The job of a manager

Decision Making

Meaning of Decision makingDecision making is the process of choosing

a particular course of action from among the alternatives available. It involves judgement.

Decision making is a process of responding to a problem by searching for and selecting a solution or course of action that will create value for organizational members.

The objectives of decision making is to achieve an organizational goals or to solve a problem.

Types of ProblemsStructured problems • Involved goals that clear.• Are familiar(have occurred before)• Easily and completely defined-

information about the problem is available.

Unstructured Problems • Problems that are new or unusual • Goals are not clear.• Information is ambiguous or incomplete.

Types of DecisionsThere are basically two kinds of decision

that managers called upon to make: Programmed and Non-programmed Decision

Programmed decision• Programmed decision is a repetitive

decision the can be handled by a routine approach.

• They are relatively structured and information are available and complete. Here a manager makes a decision once and he uses that decision again and again.

• Examples:

Non-programmed decisionsNon programmed decisions are used for

non- routine matters of an organization. They are unique in nature and every

situation requires special attention. Non- programmed decisions are those

decisions that are relatively unstructured and occurs much less often than a programmed decisions.

Examples:

Programmed Versus Non-Programmed Decision Making

Characteristic

s

Programmed

decisions

Non- Programmed

Decision

Type of problem Structured Unstructured

Managerial

level

Lower Level Upper Level

Frequency Repetitive New, unusual

Information Readily

available

Ambiguous or

incomplete

Time frame Short Relatively long

The Decision making processStep 1: Identify the problem:

Decision making process starts with identification of the problem. Problem is the differences between the actual and desired situation.

Step 2: Develop alternative solutions: In this step managers developed alternative solutions of the problem.

The Decision making process

They can develop alternative solution in the following ways-Brain stormingTalk to the staff membersTalk to major customersStudy hardAllow subordinates to participate in a

decision making process

The Decision making processStep 3:Evaluate alternative

solutions: Once managers have developed a set of alternatives, they must evaluate each one on the basis of three questions-

Is this alternative feasible?Is the alternative provide a satisfactory

solution?What are the possible consequences for

the rest of the organization?

The Decision making processStep 4 :Make a choice: Making a choice is

not a easy task, it is the most complex task. It is one of the most difficult part of the decision making process. Managers can use following factors as a guideline in making a decision-Concentrate on differencesIdentify must and shouldNo compromise with mustRelate resource requirement to resource

availableConsider time as a great factors

Characteristics of Effective decision makingIt is logical and consistent.It requires only as much information and

analysis as is necessary to resolve a particular dilemma.

It is straightforward,Reliable, Easy to use and understandFlexible.  

Risk involved in decision making

Decision making is undoubtedly a risky job on the part of a manager. But all decisions are not equally risky. From the point of involvement of risk, decision making may be of following types:

Decision making under conditions of certainty: In a situation involving certainty, people are reasonably sure about what will happen when they make decision.

Here the risk of the manager is minimum.A manager is making decisions under

conditions of certainty when the following conditions are fulfilled:

Risk involved in decision making1. Information available to make a decision are

sufficient.2. Outcome of a decision may be predicted with

a fair amount of certainty. Decision making under conditions of

Risk:In risk situation, a factual information may exist, but it may be incomplete.

Here risk of the manager is moderate. A manager is making decision under conditions of risk when the following conditions are fulfilled:

1. Information available is not sufficient2. Outcome of the decision may only be guessed

Risk involved in decision makingDecision making under Uncertainty: In

a situation of uncertainty, people have only information, but they do not know whether or not the data are reliable and they are very unsure about whether or not the situation may change.

Here the risk of the manager is the highest. A manager is mainly making decision under conditions of uncertainty when the following conditions are fulfilled:

1.Very little of no information are available2.Outcome is unpredictable.