DECISION MAKING

Decision making refers to making choices among alternative courses of action—which

may also include inaction. While it can be argued that management is decision making,
half of the decisions made by managers within organizations ultimately fail. Therefore,
increasing effectiveness in decision making is an important part of maximizing your
effectiveness at work. Individuals throughout organizations use the information they
gather to make a wide range of decisions. These decisions may affect the lives of others
and change the course of an organization. Managers at all levels and in all areas of
organizations make decisions.
 TYPES OF DECISION MAKING
• Personal and Organizational Decisions: Decisions to watch television, to study, or
retire early are examples of personal decisions. Such decisions, pertain to managers
as individuals. personal decisions cannot be delegated and have a limited impact.
Organizational decisions are made by managers, in their official or formal capacity.
These decisions are aimed at furthering the interests of the organization and can be
delegated. While trying to deliver value to the organization, managers are expected to
keep the interests of all stakeholders also in mind-such as employees, customers,
suppliers, the general public etc. they need to take decisions carefully so that all
stakeholders benefit by what they do (Like price the products appropriately, do not
resort to unethical practices, do not sell low quality goods etc.)
• Programmed and Non-Programmed Decisions: A programmed decision is one that
is routine and repetitive. Rules and policies are established well in advance to solve
recurring problems quickly. For example a hospital establishes a procedure for
admitting new patients and this helps everyone to put things in place quickly and
easily even when many patients seek entry into the hospital.
Programmed decisions leave no room for discretion. They have to be followed in a
certain way. They are generally made by lower level personnel following established
rules and procedures. Non-programmed decisions deal with unique/unusual problems.
Such problems crop up suddenly and there is no established procedure or formula to
resolve them. Deciding whether to take over a sick unit, how to restructure an
organisation to improve efficiency, where to locate a new company warehouse, are
examples of non-programmed decisions. The common feature in these decisions is that
they are non-recurring.
• Policy decisions: it is taken by top management or administration of an organization. They relate to
major issues and policies such as the nature of the financial structure, marketing policies, outline of
organization structure.

• Basic and Routine Decisions : Basic decision are those which require a good deal of deliberation and
are of crucial importance. These decisions require the formulation of new norms through deliberate
thought provoking process. Examples of basic decisions are plant location, product diversification,
selecting channels of distribution etc. Routine decisions are of repetitive nature and hence, require
relatively little consideration. It may be seen that basic decisions generally relate to strategic aspects,
while routine decisions are related to tactical aspects of a organization.

• Tactical and Strategic Decisions : Tactical decisions are those which a manager makes over and over
again adhering to certain established rules, policies and procedures. They are of repetitive nature and
related to general functioning. Authority for taking tactical decisions is usually delegated to lower levels
in the organization. Strategic decisions on the other hand are relatively more difficult. They influence the
future of the business and involve the entire organization. Decisions pertaining to objective of the
business, capital expenditure, plant layout, production etc., are examples of strategic decisions.
PROCESS OF DECISION MAKING
Who is a manager?
Someone who coordinates and oversees the work of other people so organizational goals can be
accomplished.

What do managers do?

• Management : Coordinating and overseeing the work activities of others so their activities are
completed efficiently and effectively

• Efficiency : Doing things right, or getting the most output from the least amount of inputs
• Effectiveness: Doing the right things, or doing those work activities that will result in achieving goa

How can managers be classified in organizations?

• First -line (or front-line) managers
• Middle Level managers
• Top level managers
 CHALLENGES AND OPPORTUNITIES
FOR MANAGERS
• Responding to the globalization
• Managing workforce diversity
• Changing demographics of workforce
• Changed employee expectations
• Empowering people
• Improving quality and productivity
• Technology ( Automation & Information Technology)
• Improving ethical behavior
• Coping with temporariness/Contingent/Temporary Workforce
• Stimulating innovation and change
• Helping Employees Balance Work-Life Conflicts.
 Decisions Are Typically Made Under One Of Three Conditions :
 Certainty
 Risk and
 Uncertainty

These conditions are based on the amount of knowledge the decision maker has regarding the final outcome of the
decision. The manager's decision depends on a number of factors, like the manager's knowledge, experience,
understanding and intuition.

Certainty

Decisions are made under conditions of certainty when the manager has enough information to know the outcome
of the decision before it is made.
The manager knows the available alternatives as well as the conditions and consequences of those actions.
There is little ambiguity and hence relatively low possibility of making a bad decision.
Risk

Most managerial decisions are made under conditions of risk.

Decisions are taken in risk when the manager has some information leading to the decision but does not
know everything and is unsure or unaware of the consequences.
Under conditions of risk, the manager may find it helpful to use probability estimates. This is where the
manager‘s experience and/or intelligence is of great help.

Uncertainty

Decisions are made under uncertainty when the probabilities of the results are unknown.
There is no awareness of all the alternatives and also the outcomes, even for the known alternatives.
Under such conditions managers need to make certain assumptions about the situation in order to
provide a reasonable framework for decision making. Intuition, judgment, and experience always play a
major role in the decision making process under conditions of uncertainty.
 FACTORS AFFECTING DECISION
MAKING IN AN ORGANISATION
Whenever we are involved in making decisions a number of factors can affect the process we follow and
ultimately the decision we make. They can be organized into three major groups: Perception Issues,
Organizational Issues, Environmental Issues.
 PERCEPTION ISSUES : Perception can be described as the way in which individuals interpret their
environment. Perception can be influenced by the following:  The perceiver The types of personal
characteristics that can affect an individual's perception include:  Background and experience  Personal
values  Personal expectations  Personal interests  The situation: Time, location and other situational
factors can influence our perception of an object. E.g., For example, a Team Leader may notice team
members who work late on the same evenings as the Team Leader. However, team members who work late
on other evenings may not be noticed by the Team Leader.
 POLICIES AND PROCEDURES : Many organisations have formalized policies and procedures which
have been developed to resolve common problems and to guide managers when making decisions.  e.g.,
many organisations have documented disciplinary procedures which guide managers through a process of
resolving issues with staff member

 ORGANISATIONAL HIERARCHY : Organizational hierarchy refers to the management structure of

the organisation. Most organisations have different levels of management which carry with them different
degrees of authority. The degree of authority directly impacts on the nature of the decisions an individual
can make.  E.g., a Customer Contact Centre Team Leader cannot make decisions about the overall goals of
the organisation. However, the Team Leader can make decisions about how their team contributes to the
achievement of the organization's goals.

 ORGANISATIONAL POLITICS: Organizational politics refers to behaviour displayed by individuals

and groups which is designed to influence others. Individuals and teams will often use politics to: 
Advance their careers  Advance their interests and ideas  Increase their rewards. Organisations are made
up of individuals with different beliefs, values and interests. These differences are often the driving forces
behind organizational politics. For example, two teams believe they require an extra team member.
Unfortunately the organisation can only afford one new employee. The two teams may well use politics in
an attempt to influence their manager to allocate the new employee to their team.
 Personal factors  Personal Demographics: age, gender, stages in life cycle, education, occupation,
economic position, etc.  Personal psychographics: includes lifestyle, attitudes, self-concept, concern about
status, value systems, beliefs etc.

 Cultural factors  Culture: combined resulted of factors like religion, traditions, taboos, language,
education, upbringing, established pattern of social behaviour, values (core & secondary)etc.  Sub culture:
caste  Social class: it is determined by the education level, wealth, occupation, profession & designation,
location of residence, values, and behaviour of its members. Social Factors Influence of reference group: 
Intimate groups: e.g. family, friends, peer groups, close colleagues & close-knit organisations.  Face-to-face
& frequent interactions are characteristic feature of the group.  Secondary groups(including Opinion
leaders): based on occupation, profession place of residence, etc., of the members.  O.L has the high
credibility & influence.

 Information : information, should be authentic, reliable, adequate and must be available at time. So enough
time must be there to analyze the problem. It reduces the uncertainty. Too much information or information
over-load creates confusion & delay in decision making.

 Psychological factors Motivation: it all begins with needs. Perception: According to consistency theory one
mostly listen to things that support one‘s existing belief system)  Selective attention  Selective distortion 
Selective retention. Learning Process: people do change their beliefs, faiths, likes & dislike which happens
through learning. Memory Process which include past experiences even the hearsay experiences.
 DECISION TREE
• Decision tree analysis involves making a tree-shaped diagram to chart out a course of action or a
statistical probability analysis. It is used to break down complex problems or branches. Each branch of
the decision tree could be a possible outcome.
• People use decision trees in a variety of situations, from something personal to more complex business,
financial, or investment undertakings.
• In the decision tree, each end result has an assigned risk and reward weight or number. If a person uses a
decision tree to make a decision, they look at each final outcome and assess the benefits and drawbacks.
The tree itself can span as long or as short as needed in order to come to a proper conclusion.

• Decision trees are useful tools, particularly for situations where financial data and probability of
outcomes are relatively reliable. They are used to compare the costs and likely values of decision
pathways that a business might take. They often include decision alternatives that lead to multiple
possible outcomes, with the likelihood of each outcome being measured numerically.
EG:
EG :
 IMPROVING QUALITY &
PRODUCTIVITY
With the help of TQM, Re-engineering
TQM-(Total Quality Management)

• A philosophy of management that is driven by the constant attainment of customer satisfaction

through continuous improvement of all organizational process.
Re-engineering
• Reconsider how work would be done and the organisation structured if they were being created from
scratch. Business Process Reengineering involves the radical redesign of core business processes to
achieve dramatic improvements in productivity, cycle times and quality. It also helps technology to
improve data dissemination and decision making.
 TECHNOLOGY TRANSFORMATION

• Technology-anything that the worker of an organisation use to transform its inputs to

outputs Divided in to
Automation
• Automation occurs when a task performed by a worker is mechanized to be performed
by a machine Can result is loss of job for employees.
Information Technology
 Downsizing

organisation uses fewer employees to produce greater volumes

 Outsourcing

Process of hiring outside firms to perform the non core activities of the business.

 Wired organisation

• Organisations of today are totally connected. It include :

• Work from home/ telecommuting.

• Web conferencing/web seminars.
• Time differences across the globe.
• Problems relating to motivate the employees.
• Leadership
• Interference in to the privacy of the employees - hidden cams & CCTV.
 ETHICS & ETHICAL DILEMMA
Ethics
Refers to a system of moral principles-a sense of right or wrong, the goodness of badness of actions
and the motives and consequences of actions.
• Eg: if protecting others from any harm is considered to be ethical, then a company which recalls a
defective product from the market is an ethical company.
Ethical Dilemma

Situation in which an individual is required to define right and wrong conduct.

Whistle blowing
Refers to the disclosure by a former or current employee of any illegal, immoral, or illegitimate
practices involving its employees.
How Is The Manager’s Job Changing?-
Changing Technology (Digitization)

 Refer your PPT presentation

 How Is The Manager’s Job Changing?-Increased
Emphasis On Organizational And Managerial Ethics

 Refer your PPT presentation

How Is The Manager’s Job Changing?-
Increased Competitiveness

 Refer your PPT presentation

 How Is The Manager’s Job
Changing?- Security Threats

 Refer your PPT presentation

 How is the manager’s job changing?-
Managing Diversity
Workforce diversity : The ways in which people in an organization are different from
one another.

 Refer your PPT

presentation
IMPORTANCE OF CUSTOMERS TO THE
MANAGER’S JOB
• All levels of manager‘s need to understand the importance of customers
• Success in today‘s competitive environment
• Delivering consistent , high-quality customer service

• Managers must create a customer-responsive organization

• Employees are friendly and courteous, accessible, knowledgeable, prompt in responding to customer
needs, and willing to do what‘s necessary to create customer satisfaction.

“Customer is the king”

Refer your PPT presentation
 IMPORTANCE OF SOCIAL MEDIA TO THE
MANAGER’S JOB
Social media
• –Forms of electronic communication through which users create online communities to share ideas,
information, personal messages, and other content.
Organisations are using social media
• To foster cooperation and collaboration among the business units spread across different geographic
locations.
• Connect with customers
• Manage their human resources and tap into their innovation and talent.
• Managers need to be vigil about the wrongful use of social media by the employees

 Refer your PPT presentation

 IMPORTANCE OF INNOVATION TO THE
MANAGER’S JOB

• Innovation means exploring new territory, taking risks, and doing

things differently.
• Innovation is critical throughout all levels and parts of an organization.

 Refer your PPT presentation

 IMPORTANCE OF SUSTAINABILITY TO THE
MANAGER’S JOB
• Sustainability and green management have become mainstream issues for managers.
Sustainability
• Sustainable development is development that meets the needs of the present without
compromising the ability of future generations to meet their own needs.―
• A company‘s ability to achieve its business goals and increase long-term shareholder
value by integrating economic, environmental, and social opportunities into its business
strategies.

 Refer your PPT presentation

NATURE OF PROBLEMS AND DECISION
MAKING IN ORGANIZATION
 DECISION MAKING PERSPECTIVES

• Rationality
• Bounded Rationality
• The Role of Intuition
• The Role of Evidence-Based Management
 Rationality

•Assumptions of Rationality
•A rational decision maker would be fully objective and logical.
•The problem faced would be clear and unambiguous, and the decision maker would have
a clear and specific goal and know all possible alternatives and consequences.
•Making decisions rationally would consistently lead to selecting the alternative that
maximizes the likelihood of achieving that goal.

 Bounded Rationality
•Decision making that‘s rational, but limited (bounded) by an individual’s ability to
process information
• Manager‘s can‘t possibly analyze all information on all alternatives, managers satisfice,
rather than maximize.
 The Role of Intuition

•Making decisions on the basis of experience, feelings, and accumulated judgment

 The Role of Evidence-Based Management (EBMgt)

•The systematic use of the best available evidence
• The four essential elements of EBMgt are:
(1) the decision maker‘s expertise and judgment
(2) external evidence that‘s been evaluated by the decision maker
(3) opinions, preferences of those who have a stake in the decision.
(4) relevant organizational (internal) factors such as context, circumstances, and
organizational members.
 DECISION MAKING STRATEGIES
 Optimizing

• Choosing the best possible solution to a problem

• It is implemented by discovering as many alternatives as possible and choosing the most appropriate one.
 Satisficing

• The first satisfactory alternative is chosen as a decision rather than identifying the best alternative
• Coined by combining the words satisfactory and sufficient
 Regret Criterion

• Managers recognize that once decision is made, it will not necessarily result in the most profitable payoff
• There may be a regret of profits given up
• Regret refers to the amount of money that could have been made had a different strategy been used.
 Maxi-max

• Strategy of the optimist , stands for ‗maximize the maximum‘.

• This strategy will be effective in an environment where risk-taking is accepted /
encouraged without any penalties.
• Maximax criterion is an optimistic approach where a decision maker determines the
maximum payoff for each act and then an act is selected which provides the highest
returns.

 Maxi-min
• Strategy of the pessimist stands for ‗maximize the minimum‘
• Is good when the consequences of a failure decision could be very harmful.
• Maximin criterion is a conservative approach to decision making. The decision
maker tries to avoid the worst choice. In this approach, the minimum payoff over
the various events or possible states of nature is determined by the decision maker
and an act is selected for which the Maximin payoff is the highest.
 Guidelines for Effective Decision Making
• Augmenting Knowledge
• Continuous effort to equip managers with relevant knowledge to widen their knowledgebase
• Unbiased judgment

• Understand cultural differences

• Right Timing
• Know when it‘s time to call it quits.

• Being creative
• Develop your ability to think clearly
• Open-mindedness
 Big Data and Decision Making

Big data
• The vast amount of quantifiable information that can be analysed by highly
sophisticated data processing
• ―3V‘s of Big Data: high volume, high velocity, and/or high variety information
• Amazon.com, Earth‘s biggest online retailer, earns billions of dollars of revenue
each year -estimated at one-third of sales—from its ―personalization technologies‖
such as product recommendations and computer-generated e-mails