Decision Making

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It's NOT hard to make decision when you know what your VALUES are.

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Decision Making : How To Be Better and Faster www.humanikaconsulting.com

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Contents • What are some of the current issues in decision making • What is the decision-making process in organizations • Effective decision making • When do decisions need to be made • Choose the appropriate strategy • How do intuition judgment and creativity affect decision making • The decision making process • Gather the facts • Identify alternatives • Assess the alternatives • Decide • Helpful hints • Decision making behaviour • Decision making approaches • Consensus decision making • When to use which decision making method • How to conduct a consensus decision making session • Further assistance

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What are some of the current issues in decision making  Workplace trends affecting organizational decision makers. – Business units are becoming smaller in size. – New more flexible and adaptable organizational forms. – Multifunctional understanding is increasingly important. – Workers with both technical knowledge and team skills are increasingly desirable. – The nature of “work” is in a state of flux.

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What are some of the current issues in decision making  Information technology and decision making. – Artificial intelligence is the study of how computers can be programmed to think like human beings. – Expert systems support decision making by following “either-or” rules to make deductions. What are some of the current issues in decision making

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 Information technology and decision making cont.. – Fuzzy logic and neural networks reason inductively. – Computer support for decision making. – Information technology does not deal with issues raised by the garbage can model. What are some of the current issues in decision making

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What are some of the current issues in decision making  Cultural factors and decision making. – Culture is “the way in which a group of people solves problems.” – North American culture stresses decisiveness speed and the individual selection of alternatives. – Other cultures place less emphasis on individual choice than on developing implementations that work. – The most important impact of culture on decision making concerns which issues are elevated to the status of problems solvable within the firm. What are some of the current in decision making

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How do you infuse ethics into the decision-making process  Ways to infuse ethics into decision making. – Develop a code of ethics and follow it. – Establish procedures for reporting violations. – Involve employees in identifying ethical issues. – Monitor ethical performance. – Reward ethical behavior. – Publicize ethical efforts.

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How do you infuse ethics into the decision-making process  Morality is involved in: – Choosing problems. – Deciding who should be involved in making decisions. – Estimating the impacts of decision alternatives. – Selecting an alternative for implementation.  An effective decision needs to solve a problem as well as match moral values and help others.

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What is the decision-making process in organizations  Decision making is the process of choosing a course of action for dealing with a problem or opportunity.  Steps in systematic decision making. – Recognize and define the problem or opportunity. – Identify and analyze alternative courses of action and estimate their effects on the problem or opportunity. – Choose a preferred course of action. – Implement the preferred course of action. – Evaluate the results and follow up as necessary.

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What is the decision-making process in organizations  Certain decision environments. – Exist when information is sufficient to predict the results of each alternative in advance of implementation.  Risk decision environments. – Exist when decision makers lack complete certainty regarding the outcomes of various courses of action but they are aware of the probabilities associated with their occurrence.

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What is the decision-making process in organizations  Uncertain decision environments. – Exist when managers have so little information on hand that they cannot even assign probabilities to various alternatives and their possible outcomes. – Described as a rapidly changing setting in terms of: • External conditions. • The information technology requirements needed for analyzing and making decisions. • The people who influence problem and choice definitions.

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What is the decision- making process in organizations  Uncertain decision environments cont.. – Can be described in terms of types of risks encountered by the organization. • Strategic risks are threats to overall business success. • Operational risks are threats inherent in the technologies used to reach business success. • Reputation risks are threats to a brand or to the firm’s reputation

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What is the decision- making process in organizations  Types of decisions. – Programmed decisions. • Involve routine problems that arise regularly and can be addressed through standard responses. – Nonprogrammed decisions. • Involve nonroutine problems that require solutions specifically tailored to the situation at hand.

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In decision making A major activity of management is the making of decisions. Decisions need to be timely. There are times when a decision has to be made. Even if it turns out not to be the best decision it can be better than not making a decision at all. Decisions often have to be made when there is insufficient information. Decisions involve taking risks. Effective decision making involves gathering what information is known identifying the options assessing the risks and making the best decision with the information available in a timely manner.

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When do decisions need to be made • Selecting external suppliers • Handling disagreements and conflict resolution • Scheduling work and allocating resources to tasks • Managing meetings Situations include: • Determining the project strategy/approach • Resolving project issues • Developing estimates • Making purchases • Interviewing and selecting project team members

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Choose the appropriate strategy High importance Risks/Impacts/Costs are major Low importance Risks/Impacts/Costs are minor Urgent decision required No time for detailed analysis so use considered judgement or consult an expert. A quick decision can be made with minimal analysis. No urgency on making decision Conduct detailed analysis Defer or delegate decision When making a decision it is useful to determine what type of decision it is and the appropriate strategy to follow. Focus time on important decisions don’t waste time on unimportant decisions.

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How do intuition judgment and creativity affect decision making  Intuition. – The ability to know or recognize quickly and readily the possibilities of a given situation. – A key element of decision making under risk and uncertainty.

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How do intuition judgment and creativity affect decision making  Judgmental heuristics. – Simplifying strategies or “rules of thumb” used to make decisions. – Make it easier to to deal with uncertainty and limited information.

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How do intuition judgment and creativity affect decision making  Types of heuristics. – Availability heuristic. • Bases a decision on similarity to past occurrences that are easily remembered. – Representativeness heuristic. • Bases a decision on similarities between an event and stereotypes of similar occurrences. – Anchoring and adjustment heuristic. • Bases a decision on incremental adjustments to an initial value determined by historical precedent or some reference point.

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How do intuition judgment and creativity affect decision making  General judgmental biases in decision making. – Confirmation trap. • The tendency to seek confirmation for what is already thought to be true and to not search for disconfirming information. – Hindsight trap. • The tendency to overestimate the degree to which an event that has already taken place could have been predicted.

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How do intuition judgment and creativity affect decision making  Stages in the creative thinking process. – Preparation. – Concentration. – Incubation. – Illumination – Verification.

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How do intuition judgment and creativity affect decision making  Ways of fostering creativity. – Diversifying teams to include members with different backgrounds training and perspectives. – Encouraging analogical reasoning. – Stressing periods of silent reflection. – Recording all ideas so that the same ones are not rediscovered. – Establishing high expectations for creativity. – Developing a physical space that encourages fun divergent ideas.

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Study Question 3: How do intuition judgment and creativity affect decision making  Creativity is higher when: – Linguistic ability willingness to engage in divergent thinking and intelligence are present. – Individuals are motivated by and derive satisfaction from task accomplishment. – There are opportunities for creativity as many constraints as possible are eliminated and rewards are provided for creative efforts.

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How do intuition judgment and creativity affect decision making  Creativity is higher when cont.: – The decision maker emphasizes engagement in the creative process and counsels individuals to share their ideas with others. – The decision maker encourages subordinates to recognize ambiguity contact others with different views and be prepared to make considerable changes.

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The decision making process 1. Gather the facts 2. Identify a number of alternatives 3. Assess the alternatives 4. Decide Four simple steps: Where quick decisions need to be made these steps can be done mentally “on the fly” or by one person. When time allows and the decision is important more people can be involved and a more thorough decision making process used.

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Gather the facts • Write down a statement of what needs to be decided. • Is the decision statement clear and precise If not refine the statement. • Is the need for the decision a result of an underlying problem which also needs to be addressed • Are there assumptions underlying the decision that need to be clarified and possibly challenged • Is the decision part of a bigger decision that needs to be made or can this decision be decomposed into smaller decisions Guidelines

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Identify alternatives • Identify as many alternatives as possible. • Use brainstorming if appropriate. • Do not filter out alternative options at this stage - assume they can all be made to work. • When you have generated lots of ideas consider each one to see if it is a viable alternative. • Shortlist the viable alternatives. Guidelines

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Assess the alternatives • Write down the pros and cons of each alternative. • Identify the risks associated with each alternative. • Determine the impact of each alternative on other areas of the organisation. Consider the big picture. • Review the alternatives to determine if there is clearly a preferable choice. Guidelines

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Decide • Select the best alternative from those available. • Consider your “gut feel”. Instincts can often be right. • If the best alternative is not obvious draw up a table for the options. List the attributes that the options are to be assessed on. Assign points to each see example below • Make the decision and take action. Guidelines Attribute Repair option Replace option Comments Cost 2 0 Repair is a much cheaper option Warranty 1 2 Full warranty if replace partial only if repair Expected useful life 1 2 Extended by repair but not as long as if new Risk 1 2 Repair could damage other components new is less risky Functionality 0 1 Replacement has more features. Total 5 7 Replace is better option overall.

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Helpful hints • Do: – Clearly identify the decision to be made – Involve people qualified to help in the decision making – Identify the context of the decision the bigger picture – Identify all alternatives – Assess each alternative – Assess the risks – Consider your “gut feel” – Make the decision and stick to it  Don’t: – Make assumptions – Procrastinate – Jump to conclusions – Make uninformed decisions – Favour one decision prior to gathering the facts and evaluating the alternatives – Allow only technical people to make the decisions – Attempt to make a decision in isolation of the context – Let emotion override objectivity

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Decision making behaviour People tend to adopt a particular decision making approach as a result of factors such as: • their own personality • their current mood • the organisational culture • the personality of the person/people they are dealing with • the nature of the relationship they have with the people they are dealing with • time pressure and perceived level of stress Being aware of these influences can result in better decision making by adopting the best decision making approach for each situation.

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Decision making approaches Approaches to decision making situations: Adapted from D Billows Project Manager’s KnowledgeBase 2 nd edition 2004 The Hampton Group. • Withdrawing: holding off making the decision. • Smoothing: focusing on areas of agreement and ignoring areas of difference. • Compromising: trying to come up with a decision that provides some degree of satisfaction for all parties. • Confronting/problem solving: working through the issues. • Forcing: executing a particular decision knowing agreement has not been reached.

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Decision making approaches Withdrawing: • Withdraw to gather more information and perspective • Only a stop gap measure • Useful in “cooling down” an overheated situation • Taking time out “sleep on it” before final decision Smoothing: • Relationship focused rather than solution focused • Avoids dealing with the issues • Can be useful in reducing the emotional tension where the decision is of low importance. • Does not provide a long-term solution Skilled project managers and business analysts select the best approach appropriate to the situation.

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Decision making approaches Confronting/problem solving: • Direct approach • Identifies alternatives and works through the issues • Time-consuming • Most likely method to develop the best solution Forcing: • Used when an urgent decision is required or as a last resort • Necessary for situations when decision making is blocked • May result in reluctance in execution of decision if not handled well. Compromising: • Bargaining to get an acceptable agreement • Falls short of the best decision • Can be useful in resolving negotiation deadlocks

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Consensus decision making Consensus decision making is the process of involving a group of stakeholders in the making of a decision such that even though some of the participants may not agree with the decision that is made they all accept the decision. Consensus decision making is more time-consuming than unilateral decision making but does have the added benefit of building commitment to the decision that is made. Consensus decision making should make use of the confronting/problem solving approach and avoid resorting to compromising or forcing.

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When to use consensus decision making Unilateral Consensus • Decision is minor or urgent • Does not affect the overall team • There are issues of confidentiality • Suggestions of alternatives are needed • The decision can have a significant impact on the team • The team need to action the decision • There is sufficient time to organise a meeting to work through the decision

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How to conduct a consensus decision making session… 1. Provide a brief of what decision needs to be made and what information is already available. Gather additional facts. 2. Identify the alternatives. 3. Assess the alternatives allowing all opinions and concerns to be raised. Use a round robin technique. 4. Identify common areas of agreement 5. Identify the differences and work through them 6. Measure consensus 7. State the final agreed-upon decision. Round robin is where each of the participants in a meeting is asked in turn for their opinion. It ensures that the quieter members of the group have a chance to express their views. Consensus can be measured by people raising one hand and showing the number of fingers to indicate level of agreement from one finger for low level of consensus through to open hand for full consensus. Do not hold a vote because this splits the team into winners and losers.

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Further assistance • Guide to Problem Solving • Guide to Brainstorming For additional supporting guides see

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