Why is the system view so important to Optimisation?

Following points are showing importance of optimization for the system view

Through the Optimization waste of input such as material and energy could be saved.
By optimization we can gain maximum efficiency with minimum input and it gives
perfect solution for given system.

CHAPTER 7:DECISION MAKING

TASKS IN MAKING DECISIONS
decision= a specific commitment to action (usually a commitment of resources)
decision making = process of identifying problems and opportunities and then resolving
them
Recognising a problem or opportunity
problem = a gap between an existing and a desired state of affairs
opportunity = the chance to do something not previously expected
Set goals and weight critera
decision criteria = factors that are relevant in making a decision
Develop alternatives
identifying solutions and alternatives
Compare alternatives and choose between them
can be done by using a decision tree
Implement the choice
sometimes takes longer than expected
Monitor and evaluate
the final stage
PROGRAMMED AND NON-PROGRAMMED DECISIONS
What is a programmed/ non-programmed decision?
Programmed (=structured) decision:
A decision for a problem one can handle by routine decision making

Non-programmed (unstructured) decision:

A unique decision for a unique problem requiring a custom-made solution mostly major
decisions
with increasing responsibility the decisions you deal with get more unstructured.
DECISION MAKING CONDITIONS

certainty
when all the information the decision maker needs are given
risk
when the decision maker can estimate all alternative outcomes
uncertainty
when people are clear about their goals, but lack information about how best to
achieve them
factors affecting the outcomes difficult to predict
ambiguity
when people are uncertain about their goals and how best to achieve them
circumstances are rapidly changing
dependency:
when people make a decision in a historical and social context, influenced by past
and possible future decisions and situations
DECISION MAKING MODELS

Computational strategy rational model

assumes that people make consistent choices to maximise economic value within
specified constraints
used when the goal is clear, but there are several ways to achieve it, and when
enough info is provided
Judgemental strategies
Administrative models
when people make decisions in ambiguous situations and there is no clear
goal
when limitations in situations are recognised
based on two concepts:
bounded rationality:
rational behaviour within a decision process which is limited by an individual's ability to
process information
satisficing:
acceptance by decision makers of the first solution that is 'good enough'
Incremental models
when people are uncertain about the consequences
search for limited options
making small steps and decisions, always able to go back and change a

decision
as much control over the outcome as possible
Intuitional model
used by people working under extreme time pressure
using predefined patterns to make a decision
acting on intuition, no big evaluation of the situation

Compromise strategy political model

when decision making reflects the view of an organisation consisting of groups of
different interests, goals and values
manager needs to ensure to align those different interests of all groups
the information is ambiguous and incomplete
the groups debate on goals
used when: there is a clear goal, but several ways to achieve it
eventually a solution is chosen that everyone agrees on
Inspirational strategy garbage-can model
decisions are made when four independent streams of activities meet by chance:
Choice opportunities
Participants
Problems
Solutions
goals and solutions are independent

Features

Rational

Political

Garbage can

Clarity of
Clear problem and Vague problems
problem and goal goals
and goals

Conflict over
goals

Goals and solution

s independent

Degree of
certainty

Uncertainty and/
or conflict

Ambiguity

High degree of
certainty

Administrative/
incremental

High degree of
uncertainty

Available
Much information Little information
information on
about costs and
about costs and
costs and benefits benefits
benefits of
alternatives
Method of
Choice

Conflicting views Costs and benefits

about costs and
unconnected at
benefits of
start
alternatives

Rational choice to Satisficing choice Choice by

maximise benefit good enough
bargaining
amongst players

Choice by
accidental
merging of
streams

BIASES IN MAKING DECISIONS

Prior hypothesis bias

basing a decision on strong prior believes, even it there is evidence that they are
wrong

 Representativeness bias
generalising from a small sample or episode
Optimism bias
seeing the future more positively than it is warranted by experience
Illusion of control
overestimating one's ability to control activities and events
Escalating commitment
still/ increasingly committing to a decision although it is proven to be wrong
Emotional attachment
wanting to make/ stick to a decision, because one has an emotional attachment to
something
Heuristics
using shortcuts or simple rules that simplify the decision making process
risk of not thinking rationally, not evaluating
GROUP DECISION MAKING
Vroom and Yetton's decision model
5 leadership styles:
autocratic:
the manager makes the decision himself
information-seeking:
the manager obtains necessary information from his subordinates, but decides by
himself on
a solution
consulting:
the manager shares the problem with relevant subordinates individually, but makes the
decision by himself
negotiating:
the manager discusses the problem with subordinates as a group, but makes the
decision
himself
group:
the manager shares the problem with subordinates as a group and the group finds a solution
together
the leadership style changes depending on the situation
Irving Janis and groupthink
groupthink =When people are involved in a cohesive and tightly-knit group and the
members' striving for unanimity and agreement overrides their motivation to come up with
more realistic decisions
pressure for agreement and harmony within the group have the effects of discouraging
indiiduals from raising issues that run counter to the majority opinion