DECISION MAKING

DR. TANUSHREE CHAKRABORTY, Ph.D

Faculty Member,OB/HR
INTERNATIONAL SCHOOL OF BUSINESS AND MEDIA
EN 22 & 26, SALT LAKE CITY
KOLKATA-700091
What is a decision?
Choices made from among two or more alternatives

Formulation Implementation
Rationality
Bounded rationality
Intuition
 Solution Types

Optimization model
Finding the best solution
Satisficing model
Finding a good -- but not necessarily the best -- solution to a
problem
Heuristics
Commonly accepted guidelines or procedures that usually
find a good solution
 Models of Behavioural Decision Making
The role and importance of human behavior is
emphasized by the behavioral model of decision
making.

The Economic Rationality Model

Simon’s Bounded Rationality Model
Judgemental Heuristics and Biases Model
The Social Model
Scanlon Plan
The Economic Rationality Model
Decision maker is believed to be rational while making
decision

Understands links and does good means end analysis

This model maximises profitability

Undermines human behaviour and seeks a detached and

analytical justification of decisions
Simon's bounded rationality model
Simon's bounded rationality model proposes that decision
makers operate with a 'bounded' rationality.

Bounded rationality is said to occur when decision makers

get satisfied with a 'less-than-ideal' solution to a particular
problem
Judgmental heuristics and Biases model

Decision maker uses rules of thumb

This model identifies three heuristics- the availability, representative
and the anchoring and adjustment heuristics.
The Availability heuristic- decision is influenced by remarkable and
readily available information (recency in appraisal)

The Representative Heuristic- Predicted probability of an outcome

based on previous experience

The Anchoring and Adjustment Heuristic-Decision is made by

anchoring the process to an initial value and then adjustment continues
The Social Model
Human feelings and emotions, by and large, affect the
decisions made by the decision maker

People tend to conform to social pressures

Unconscious desires also influence decision

Sometimes irrational decisions can result from this

technique
 The Scanlon Plan
It is a traditional participative technique of decision
making

It involves creation of formal committees to encourage

labor participation in the decision making process.

Introduction of suggestion boxes is another technique of

problem solving.
Modern Decision Making Techniques
Empowerment of lower level employees

Work groups

Self managed teams

Quality Circles
Bias and Errors
Overconfidence bias
Anchoring bias
Confirmation bias
Availability bias
Escalation of commitment
Randomness error
Winner’s curse
Hindsight bias
Steps in Decision Making
Verify, Define, and Detail the problem
Generate all possible solutions
Generate objective assessment criteria
Choose the best solution which we have already generated
Implementing the preferred alternative
Monitoring and evaluating outcomes and results
Feedback
Types of Decision Making-
Brainstorming
Ideas writing
Setting well formed outcomes
Mind Mapping
Lateral thinking
Six thinking hats
Decision trees
Force field analysis
 CREATIVITY AND
DECISION MAKING
Creativity-

Creativity is a mental and social process involving the

generation of new ideas or concepts, or new associations
of the creative mind between existing ideas or concepts.

Creativity is fueled by the process of either conscious or

unconscious insight.

An alternative conception of creativeness is that it is

simply the act of making something new.
 Steps in Creative Thinking

Orientation: pointing up the problem

Preparation: gathering pertinent data
Analysis: breaking down the relevant material
Ideation: piling up alternatives by way of ideas
Incubation: letting up, to invite illumination
Synthesis: putting the pieces together
Evaluation: judging the resulting ideas
Decision Making and Creativity
Creativity is a function of knowledge, evaluation and
imagination
Creative process in individuals are manifested through
divergent thinking and cognitive complexity
There is a high positive correlation between innovation
skills and divergent thinking and cognitive complexity
Creativity is not equated with intelligence
Decision Making Styles
Directive Analytical Conceptual Behavioral
•Prefer simple •Prefer •Socially Concern for
clear solutions complex oriented their
problems organization
•Make •Humanistic
decisions •Carefully and artistic Interest in
rapidly analyze approach helping others
alternatives
•Do not •Solve Open to
consider many •Enjoy solving problems suggestions
alternatives problems creatively
Rely on
•Rely on •Willing to use •Enjoy new meetings
existing rules innovative ideas
methods
Group Influences
in
Decision Making

+?+?+?-?-? -
Group decision making
Groups decision making is decision making in groups
consisting of multiple members/entities.

The challenge of group decision is deciding what action a

group should take.
BRAINSTORMING.
Brainstorming involves group members verbally suggesting ideas or alternative courses of
action.

 The "brainstorming session" is usually relatively unstructured.

Group members MUST understand the issue or problem.

The group leader is a facilitator

 The "generation of alternatives" stage is clearly differentiated from the "alternative evaluation"
stage, as group members are not allowed to evaluate suggestions until all ideas have been
presented. Once the ideas of the group members have been exhausted, the group members then
begin the process of evaluating the utility of the different suggestions presented.

Brainstorming is a useful means by which to generate alternatives, but does not offer much in
the way of process for the evaluation of alternatives or the selection of a proposed course of
action.
 DIALECTICAL INQUIRY.

 Focuses on ensuring full consideration of

alternatives.

 Debate the advantages and disadvantages

of proposed solutions or decisions.

 A similar group decision-making method, devil's advocacy, requires that

one member of the group highlight the potential problems with a proposed
decision.

 Both of these techniques are designed to try and make sure that the group
considers all possible ramifications of its decision.
NOMINAL GROUP TECHNIQUE .

Involves composing a comprehensive list of ideas or

proposed alternatives in writing.

All ideas or alternatives have been publicly recorded on a

flip chart or marker board.

Clarification of ideas is allowed

Proposed ideas are ranked in order of preferences

DELPHI TECHNIQUE.
Individual members are in different physical locations.

 Members have specific domain knowledge

Group members are asked to independently provide ideas, input,
and/or alternative solutions to the decision problem in successive
stages.
These inputs may be provided in a variety of ways, such as e-mail,
fax, or online in a discussion room or electronic bulletin board.
After each stage in the process, other group members ask
questions and alternatives are ranked or rated in some fashion.
After an indefinite number of rounds, the group eventually arrives
at a consensus decision on the best course of action.
 Problems
Groupthink

Group polarization
 Difficulties in Decision Making

Individual differences
Personality
Gender

Organizational Constraints
Performance evaluation
Reward Systems
Formal Regulations
System imposed time constraints
Levels of Decision Making

Strategic

Tactical

Operational
Why Decision Making in OB?
Senior Management: makes decisions based on internal business
information but also external industry and society changes;
decisions affect long-term and strategic goals and the firm's
objectives.
Middle Management and project teams: decisions affect
resource allocation, short-range plans and performance of specific
departments, task forces, teams, and special project groups.
Operational management and project teams: decisions affect
subunits and individual employees regarding the resources,
schedules and personnel decisions for specific projects.
Individual employees: decisions affect specific vendors, other
employees and most importantly the customer.
Systems for Decision Support

 Unstructured: requires judgment, evaluation, and insight into non-routine

situations. Usually made at senior levels of management.

 Structured: repetitive, routine, with definite procedures for making the

decision. Usually made at the lowest organizational levels.

 Semistructured: A combination of the two. Usually made by middle

managers.
Effective Decisions-
It focuses on what’s important
It is logical and consistent
It acknowledges both subjective and objective
thinking and blends with logical and analytical
thinking
I needs minimum information- just to resole a
dilemma
Encourages gathering of relevant information
It is straight forward, reliable and easy to use and
flexible
What managers need to know?
Understand cultural differences

Know when it is time to call it quits

Use an effective decision making process

Develop highly reliable organizations

THANK YOU