Transcript Decision-Making Process and Its Implementation

Decision-Making Process
and Its Implementation
Decision Making.
Decisions are processes by which a manager seeks to
achieve some desired state. They are means rather
than ends. Making a decision involves making a
choice between the alternatives. Decisions could be
a) engineering or scientific or b) management
Decision making is the sequential process of thought
and deliberation that results in a decision.
The process of decision making is same in both the
types of decisions and involves a) defining the
problem b) gathering facts related to the problem c)
comparing these with right or wrong criteria based
on knowledge and experience and then taking the
best course of action
Management decision making a more of an art than a
science.
Management
Level
Management decisions are tough because
management problems are wider in scope and they
are related to human behavior which is most
unpredictable.
Management decisions could be either a) programmed
or b) Non programmed.
While Programmed decisions are repetitive and
routine in nature and provide solutions to structured
problems the Non programmed decisions are of non
routine or unique in nature and attempt to provide
solutions to complex and unstructured problems
Top
Broad, unstructured, infrequent, uncertainty
Middle
Both structured and unstructured
Lower
Frequent, structured, repetitive,
routine, certainty
Programmed decisions
Un Programmed decisions
A Categorization of Decision Characteristics
Category I Decisions
Category II Decisions
Classifications
Programmable; routine;
generic; computational;
negotiated; compromise
Nonprogrammable; unique;
judgmental; creative;
adaptive; innovative; inspirational
Structure
Procedural; predictable;
certainty regarding
cause/effect relationships;
recurring; within existing
technologies; well-defined
information channels;
definite decision criteria;
outcome preferences may
be certain or uncertain
Novel, unstructured,
consequential, elusive, and
complex; uncertain cause/
effect relationships; nonrecurring; information
channels undefined, incomplete information; decision
criteria may be unknown;
outcome preferences may
be certain or uncertain
Strategy
Reliance upon rules and
principles; habitual
reactions; prefabricated
response; uniform
processing; computational
techniques; accepted
methods for handling
Reliance on judgment,
intuition, and creativity;
individual processing;
heuristic problem-solving
techniques; rules of thumb;
general problem-solving
processes
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The origin of decision theory is derived
from economics by using the utility
function of payoffs. It suggests that
decisions be made by computing the utility
and probability, the ranges of options, and
also lays down strategies for good
decisions:
The Decision Process
The decision process
Identify & define
The problem
Gather
Information
Revise
Develop
alternatives
Evaluate
alternatives
Certainty
Risk
Uncertainty
Select
alternatives
Implement
decision
Evaluate
& control
The Decision Making Process
Map
The following map briefly describes each
phase of the decision making process and
the difficulties that decision makers have
in that phase.
 Decision makers, who are used to
depending on their past experiences, must
make decisions and take actions in the
rapidly changing world we face today.
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The Decision Making
Process Map
The Decision Making Process
Map
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In this turbulent environment, the ability
to successfully view the current situation
through the traditional "good judgment"
viewpoint is weakened through increasing
external noise (a multitude of information
sources on multiple topics) and changing
paradigms of how we think about social,
cultural, organizational and economic
issues, creating internal noise within our
prevailing mental models.
The Decision Making Process
Map
These noises skew our perception of what is
really happening in the world.
 In addition to facing this constant flux, leaders
are being asked to choose the path to the future
as well as to explain exactly how they plan to
get there.
 Before putting a stake in the sand, leaders begin
by developing and testing hypotheses about
possible scenarios, and then eliminate numerous
courses of action until a small set of viable
choices remain.
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The Decision Making Process
Map
Once the decision to act is made, the
communication of the new initiatives
begins.
 The results of these initiatives usually
produce some expected behavior, but
almost always, much to our surprise, our
actions produce unexpected behavior as
well, that once again changes our
situation. And so it goes…
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The Evaluation of Alternatives
The evaluation of alternatives is based on
alternative outcome relationship. The three
possible conditions are 1. Certainty 2. Risk and
3. Uncertainty
1. Certainty : The decision maker has a complete
knowledge of the outcome of each alternative.
2. Risk : The decision maker has some
probabilistic estimate of the outcome of each
decision. Condition of risk occurs when the
decision maker has enough information to
allow the use of probability in evaluating the
alternatives.
Probability of occurrence of an is event is the
expectancy of event happening.
Decisions with risk
Probability can be assigned based on
a. Logic or deduction: This is Objective probability.
This reflects the historical evidence. Ex.
Getting head/tail for a tossed coin. Or getting a
number on rolling dice etc.
b. Past experience is with empirical evidence.
c. Subjective estimate due to intelligence or
intuition.
When the decision maker has access to probability
information, the criterion for decision making is
to maximize s the expected value of the
decision.
Decisions under uncertainty
Uncertainty : The decision maker (dm) has
absolutely no knowledge of the probability of
outcome of each alternative.
When no information exists the personality
characteristics of the decision maker become
more important for determining which decision
is made. The following five characteristics
describe what most of the dm’s do.
a. Optimistic Decisions
b. Pessimistic Decisions
c. Realistic decisions.
d. Regret minimizing Decisions.
e. Insufficient Reasoner
3.
Criteria of Decision making
a.
Optimistic Decisions The DM think optimistically about
the event that influence decisions. They choose the
alternative that maximizes the outcome
b.
Pessimistic Decisions They believe that worst possible
outcome will occur no matter what they do. They estimate
the worst outcomes associated with each alternative and
select the best of these worst outcomes.
c.
Realistic Decisions. They take the middle path neither
optimistic nor pessimistic.
d.
Regret minimizing Decisions. They want to minimize
the dissonance they experience after the fact.
e.
Insufficient Reason Decisions. These are also called
eqi-probable decision maker. They assume that all the
possible outcomes have equal chance of occurring.
Factors influencing decision making
Individual differences influence the decision making
process. The four individual differences which have
a significant impact of the decision making process
are
1.
Values: Values are the guidelines that a person uses when
confronted with a situation in which a choice has to be made.
Values are acquired early in life and are a basic part of
individual’s thought. Value judgment is involved at every
stage in the process of decision making. They are reflected in
the decision maker’s behavior before making the decision, in
making the decision and in putting the decision into effect.
2.
Personality : Decision makers are influenced by many
psychological forces both conscious and subconscious. These
are strongly reflected in decision making under uncertainty.
Personality traits of the decision maker combine with
situational and interact ional variables influence the decision
making process..
3.
Propensity for risk : (Risk taking capacity ) This is a
4.
Potential for dissonance : Traditionally researchers have
specific aspect of personality which strongly influences the
process of making decision.
focused much of their attention on the forces and influences
on the decision maker before a decision is made.
Utility of the alternatives is the criterion for decision making.
Value of the decision is dependent on the utility.
Recently Behavioral scientists have focused their attention
on post decision anxiety or cognitive dissonance experienced
by the decision maker. Such anxiety is related to lack of
consistency or harmony among individual’s various
cognitions (attitudes, beliefs and so on) Individuals are likely
to use one or more of the following to reduce their
dissonance
a. Seek information that supports their decision.
b. selectively perceive information that supports the decision
c. adopt a less favorable view of the foregone alternatives.
d. Exaggerate the importance of positive aspects of the
decision
The Scope of Decision Making
Decisional Inputs
(Objectives,
information,
resources,
energy)
Metaorganization
Organization
Group
Interactional
Levels
Individual
Decisional
Outputs
Permeable
Boundaries
(Actions
transactions,
outcomes)
External Environment
Individual Models of DecisionMaking
Cognitive style
 Underlying personality dispositions toward the treatment of information,
selection of alternatives, and evaluation of consequences.
Systematic decision makers
 cognitive style that describes people who approach a problem by
structuring it in terms of some formal method.
Intuitive decision makers
 Cognitive style that describes people who approach a problem with
multiple methods in an unstructured manner, using trail and error to find a
solution.
Organizational models of decision making
 Models of decision making that take into account the structural and political
characteristics of an organization.
Organizational Models of
Decision-Making
Bureaucratic models of decision making
 Models of decision making where decisions are shaped by the
organization’s standard operating procedures(SOPs).
Political models of decision making
 Models of decision making where decisions result from competition
and bargaining among the organization’s interest groups and key
leaders.
“Garbage can” model
 Model of decision making that states that organizations are not
rational and that decisions are solutions that become attached to
problems for accidental reasons.
Steps for decision
implementation
A decision making process can be defined as consisting
of a set of four major steps: the problem definition; the
identification of solutions; the selection of the best
option; and the decision implementation plan.
 People participating in the first three phases of a
decision making process will probably be the same
(except perhaps for a few advisors or observers who
may participate just in one of the phases).
 On the other hand, people working in the post-decision
phase are implementers, most probably different from
the decision makers participating in the previous phases.
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Steps for decision
implementation
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Document decision making steps
Allocate resources
Determine tasks and activities
Develop a timeline
Assign responsibility to specific individuals
Consider likely obstacles and alternate courses of action.
For Svenson, the follow-up of the decision
implementation is fundamental to the evaluation of the
quality of past decisions and as background knowledge
for present and future decisions.
Evaluation of Strategic
Decision Success
Strategic
Decision=
Success
f
Strategic
Decision +
Quality
f
Strategic
Decision
Implementation
1. Compatibility with
operating constraints.
1. Conflict of interest.
2. Timeliness.
2. Risk-reward factor.
3. Optimum amount of
information.
3. Understanding the
decision.
4. Influence of the
decision maker.
Follow-Up and Control
Follow-up and control is essential to
ensure that an implemented decision
meets its objective.
Performance is measured by observing
the implemented decision in relation
to its standard derived from the
objective.
Decision Making in Foreign Policy
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Margaret Hermann, Charles Hermann, and Joe Hagan
have incorporated various models of foreign policy
decision making into a contingency model and called it
the “decision-units” framework. The main purpose of a
contingency model is to formulate middle-range theories
that suggest under what conditions certain types of
foreign policy behaviors take place. The decision-units
framework builds upon a growing body of research on
foreign policy decision making, focusing on bureaucratic
politics, group dynamics, governmental politics,
leadership styles, coalition politics, and the strategies
with domestic opposition.
Decision Making in Foreign Policy
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This framework suggests that previous decision making
approaches—such as bureaucratic politics, groupthink—
have wanted to declare a “winner” at the expense of
seeing all as complementary. It also suggests that the
literature has been very US-centric, making it almost
impossible to generalize findings across nations.
Thus, the main aim of the decision-units framework has
been to incorporate these previously existing decision
making approaches in a more comprehensive and
contingent manner, to build middle-range theories that
are applicable in non-US settings as well, and finally, to
further open up the ‘black box’ of the foreign policy
decision making process.
Decision Making in Foreign Policy
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One of the key components of the decision-units
framework is that, “there is within any
government an individual or a set of individuals
with the ability to commit the resources of the
society and, when faced with a problem, the
authority to make a decision that cannot be
readily reversed.” This set of decisionmakers is
called the authoritative decision unit. There are
three types of authoritative decision units:
Decision Making in Foreign Policy
1. predominant leader,
 2. single group, and
 3. coalition of multiple autonomous actors.
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The framework suggests that each decision unit
“sets into motion alternative decision
processes,”16 resulting in different process
outcomes. A predominant leader is the decision
unit seen when a single individual has the power
to make a decision alone.
Decision Making in Foreign Policy
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A single group is the case when a number of individuals
collectively choose an action consulting with each other.
A coalition of autonomous actors is the relevant decision
unit description when separate individuals,
representatives of organizations, groups and so on come
together to decide upon an action.
In this last case, no single component within this group
of actors has sufficient power to make a binding decision
on its own, yet each has the resources and capability to
block the decision or withdraw the resources needed for
the implementation of the decision if not satisfied.
Decision Making in Foreign Policy
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This figure summarizes the three stages of
foreign policymaking according to the
decision-units framework. It also
illustrates the place of the decision units
within the foreign policy decisionmaking
process.
Decision Making in Foreign Policy
Predominant
Leader
Foreign Policy
Problem
Occasion for
Decision
Single Group
Emergence of
Authoritative
Decision-Unit
Process
Outcomes
Coalition
INPUTS
DECISION UNITS
DYNAMICS
OUTPUTS
Foreign
Policy
Action
Decision Making in Foreign Policy
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The first stage occurs whenever a foreign policy
problem emerges. The “inputs” (occasion for
decisions18 and the emergence of the
authoritative decision unit) lead the way to the
“decisionmaking dynamics” that are determined
by which unit is authoritative and which key
contingencies are at play. These dynamics result
in the “outputs” that are the outcomes of the
decision making processes and the foreign policy
action.
Literature
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Borges, M.R.S., Pino, J.A., Valle, C., “On the Implementation and
Follow-up of Decisions”, in In Proc.of the DSIAge -International
Conference on Decision Making and Decision Support in the Internet
Age, Cork, Ireland, July 2002, p. 366-375.
Harrison, E.F., The Managerial Decision- Making Process, Fifth Edition,
Houghton Mifflin Company, 1999.
White, D.J., Decision Theory, Aldine Pub.Co., 2006.