Decision Making: The Essence of Managers

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Decision MakingThe Essence of Managers Jobby
Muhammad Iqbal Malik
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Key Topics

• Introduction
• The Decision-making process
• Decision-making models
• Decision Styles
• A discussion on Group Decisions

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Part IIntroduction
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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

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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

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Managers

• One of the key traits that distinguish managers
  from operatives is the ability to make
  independent decisions.

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Part IIDecision-making
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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 .

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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)

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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.

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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.

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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

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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.

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Allocating Weights Example
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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.

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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)

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Criteria Rating Example
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Analyzing Assessment Example
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Selecting an alternative

• Involves choosing the best alternative, based on
  the above rating and analysis
• Generally implies selecting the alternative with
  the highest score.

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Implementing the Alternative

• Putting the decision into action
• Involves clear communication of the decision to
  all concerned and obtaining their commitment

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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

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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)

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Rational/Bounded Rational

• So Rational and Bounded Rational Models are
  cognitive models that describe how managers make
  rational decisions

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The Rational Model
1. Define and diagnose the problem

• 2. Set goals

7. Follow up and control
External and internal Environ. forces
3. Search for alternative solutions
6. Implement the solution selected
5. Choose among alternative solutions
4. Compare and evaluate solution
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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

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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

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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

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Intuition

• An unconscious process of making decisions on the
  basis of experience and judgment

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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

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Decision Types

• Effective managers make various kinds of
  decisions. In general, these decisions are either
• Programmed decisions
• Non-programmed decisions

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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.

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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

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Non-programmed Decisions
Organizational Levels
Nature ofProblems
Nature ofDecision-making
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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

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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

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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

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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

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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

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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 decision-making
• Focused on the long run and often result in
  creative outcomes or alternatives

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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

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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

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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

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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

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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

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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

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Group Decision-making

• The factors requiring group decisions include
• Involving sensitive issues
• High cost alternatives
• Involving very high risk factor
• Strategic impact

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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

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Group Decisions Disadvantages

• Take longer time
• Group can be indecisive
• Groups can compromise
• Groups can be dominated
• Groups can play games
• Victim to Groupthink

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Situational Factors for Individual Decision-making

• Short time
• Unimportant to group
• Manager can take decision
• Dominate the decision
• Destructive conflict
• Members hesitant

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Situational Factors for Individual Decision-making

• Confidential data
• Incapability of members
• Managers dominance
• Indirect effect on group members

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Situational Factors for Group Decision-making

• Need for innovation and creativity
• Data collection
• Importance of acceptance
• Importance of solution
• Complex problem
• Democratic process

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Situational Factors for Group Decision-making

• Risk taking solution needed
• Better understanding
• Whole responsibility
• Feedback required

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Improving Group Decision-making

• Brainstorming
• Nominal group techniques
• Electronic meeting