Transcript Introduction - Lets Start Thinking

Decision Making:
The Essence of Managers’
Job
by Muhammad Iqbal Malik
Key Topics
 Introduction
 The Decision-making process
 Decision-making models
 Decision Styles
 A discussion on Group Decisions
Part I
Introduction
Organizations
 Organizations are systems
 Involve people, structure and a
common purpose
 Have limited resources
 Need to perform a series of functions
to meet its objectives
Managers
 Managers are responsible for effective
and efficient execution of these
organizational functions.
 A typical manager performs a number
of functions that are categorized as:
• Interpersonal
• Informational
• Decisional
Managers
One of the key traits that distinguish
managers from operatives is the ability to
make independent decisions.
Part II
Decision-making
What is decision-making?
The word decision is defined as:
“A choice between two or more
alternatives”.
Thus decision-making can be defined as:
“the selection of a course of action from
among alternatives ”.
Decision-making Process
 Identifying a problem
 Identifying decision criteria
 Allocating weights to criteria
 Developing alternatives
 Analyzing alternatives
 Selecting an alternative
 Implementing the alternative
 Evaluation (of decision effectiveness)
Problem Definition
Problem is a discrepancy (difference)
between an existing and a desired state.
Example:
“The manager has resigned, and we need
another manager”
Here the phrase “manager has resigned”
reflects the current state while “need
another manager” represents a desired
state.
Identifying Decision Criteria
The word criteria, is defined as “a
standard by which something can be
judged”.
A decision criteria therefore, is the basis
of a decision, which outlines the relevant
and important factors for a decision. And
implicitly, it also defines what is not
important.
Decision Criteria: Example
In the above-cited scenario, the decision
criteria may include the following factors:
 Relevant qualifications
 Leadership skills
 Communication skills
 Planning and analytical skills
 Professional experience
Allocating Weights to Criteria
 The next step in the decision making
process is prioritization.
 Prioritization is achieved by assigning
quantitative weights to each criteria
element.
 The weightage defines the relative
significance of each element.
Allocating Weights: Example
Criterion
Weight
Relevant qualifications
3
Leadership skills
5
Communication skills
3
Analytical skills
4
Professional experience
1
Developing Alternatives
 Involves defining the possible
alternatives (or choices) that would
resolve the problem.
 In our case, the alternatives would be
a list of candidates or job applicants.
Analyzing Alternatives
 Alternatives are rated and analyzed
on the basis of the criteria
 The rating can be based on a specified
scale, say 1 – 5 etc.
 Rating may be subjective in nature
and thus,may depend on the judgment
of the individual(s)
Criteria Rating: Example
CANDIDATES RATING AND ASSESSMENT
Candidate
Qualification
Leadership
Communication
Analysis
Experience
Kamran Ashraf
3
3
3
1
1
Rahila Mushtaq
2
1
4
2
2
Tasaduq Hussain
4
2
3
2
3
Zubair Ahmed
2
5
2
4
1
Maliha Javed
4
5
4
3
2
Analyzing & Assessment:
Example
EVALUATION OF CANDIDATES
Candidate
Qualification
Leadership
Communication
Analysis
Experience
Total
Kamran Ashraf
9
15
9
4
1
38
Rahila Mushtaq
6
5
12
8
2
33
12
10
9
8
3
42
Zubair Ahmed
6
25
6
16
1
54
Maliha Javed
12
25
12
12
2
63
Tasaduq Hussain
Selecting an alternative
 Involves choosing the best alternative,
based on the above rating and analysis
 Generally implies selecting the
alternative with the highest score.
Implementing the Alternative
 Putting the decision into action
 Involves clear communication of the
decision to all concerned and obtaining
their commitment
Evaluation
 Evaluation forms an integral part of
any process
 Involves evaluation of the outcome
based on the desired goal and criteria
 Involves assessing the effectiveness
and efficiency of the outcome (or the
entire process)
 In case of any undesired results, each
step of the process is carefully
reviewed to trace the root causes
Decision-making Models
Model
“A simplified representation or description
of a system or complex entity”
Examples
 A model of a building
 A globe (Earth model)
Rational/Bounded Rational
So Rational and Bounded Rational Models
are cognitive models that describe how
managers make rational decisions
The Rational Model
1. Define and
diagnose the
problem
7. Follow up
and control
2. Set goals
External and
internal
Environ. forces
3. Search for
alternative
solutions
6. Implement
the solution
selected
5. Choose 4. Compare
among
and evaluate
alternative
solution
solutions
Rational Model: Assumptions
 Clear and unambiguous problem
 Single, well-defined goal
 All alternatives are known
 Clear preferences (ranking criteria)
 Constant/stable preferences
 No time or cost constraints
 Decision will maximize payoff
Rational Model: Criticism
 Not all decisions made on rational
basis
 Most problems, goals and preferences
are not clear or well defined
 Not practical to know all possible
alternatives
 Time and cost constraints exist in all
practical problems
 Result not maximized in most cases
Bounded Rational: Assumptions
 Limited set of criteria
 Self-interest influences ratings
 Limited no. of alternatives
 Alternatives are assessed one at a
time till a satisficing (or good
enough) alternative is found
 Politics influences acceptance and
commitment of decision
Intuition
An unconscious process of making
decisions on the basis of experience and
judgment
Intuition
 Involves gut feeling
 May also have rational basis
 The “feeling” arises from past
experience and knowledge
 Involves quicker response
 Does not involve systematic analysis
Decision Types
Effective managers make various kinds of
decisions. In general, these decisions are
either
 Programmed decisions
 Non-programmed decisions
Programmed Decisions
 A decision that is repetitive and routine
 A definite method for its solution can
be established
 Does not have to be treated a new
each time it occurs
 Procedures are often already laid out
 Examples: pricing standard customer
orders, determining billing dates,
recording office supplies etc.
Non-programmed Decisions
 A decision that is novel (new or
unique) or Ill structured
 No established methods exist, because
it has never occurred before or
because
 It is too complex
Non-programmed Decisions
Organizational
Levels
Nature of
Problems
Nature of
Decision-making
Non-programmed Decisions
 Are “tough” decisions that involve risk
and uncertainty and
 call for entrepreneurial abilities
 Such decisions draw heavily on the
analytical abilities of the manager
 Examples: Moving into a new market,
investing in a new unproven
technology, changing strategic direction
Decision Styles
 Decision-making, though a rational
process does include some subjective
elements
 Thus in real organizational settings, the
quality of decision does depend on the
ability, style and approach of the
manager
Decision Styles: Directive
Directive
 Represents low tolerance for
ambiguity and uncertainty
 Reflects rational thinking of the
manager
 Such decision styles are more suitable
for routine procedural tasks
Decision Styles: Analytic
Analytic
 Analytical style is also a rational style
of thinking
 Involves a very high tolerance for
ambiguity and uncertainty
 Such managers generally seek detailed
information before making a decision
Decision Styles: Behavioural
Behavioural
 Represents a creative way of thinking
 Involves a low tolerance for
ambiguity or uncertainty
 Managers with a behavioural style
introduce “new” ways of doing things
Decision Styles: Conceptual
Conceptual
 Conceptual style also reflects a
creative and intuitive way of thinking
 Conceptual style managers have a very
broad vision and generally look at
numerous alternatives for decisionmaking
 Focused on the long run and often
result in creative outcomes or
alternatives
Vroom and Yetton Model
Vroom and Yetton have identified five
decision styles for managers, and are
classified as follows:
Autocratic
AI
The decision is made individually, using
the information available to the individual
only
Vroom and Yetton Model
AII
 The manager obtains information from
subordinates and himself makes the
decision
 May or may not share with
subordinates, the purpose of questions
or the nature of problem
 Subordinates do not play any role in
problem definition or selection of
alternatives
Vroom and Yetton Model
Consultative
CI
 The manager shares the problem with
relevant subordinates individually
 Getting their input individually and
not as a group. The manager then
makes the decision independently,
and may or may not be influenced by
the subordinates’ suggestions
Vroom and Yetton Model
CII
 The problem is shared to subordinates
in a group
 Their ideas and suggestions are sought
in a group meeting
 The decision is then made by the
manager which
 May or may not reflect the
subordinates’ influence
Vroom and Yetton Model
Group Consensus
GI
 The problem is shared to subordinates
as a group
 Alternatives are generated and
evaluated collectively
 Effort is made to reach a consensus
Vroom and Yetton Model
GI (Contd.)
 The decision is made collectively and
the manager functions as a coordinator
 Does not “press” the group in adopting
the manager’s “solution”
 The manager is willing to accept and
implement the decision of the group
Group Decision-making
The factors requiring group decisions
include:
 Involving sensitive issues
 High cost alternatives
 Involving very high risk factor
 Strategic impact
Group Decisions: Advantages
 Acceptance of group members
 Coordination is easier
 Communication is easier
 Existence of large alternatives
 More information can be processed
 Diversity of experience and
perspectives
Group Decisions: Disadvantages
 Take longer time
 Group can be indecisive
 Groups can compromise
 Groups can be dominated
 Groups can “play games”
 Victim to Groupthink
Situational Factors for
Individual Decision-making
 Short time
 Unimportant to group
 Manager can take decision
 Dominate the decision
 Destructive conflict
 Members hesitant
Situational Factors for
Individual Decision-making
 Confidential data
 Incapability of members
 Manager’s dominance
 Indirect effect on group members
Situational Factors for
Group Decision-making
 Need for innovation and creativity
 Data collection
 Importance of acceptance
 Importance of solution
 Complex problem
 Democratic process
Situational Factors for
Group Decision-making
 Risk taking solution needed
 Better understanding
 Whole responsibility
 Feedback required
Improving Group
Decision-making
 Brainstorming
 Nominal group techniques
 Electronic meeting