Introduction - Let's Start Thinking

Introduction - Let's Start Thinking

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 Weight Relevant qualifications 3

Leadership skills 5 Communication skills 3 Analytical skills 4

Professional experience 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 CANDI DATES RATI NG AND ASSESSMENT Candidate

Qualification Leadership Communication Analysis Experience Kamran Ashraf

3 3 3 1 1 Rahila Mushtaq

2 1 4 2 2 Tasaduq Hussain

4 2 3 2 3 Zubair Ahmed

2 5 2 4 1 Maliha J aved

4 5 4 3 2 Analyzing & Assessment:

Example EVALUATI ON OF CANDI DATES Candidate Qualification Leadership Communication Analysis

Experience Total Kamran Ashraf 9 15 9

4 1 38 Rahila Mushtaq 6 5

12 8 2 33 12 10

9 8 3 42 Zubair Ahmed 6

25 6 16 1 54 Maliha J aved

12 25 12 12 2 63

Tasaduq Hussain 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 External and internal Environ. forces

2. Set goals 3. Search for alternative solutions 6. Implement the solution selected 5. Choose 4. Compare among and evaluate alternative

solution solutions 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

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