Submitted to: Submitted by:

Dr. Shipra Mittal Gupta Nikita Gupta

Mtech(2nd sem)

March 6, 2015 1
 What is decision-making?
Decision-making is one of the central activities of
management and is a huge part of any process of
implementation
Good decision making is an essential skill to become an
effective leaders and for a successful career
“A decision is a judgment. It is a choice between alternatives.
It is rarely a choice between right and wrong. It is at best a
choice between “almost right” and “probably wrong”.-
Drucker.
wikipedia.org/wiki/Decision

www.merriam-webster.com/dictionary/decision

March 6, 2015 2
 The Significance of Decision Making

 Decision making is the one truly distinctive

characteristic of managers.
 Decisions made by top managers commit the total
organization toward particular courses of action.
 Decisions made by lower levels of management
implement the strategic decisions of top managers
in the operating areas of the organization.
 Decisions invariably involve organizational
change and the commitment of scarce resources.
www.mindtools.com
March 6, 2015 3
 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)
March 6, 2015 4
Introduction to management by L.M. Prasad
The Decision-Making Process
Allocation of Development of
Problem Identification of Weights to Alternatives
Identification Decision Criteria Criteria
Acer
“My salespeople Price Reliability 10 Compaq
Gateway
need new computers” Weight Screen size 8
Warranty Warranty 5 HP
Screen type Weight 5 Micromedia
Reliability Price 4 NEC
Screen size Screen type 3 Sony
Toshiba
Analysis of Selection of an Implementation
Alternatives Alternative of an Alternative

Acer Acer
Compaq Compaq Evaluation
Gateway Gateway Gateway
of Decision
HP HP
Effectiveness
Micromedia Micromedia
NEC NEC
Sony Sony
Toshiba Toshiba
March 6, 2015 5
 Categories of 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.
www.slideshare.net

March 6, 2015 6
 Categories of Decisions
Nonprogrammed 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
 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
March 6, 2015 7

www.slideshare.net
 Programmed vs. Non-programmed Decisions

Characteristics Programmed decisions Non-programmed

decisions
Type of problem Structured Unstructured

Managerial level Lower level Upper level

Frequency Repetitive New,unusual

Information Readily available Ambiguous or incomplete

Time frame for solution Short Relatively long

Solution relies on Procedures,rules, and Judgment and creativity

policies
 Selecting a Decision Making Model

 Depends on the manager’s personal

preference
 Whether the decision is programmed or
non-programmed
 Extent to which the decision is
characterized by risk, uncertainty, or
ambiguity
www.mindtools.com
March 6, 2015 9
 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

www.slideshare.net

March 6, 2015 10
 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
www.slideshare.net

March 6, 2015 11
Bounded Rational Model: 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
education-portal.com/.../bounded-rationality

March 6, 2015 12
1. NOMINAL GROUP THINK

The NGT is designed to help all team members participate and

express opinions while still building team consensus

The nominal group technique is a structured decision making

process in which group members are required to compose a
comprehensive list of their ideas or proposed alternatives in
writing

NGT is designed to help with group decision making by ensuring

that all members participate fully.
http://www.slideshare.net/LouzelLinejan/decision-making-by-individual-and-group
NGT follows these steps:

7-10 individuals are brought together to participate in a

structured exercise that includes the following steps:

 Team members are presented with a problem, challenge or

issue

 Individual team members silently and independently write

down their ideas about how to tackle the problem.

 Each team member (one at a time, in round-robin fashion)

presents an idea to the group.

Individuals silently and independently vote on each idea.

http://www.slideshare.net/LouzelLinejan/decision-making-by-individual-and-group
2. DELPHI TECHNIQUE

Another technique which capitalises group's resources, while

avoiding several possible disadvantages of relying on group
decision-making processes

This approach, called the Delphi Technique, is similar to NGT in

several respects, but also differs significantly in that the
decision-makers never actually meet.

Its greatest advantage is that it avoids many of the biases and

obstacles associated with interacting groups (that is, groups
where the members meet face-to-face)
http://www.slideshare.net/LouzelLinejan/decision-making-by-individual-and-group
DELPHI follows these steps:

 Select a group of individuals who possess expertise in a

given problem area
 Survey the experts for their opinions via a mailed
questionnaire.
 Analyse and distil the experts' responses.
 Mail the summarised results of the survey to the
experts and request that they respond once again to a
questionnaire.
 If one expert's opinion sharply differs from the rest, he or
she may be asked to provide a rationale.
 process is repeated several times, the experts usually
achieve a consensus
http://www.slideshare.net/LouzelLinejan/decision-making-by-individual-and-group
3. STEPLADDER TECHNIQUE

A problem-solving structure recently proposed as a solution to

the problem of unequal participation in groups.
The technique is intended to improve group decision-making
by structuring the entry of group members into a core group.
Encourages all members to contribute on an individual level
before being influenced by anyone else.
This results in a wider variety of ideas, it prevents people from
"hiding" within the group, and it helps people avoid being
"stepped on" or overpowered by stronger, louder group members.
http://www.slideshare.net/LouzelLinejan/decision-making-by-individual-and-group
3. STEPLADDER TECHNIQUE

Step 1: Before getting together as a group, present the task or

problem to all members. Give everyone sufficient time to
think about what needs to be done

Step 2: Form a core group of two members. Have them discuss

the problem.

Step 3: Add a third group member to the core group. The third
member presents ideas to the first two members BEFORE
hearing the ideas that have already been discussed.
http://www.slideshare.net/LouzelLinejan/decision-making-by-individual-and-group
3. STEPLADDER TECHNIQUE

Step 4: Repeat the same process by adding a fourth member, and

so on, to the group. Allow time for discussion after each
additional member has presented his or her ideas.

Step 5: Reach a final decision only after all members have been
brought in and presented their ideas.
http://www.slideshare.net/LouzelLinejan/decision-making-by-individual-and-group
 Group Decision-making

The factors requiring group decisions include:

 Involving sensitive issues
 High cost alternatives
 Involving very high risk factor
 Strategic impact
http://smallbusiness.chron.com/

March 6, 2015 20
 Group Decision-making

Advantages Disadvantages
1. More information and 1. The process takes longer than
knowledge are available. individual decision making, so
it is costlier.
2. More alternatives are likely
to be generated. 2. Compromise decisions resulting
from indecisiveness may emerge.
3. More acceptance of the final 3. One person may dominate
decision is likely. the group.
4. Enhanced communication 4. Groupthink may occur.
of the decision may result. http://smallbusiness.chron.com/

5. Better decisions generally emerge.

March 6, 2015 21
Ethics into decision making
 Ways to infuse ethics into decision making.
 Develop a code of ethics and follow it.
 Establish procedures for reporting violations.
 Involve employees in identifying ethical issues.
 Monitor ethical performance.
 Reward ethical behavior.
 Publicize ethical efforts.
http://en.wikipedia.org/wiki/Decision-making
 Ethics into decision making
 Morality is involved in:
Choosing problems.
Deciding who should be involved in making
decisions.
Estimating the impacts of decision alternatives.
Selecting an alternative for implementation.
 An effective decision needs to solve a problem as well
as match moral values and help others
http://en.wikipedia.org/wiki/Decision-making
 REFERENCES

 http://www.tutorialspoint.com/management_concepts/decision_making_proces
s.htm
 http://www.slideshare.net
 http://www.authorstream.com/
 http://en.wikipedia.org/wiki/Decision-making
 http://smallbusiness.chron.com/
 education-portal.com/.../bounded-rationality
 Books:
1. Introduction to management by L.M. Prasad
2. Handbook on Decision making by Lakhmi C Jain Vol 4
March 6, 2015 24
THANK YOU!!!

March 6, 2015 25