Decision- MakingMs. Neha GoelDecision MakingDecision Making:
Identifying and selecting a course of action to solve specific
problems/ take advantage of opportunities.Exploiting opportunities
leads to progress and problem solving leads to normality.Elements
of Decision making:Time Human RelationsProcess of Decision
MakingNature of Managerial DecisionsThe Rational/Classical Model4
step modelUsed in making non-programmed decisionsWeigh the
alternatives, calculate optimal levels of risk and chose the one
with the best chance to win.Assumption: There is an obvious
solution already existing
Rational Model of Decision MakingAssumptions:Problem
clarity.Known options.Clear and constant preferences.No constraint
of cost and time. Maximum payoffs.Rational Model of Decision
MakingBounded Rationality: Managers make the most logical decisions
they can within the constraints of limited info and
ability.Satisfice:Accept the first satisfactory decision the
manager uncovers.Effective manager learns to satisfice with a clear
sense of goals for the org.
The Administrative/Bounded Rational ModelCognitive
BiasesHeuristic Principle (rules of thumb):Managers proceed along
the empirical lines/thumb rules to find solutions or
answers.Heuristics can lead to systematic errors and cognitive
biases.Sources of biases:Prior hypothesis: tendency to base
decisions on strong prior beliefsRepresentativeness: tendency to
generalize inaptly from small sample or single event
occurrenceIllusion of control : tendency to overestimate ones own
ability to control activities and events.Escalating commitment:
tendency to commit additional resources to a projectThank
you!!!
