ideas.


Group and Team Decision Making in OrganizationsForms of Groups and Team Decision MakingAdvantages More information & knowledge are availableMore alternatives are likely to be generatedMore acceptance of the final decision is likelyEnhanced communication of the decision may resultBetter decisionsDisadvantagesThe process takes longer, so it is more costlyCompromise decisions due to indecisiveness may emergeOne person may dominate the groupGroupthink may occur

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Chapter 09 Managing Decision Making and Problem Solving.ppt