ORGANIZATIONAL BEHAVIOR

PRESENTATION
TOPIC : DECISION MAKING

BY

HARITHA SUNDHARAN
&

AABHISHA NAZEER
 CONTENTS
1. Meaning 9. Types of
decision making
2. Definition 10.
Individual v/s group decision making
3. Features of decision making 11
.Techniques for effective decision making
4. Components of decision making
5. Process of decision making
6. Managerial decision making styles
7. Models of decision making
8. Factors affecting decision making
 MEANING

Decision - originated from the Latin word decisio

which means to to cut from
To decide means to come at a conclusion or to pass a
resolution
Decision making is a fundamental process in organisations
by which manager choose ne alternative from others . It is
done to achieve a specific objective or to solve specific
problem.
 FEATURES

Decision making possess the following salient features

1. A selective process
2. Human and national process
3. Dynamic process
4. Goal oriented process
5. Continuous process
6. Freedom to decision maker
 DEFINITION
Decision making is the process of identifying and
selecting course of action to solve a specific
problem.

-
James stoner
Decision making involves the selection of a
course of actions
From among two or more possible alternatives in
 COMPONENTS OF DECISION MAKING

Decision making in management has three components, viz

1. Alternatives: when there are two or more alternatives
decision making means selecting he best alternate.

2. Choice: decision making involves choice it means to

choose the best solution for solving the problem.

3. Objectives or problem: decision making is objective

oriented . It is done to achieve an objective or to solve a problem.
 PROCESS OF DECISION
MAKING

Process of decision making involves the following steps:

i) Defining and analysing the problem.
ii) Developing alternative solutions.
iii) Evaluation of alternative solutions.
iv) Selecting the best solution.
v) Implementing the decision.
vi) Follow up.
 MANAGERIAL DECISION MAKING STYLES
Four basic styles are there
1.Decisive : refers to a manager who process a minimum
amount information to firm conclusion , concerned with
action , speed & efficiency.

2.Flexible : characterises a manager who prefers concise

reports containing a wide variety of briefly stated alternatives
from which to choose.

3. Hierarchical : describes a manager who carefully analyse

amount of information not arrive at one best solution. He/she
values perfections , thoughtness & precisions.
Contd

4. Integrative : refers to a manager who use mass of

information to generate many possible solutions
simultaneously . He constantly improves his plans
 FACTORS AFFECTING DECISION MAKING

There exists certain factors that may influence the

decision making .These factors can be organised into the
following three groups;

1.Perception issues
2.Organisational issues
3. Environmental issues
 1.PERCEPTION ISSUES

Perceptions can be described as the way in

which individuals interpret their environment. An
individuals perception can influence how they make
decisions and solve problems. The perceptions are
influenced by the following :

i) The perceiver
ii) The object
iii) The situation
 ORGANIZATIONAL ISSUES
Organizational issues include those factors within an
organisation, that are affecting decision making. These
include:

i) Policies & Procedures

ii) Organizational Hierarchy
iii)Organizational Politics
 ENVIRONMENTAL ISSUES

Environmental issues are the external factors that affect

the decisions in an organisation . The types of external factors
that can have an effect on decision making are as follows:

i) The market in which the organisation operates.

ii)The economy.
iii)Government legislations.
iv)Customers reaction to the organisations products &
services
MODELS OF DECISION MAKING

There are mainly 4 types of models for behavioural

decision making. They are:
1) 1) Economic rationality model
2) 2) Simons bounded rationality model
3) 3) Judgmental heuristics and Biases model
 ECONOMIC RATIONALITY MODEL
Assumptions:
i) The decision maker will be completely rational in the
means-end sense.
ii) There is complete and consistent system of preferences
which allow a choice among alternatives.
iii) There is complete awareness of all possible alternatives.
iv) There are no limits to the complexity of computations that
can be performed to determine the best alternative.
v) Probability calculations rare neither frightening nor
mysterious.
Contd.

With this almost infallible ability decision maker always

strives to maximise outcomes in the business firm, and
decisions will be directed to the point of maximum profit
where MC=MR
Even this depiction is not claimed as a realistic
model of modern decision making behavior by most of
the economists, this model and its techniques have
traditionally been embraced by most of the business
schools hence many of todays managers still equate
good management decision making with this approach.
SIMONS BOUNDED RATIONALITY
MODEL
This is an alternative model suggested by Herbert Simon
to present more realistic alterative to economic rationality
model. He felt that the management decision making
behaviour could be best described as follows:
i) In choosing between alternatives managers look for the
one which is satisfactory or good enough.
ii) They recognize that their conception of world is simple.
iii) they satisfy rather than maximise, they can make their
choices without ascertaining all the alternatives.
iv) They make decisions by rule of thump method
Contd.

While comparing with the rational model, this model is

also rational and maximising but it is bounded. This
model recognizes the limitations of the economic model.
JUDGMENTAL HEURISTICS & BIASES MODEL
This model is drawn mostly from Kahneman & Tversky,
cognitive decision theorists who suggested the decision
makers rely on judgmental heuristics reduces information
demands on the decision maker and realistically help in the
following ways :
i) Summarize past experiences and provide an easy method
to evaluate the present.
ii) Substitute simple rule of thump or standard operating
procedures for complex information collection and calculation.
iii) Save considerable mental activity and cognitive
processing.
Contd.

Following are the three biases:

i) i) The availability heuristics
ii) representativeness heuristics
iii)The anchoring and adjustment heuristics

This theory describes how the managers actually

make decisions.
Contd.

In the final analysis, all the decision models

are appropriate under certain conditions
and are used combination with one
another.