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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 Relevant qualifications Leadership skills Communication skills Analytical skills Professional experience Weight 3 5 3 4 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 Kamran Ashraf Rahila Mushtaq Tasaduq Hussain Zubair Ahmed Maliha Javed Qualification 3 2 4 2 4 Leadership 3 1 2 5 5 Communication 3 4 3 2 4 Analysis 1 2 2 4 3 Experience 1 2 3 1 2

Analyzing & Assessment: Example


EVALUATION OF CANDIDATES Candidate Kamran Ashraf Rahila Mushtaq Tasaduq Hussain Zubair Ahmed Maliha Javed Qualification 9 6 12 6 12 Leadership 15 5 10 25 25 Communication 9 12 9 6 12 Analysis 4 8 8 16 12 Experience 1 2 3 1 2 Total 38 33 42 54 63

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
3. Search for alternative solutions

6. Implement the solution selected 5. Choose 4. Compare among and evaluate alternative solution solutions

External and internal Environ. forces

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 managers 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
Managers 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