2. Decision Making
• ― the process of responding to a problem by searching
and selecting a solution or course of action‖.
• There are basically two kinds of decision that are called
upon to make:
Programmed and non-programmed
Page 2
3. Types of Problems and Decisions
• Structured problems
* Involve clear goals.
*Are familiar (have occurred
before)
*Are easily and completely
defined- information about the
problem is available and complete.
• Programmed decision
*A repetitive decision the can be handled by a
routine approach.
Page 3
4. • Unstructured problems
* Problems that are new or unusual and for which
information is ambiguous or incomplete.
* Problems that will require custom-made
solutions.
• Non-programmed decisions
* Decision that are unique and non-recurring.
* Decision that generate unique responses.
Page 4
5. Vitals of Decision making process
• Policy
• a general guideline for making a decision about a
problem.
• Procedure
* A series of interrelated steps that decision maker
can use to respond ( applying a policy) to a problem.
• Rule
* an explicit statement that limits what can or cannot
be done.
Page 5
6. The Decision-
Making Process
Define the Evaluate Implement the
Problem Alternatives chosen Alternative
Gather facts and Select the best Follow up and
develop alternative. evaluate the chosen
alternatives. alternative.
Page 6
7. Decision Making Process
• Identifying Problem
• Identifying Decision Criteria
• Allocating Weights to the Criteria
• Developing Alternatives
• Analyzing Alternatives
• Select Alternatives.
• Implement Alternatives.
• Evaluating decision’s effectiveness.
Page 7
8. Step 1: Identifying the Problem
* A problem becomes a problem when
someone becomes aware of it.
* there is always a pressure to solve the
problem.
* the person must have the
authority, information, or resources
needed to solve the problem.
Page 8
9. Step 2: Identify the Decision Criteria
• Decision criteria are factors that are
important ( relevant) to resolving the
problem.
* Costs that will be incurred (investment
required).
* Risks likely to be encountered ( chance
of failure).
* Outcomes that are desired ( growth of
the firm).
Page 9
10. Step 3: Allocating Weights to the
Criteria
• Decision criteria is of equal importance:
* Assigning a weight to each item.
* Places the items in the correct priority
order of their importance in the decision
making process.
Page 10
11. Step 4: Developing Alternatives
• Identifying viable alternatives.
* Alternatives are listed ( without
evaluation) that can resolve the problem.
Page 11
12. Step 5 :Analyzing alternatives
• Appraising each alternative’s
strengths and weaknesses
* An alternative’s appraisal is based
on its ability to resolve the issues
identified
Page 12
13. Step 6: Selecting the alternative
• Choosing the best
alternative
* The alternative with the
highest total weight is chosen.
Page 13
14. Step 7: Implementing the
Alternative
• Putting the decision to and gaining
comment from those whose will carry
out the decision.
Page 14
15. Step 8: Evaluating the decision’s
effectiveness
• The soundness of the decision
is judged by its outcomes.
* How effectively was the problem
resolved by outcomes resulting from
the chosen alternatives?
* if the problem was not resolve, what
went wrong?
Page 15
16. Intuition
* It is making decisions on the
basis of experience, feelings, and
accumulated judgment.
Page 16
17. Decision Making Conditions
• Certainty
* A situation in which someone can make
an accurate decision because the
outcome of every alternative choice is
known.
• Risk
* A situation in which the someone is able
to estimate the likelihood (probability) of
outcomes that result from the choice of
particular alternatives.
Page 17
18. • Uncertainty
* limited information prevents estimation of
outcome probabilities for alternatives
associated with the problem and may force to
rely on intuition, hunches, and ―gut feelings‖.
# Maximax: The optimistic person’s choice to
maximize the maximum outcome.
# Maximin: The pessimistic person’s choice to
maximize the minimum outcome.
# Minimax: The choice to minimize maximum
regret.
Page 18
19. Types of Decision Makers
* Directive
# Use minimal information and consider few
alternatives.
* Analytic
# Make careful decisions in unique situations.
* Conceptual
# Maintain a broad outlook and consider many
alternatives in making decisions.
* Behavioral
# Avoid conflict by working well with others and
being receptive to suggestions.
Page 19
20. Rational (Logical) Decision Model
Steps
Scanning the situation—identifying a signal that a
decision should be made.
Classify the decision as routine, apply the
appropriate decision rule; as non-
programmed, begin comprehensive problem
solving.
Monitor and follow-up as necessary.
Page 20
21. Trends in Decision Making
– The pace of decision
making is accelerating:
more decisions to make
and have less time to make them.
• Complex streams of decisions
• Sources of decision complexity
• Perceptual and behavioral decision traps
Page 21
22. Dealing with Complex Streams
of Decisions
– Multiple criteria to be satisfied by a decision.
– Intangibles that often determine decision
alternatives.
– Risk and uncertainty about decision alternatives.
– Long-term implications of the effects of the
choice of a particular alternative.
– Interdisciplinary input increases the number of
persons to be consulted before a decision is made.
Page 22
23. – Pooled decision making increases the
number of persons playing a part in the decision
process.
– Value judgments by differing participants
in the process create disagreement over
whether a decision is right or wrong, good or
bad, and ethical or unethical.
– Unintended consequences occur because
the results of purposeful actions cannot always
be predicted.
Page 23
24. Guidelines for effective
decision making
Categorical interpretation- the problem should be
defined properly.
Application of limiting factor- limiting factor
should be taken into account in order to analyze
Adequate information- more quantity of reliable
information leads to effective decision making.
Considering other views- various views at the
same point are taken into account for quality
decision.
Timeliness- decision should be ,made at proper
time to meet the competitive advantages.
Page 24
25. Techniques improving decision
making
Brainstorming – idea generation for decision
making.
Nominal group technique (NGT)- problem
outlined, presentation of solution in written
form, discussion over written solutions, and final
decision.
Delphi technique- decision made on the basis of
questionnaire filled by the respondents.
Consensus mapping- decision made on the basis
of the report presented by the representative of
each group after Page 25
