Decision Making

Decision Making
The process of analyzing alternatives and choosing one of them to solve a problem or as a course of action is called Decision Making. Decision making is a process of identifying and selecting a course of action to deal with a specific problem or take advantage of an opportunity.

Problem
Situation that occurs when an actual state of affairs differs from a desired state of affairs. The problem finding process:
A deviation from past experience. A deviation from a set plan. Other people bring the problem to managers. The performance of competitors.

Opportunity
Situation that occurs when circumstances offer an organization the chance to exceed stated goals and objectives. Dialectical Inquiry Method.

What is more important for a manager: Solving Problems or Exploiting Opportunities.

Deciding to Decide
Thresholds for Problem recognition: A problem for one may be a desirable situation for another. Setting Priorities Is the Problem easy to deal with? The problem might resolve itself. Is this MY Decision to make?

Types of Managerial Decisions

Programmed Decisions: solutions to routine problems determined by rule, procedure, or habit. Non-programmed Decisions: Specific solutions created through an unstructured process to deal with non-routine problems. Creativity and Innovation

Creativity and Innovation

Creativity: The ability and power to develop new ideas.
Innovation: The ability to put creative ideas to commercial advantage.

Decision making under Certainty, Risk and Uncertainty

Certainty Risk Informational asymmetry leading to probability of desired outcome. Uncertainty Unpredictable Future

The Decision Making Process

Identify the problem Identifying resources and constraints Generating alternative solutions Evaluate alternatives-feasibility, quality, acceptability, cost and ethics Selecting the alternative Implementing the decision Monitoring the decision

The Rational Model of Decision Making

Investigate the Situation
Define the Problem Diagnose the causes Identify the Decision Objectives

Develop Alternatives
Brainstorming

The Rational Model of Decision Making

Evaluate Alternatives and Select the best one available
Is the Alternative Feasible? Is the Alternative a Satisfactory Solution? What are the possible consequences for the rest of the organization?

Implement and monitor the decision

Cont.
Limitations -Future is uncertain -Difficult to find all alternatives -Very difficult when the problem is from an unrelated area -All alternatives cannot be analyzed -Limitations of information, time and certainty

The Rational Model in Perspective

Bounded Rationality, Computational Capacity and Satisficing. Heuristics & Biases - The three heuristics:
Availability & Recency effect Representativeness Anchoring and Adjustment

Game theory and Chaos theory Deciding who Decides

Thank You