Decision Making :Decision Making Business is sum total of several decisions. Good decision Vs Bad decision All the individuals at all the levels take decision. Decision- when to take dinner? It is a routine and easy decision, can be handled easily, not taking long time or is complex. Quality of managerial decision has a major influence on organizational success or failure.


Decision Making :Decision Making Decision: A choice from two or more alternatives. Decision making is every manager’s favorite job. For example: Top level managers make decisions about their organizational goals, where to locate manufacturing facilities, what new market to enter, what products or services to offer. Middle & lower level managers make decision about setting weekly or monthly production schedule, sales target, handling problem that arise, selecting and disciplining employees.


The Decision Making Process :The Decision Making Process A comprehensive, 8-step process Step 1- Identifying a Problem Problem A discrepancy between an existing and desired state of affairs. Characteristics of Problems A problem becomes a problem when a manager becomes aware of it. There is pressure to solve the problem. The manager must have the authority, information, or resources needed to solve the problem.


The Decision-Making Process :The Decision-Making Process Problem Identification “My salespeople 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 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 © Prentice Hall, 2002


The Decision Making Process :The Decision Making Process Step 2- Identifying Decision Criteria Decision criteria are factors that are important (relevant) to resolving the problem. Costs that will be incurred (investments required) Risks likely to be encountered (chance of failure) Outcomes that are desired (growth of the firm) Step 3- Allocating Weights to the Criteria - Decision criteria are not 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.


The Decision Making Process :The Decision Making Process Step 4- Developing Alternatives Identifying viable alternatives Alternatives are listed (without evaluation) that can resolve the problem. Step 5- Analyzing Alternatives The decision maker critically analyze each alternative against the criteria established in step 2 & 3. Strengths and weaknesses of each alternative become evident because of this comparison.


Assessed Values of Notebook Computer Alternatives Against Decision Criteria :Assessed Values of Notebook Computer Alternatives Against Decision Criteria © Prentice Hall, 2002 6-7


Evaluation of Laptop Computer Alternatives Against Criteria and Weights :Evaluation of Laptop Computer Alternatives Against Criteria and Weights © Prentice Hall, 2002 6-8


The Decision Making Process :The Decision Making Process Step 6- Selecting an Alternative - Choosing the best alternative - The alternative with the highest total weight is chosen. Step 7- Implementing the Alternative Putting the chosen alternative into action. Participation in decision-making process inclines people to support the decision - Decision may fail if it is not implemented properly 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 resolved, what went wrong? Evaluation of all the steps.