Making Decisions in

Organizations

Three Good Reasons Why You Should

Care About . . . Decision Making
1.

2.

3.

Human decision making is inherently imperfect,

although these imperfections can be overcome if
you know what they are and how they operate
Functioning effectively in todays business
environment requires awareness of cultural
differences in the way people make decisions
Groups are widely used to make organizational
decisions despite the fact they often are
ineffective at dealing with the kinds of tasks
they are likely to face
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Decision Making
The process by which managers respond to
opportunities and threats that confront them by
analyzing options and making determinations about
specific organizational goals and courses of
action.

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The Nature of Managerial Decision

Making

Decisions in response to opportunities -occurs

when managers respond to ways to improve
organizational performance to benefit customers,
employees, and other stakeholder groups
Decisions in response to threats - events inside
or outside the organization are adversely affecting
organizational performance

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The Decision-Making Process

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Cultural Differences
Recognizing

problems
Preference for
decision-making unit
Who makes the
decisions?
Time taken to make
decisions
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Organizational Decisions
Programmed vs.
Nonprogrammed
Certain vs.
Uncertain
Top-down vs.
Empowered
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Programmed versus Nonprogrammed

Programmed decisions are routine decisions,
made by lower-level personnel, that rely on
predetermined courses of action
Nonprogrammed decisions are decisions for
which there are no ready-made solutions. The
decision maker confronts a unique situation in
which the solutions are novel
Strategic decisions are nonprogrammed decisions that
have important long-term implications for the
organization and are made by coalitions of high-level
executives
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Examples of Strategic Decisions

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Certain versus Uncertain

Usually expressed as statements of risk
What makes an outcome risky is the probability
of obtaining the desired outcome
Objective probabilities are based on concrete,
verifiable data
Subjective probabilities are based on personal
beliefs or hunches

To make the best possible decisions in

organizations, people seek to manage the
risks they take
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Top-down versus Empowered

Top-down decision-making puts the power to
make decisions in the hands of managers, leaving
lower-level workers with little or no opportunity
to make decisions
Empowered decision-making allows employees
to make the decisions required to do their jobs
without seeking supervisory approval

More likely to lead to effective decisions

Helps build commitment to decisions
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Decision-Making Approaches
The

RationalEconomic Model
The
Administrative
Model
Image Theory
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The Rational-Economic Model

Rational Decisions:
Decisions Decisions that
maximize the attainment of individual,
group, or organizational goals
Rational-Economic Model:
Model The model of
decision making according to which
decision makers consider all possible
alternatives to problems before selecting the
optimal solution
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The Administrative Model

A model of decision making that recognizes that decision
makers may have a limited view of the problems
confronting them
Satisficing Decisions:
Decisions Decisions made by selecting the
first acceptable alternative as it becomes available
Bounded Rationality:
Rationality The idea that people lack the
cognitive skills required to formulate and solve highly
complex business problems in a completely objective,
rational way
Bounded Discretion:
Discretion The tendency to limit decision
alternatives to those that fall within the bounds of current
moral and ethical standards
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Image Theory
A theory of decision
making that recognizes
that decisions are
made in an automatic,
intuitive fashion based
on actions that best fit
their personal
standards, goals, and
plans for the future
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Characteristics of Decisions
Decision makers have a limited view of the
problems confronting them

Bounded rationality

Decision makers consider solutions as they

become available

Satisficing

Decision makers face time constraints

Decision makers are sensitive to political
face saving pressure
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Biases(Partial,unfairly) in
Decision
Making
Framing effects refers to the tendency for people to
make different decisions based on how a problem is
presented to them

Positive framing tends to make decision makers risk averse

Negative framing tends to make decision makers risk seeking

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Group vs. Individual Decisions

Advantages of group decision making

Pooling of resources
Specialization of labor
Greater decision acceptance

Disadvantages of group decision making

Wasted time
Group conflict
Intimidation(demotivated karna) by group leaders

Conclusion: neither groups nor individuals are

always superior
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Group vs. Individual Decisions

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Groupthink

When members of a group

develop a very strong group
spirit high levels of
cohesiveness they sometimes
become so concerned about not
disrupting the like-mindedness
of the group that they may be
reluctant to challenge the
groups decisions
When this happens, group
members tend to isolate
themselves from outside
information, and the process of
critical thinking deteriorates
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Improving Group Decision Making

The Stepladder
Technique
The Delphi
Technique
The Nominal
Group Technique

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Stepladder Technique
A technique for improving the quality of group decisions that minimizes the tendency
for group members to be unwilling to present their ideas by adding new members
to a group one at a time and requiring each to present his or her ideas
independently to a group that already has discussed the problem at hand

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Effectiveness of Stepladder Technique

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Delphi Technique
A systematic way of collecting and organizing the opinions of several experts
into a single decision

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Nominal Group Technique

A technique for improving
group decisions in which
small groups of individuals
systematically present and
discuss their ideas before
privately voting on their
preferred solution. The
most preferred solution is
accepted as the groups
decision
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Computer-Based Approaches

Electronic Meeting Systems:

Systems Involve holding
teleconferencees in which individuals in different
locations participate in group conferences by means of
telephone lines or direct satellite transmissions
Computer-Assisted Communication:
Communication The sharing of
information, such as text messages and data relevant to
the decision, over computer networks
Group Decision Support Systems (GDSS) :
Interactive computer-based systems that combine
communication, computer, and decision technologies
to improve the effectiveness of group problem-solving
meetings
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