DECISION MAKING

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Slide 1: 

1 By: Kira n Nalluri, Vishal Arogya Sampat. kk.nalluri@gmail.com Decision Making

Introduction : 

2 Introduction Please introduce yourself by answering the following items: Your name, age and work experience The most important decision you have taken in your life How did you take this decision?

Importance of decision making: : 

3 Importance of decision making: "Somewhere along the line of development we discover what we really are, and then we make our real decision for which we are responsible. Make that decision primarily for yourself because you can never really live anyone else's life." Eleanor Roosevelt

By the end of this session you will: : 

4 By the end of this session you will: understand decision making and its importance in managerial situations, know the factors affecting the difficulty level of decisions be able to appreciate the different styles of decision making, learn the steps in the decision making process be able identify common biases and errors during decision making, understand the need, strength & weaknesses of group decision making learn different techniques of group decision making

Decision & Decision Making : 

5 Decision & Decision Making Decision is a judgment that affects a course of action. It necessarily involves choices from two or more alternatives Decision Making is the process of identifying a set of feasible alternatives and from these, choosing a course of action Decision making is not easy because: It must be done amid ever-changing factors conflicting points of view unclear information limited resources like time, men, money & material In the Misery of Indecisiveness

When decisions are needed : 

6 When decisions are needed The current state of affairs has fallen short of a goal or ideal. A problem or crisis may arise that requires managerial action. An opportunity may present itself. In order to maintain the status quo. There is a need to be proactive as managerial entrepreneurs.

Role of decisions in a manager’s life : 

7 Role of decisions in a manager’s life

Factors affecting difficulty level of decisions : 

8 Factors affecting difficulty level of decisions

Slide 9: 

9 Factors affecting difficulty level of decisions Certainty all the information the decision maker needs is fully available Risk decision has clear-cut goals good information is available future outcomes associated with each alternative are subject to chance Uncertainty managers know which goals they wish to achieve information about alternatives and future events is incomplete managers may have to come up with creative approaches to alternatives Ambiguity by far the most difficult decision situation goals to be achieved or the problem to be solved is unclear alternatives are difficult to define information about outcomes is unavailable Termination of an employee who has been caught red-handed while stealing things from office. HR manual has recommended termination for such offences. Disciplinary action against an employee who has been alleged to have stolen cash from office. Eye witness evidence is available. Employee is Union Office Bearer. HR manual has recommended alternative punishments for such offences. Disciplinary action against an employee who has been alleged to have stolen cash from office. There is no mention of any course of action for such instances in the HR manual. Lot of unaccounted for cash has been stolen from the office. There is no clue as to how it has happened. Police complaint would lead to issues of tax evasion. No one knows how the owner will react to this. If the cash is not organized the monthly salary of employees will be on hold.

Decision Making Process : 

10 Decision Making Process

Slide 11: 

Example of Decision-Making Process Problem Identification “My employees need new computers” Identification of Decision Criteria Price Weight Warranty Screen type Reliability Screen size Allocation of Weights to Criteria Reliability 10 Screen size 8 Warranty 5 Weight 5 Price 4 Screen type 3 Development of Alternatives Acer Compaq Gateway HP Micromedia NEC Sony Toshiba Implementation of an Alternative Purchase of Gateway Evaluation of Decision Effectiveness Analysis of Alternatives Acer Compaq Gateway HP Micromedia NEC Sony Toshiba Selection of an Alternative Acer Compaq Gateway HP Micromedia NEC Sony Toshiba

Styles of decision making : 

12 Styles of decision making Autocratic I—manager makes decision, seeks no input Autocratic II—manager makes decision, asks for input Consultative I—manager makes decision after consulting with individuals in the group Consultative II—manager makes decision after consulting with the group Group—manager accepts group input and implements plan or decision agreed to by group

Which style when? : 

13 Which style when? Turn to page 3 of your reading material. Divide yourself into 7 groups. Discuss the situation corresponding to your group No. and create a managerial example for the same. One member of the group will present the example to the rest of the class.

Common biases & errors during DM : 

14 Common biases & errors during DM Overconfidence Bias Believing too much in our own decision making competencies. Anchoring Bias Fixating on early, first received information. Confirmation Bias Using only the facts that support our decision. Availability Bias Using information that is most readily available at hand.

Common biases & errors during DM : 

15 Common biases & errors during DM 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. Hindsight Bias Falsely believing to have accurately predicted the outcome of an event, after that outcome is actually known.

Need for group decision making : 

16 Need for group decision making Large groups facilitate the pooling of information about complex tasks. Smaller groups are better suited to coordinating and facilitating the implementation of complex tasks. Simple, routine standardized tasks reduce the requirement for group decision making.

Why & why not group decision making : 

17 Why & why not group decision making Strengths More complete information Increased diversity of views Higher quality of decisions (more accuracy) Increased acceptance of solutions Weaknesses More time consuming (slower) Increased pressure to conform Domination by one or a few members Ambiguous responsibility

Barriers to group decision making : 

18 Barriers to group decision making Groupthink Phenomenon in which the norm for consensus overrides the realistic appraisal of alternative course of action. Groupshift A change in decision risk between the group’s decision and the individual decision that member within the group would individually make. It can be either toward a very cautious approach or much greater risk.

Barriers to group decision making : 

19 Barriers to group decision making Group members rationalize any resistance to the assumptions they have made. Members apply direct pressures on those who express doubts about shared views or who question the alternative favored by the majority. Members who have doubts or differing points of view keep silent about misgivings. There appears to be an illusion of unanimity.

Techniques of group decision making : 

20 Techniques of group decision making Interacting Groups Typical groups, in which the members interact with each other face-to-face. Nominal Group Technique A group decision-making method in which individual members meet face-to-face to pool their judgments in a systematic but independent fashion. Brainstorming An idea-generation process that specifically encourages any and all alternatives, while withholding any criticism of those alternatives. Electronic Meeting A meeting in which members interact on computers, allowing for anonymity of comments and aggregation of votes.