By

Jaya Misra
Decision Making
Decision Making

 Decision making is a process by which an individual makes a

choice from more than one options

 There is a discrepancy between current state and desired state and

occurs as a reaction to a problem

 Data are typically received from multiple sources and they need to
be screened, processed and interpreted

 Decision Making involves proper and efficient implementation of

strategic plans and methods to achieve desired business objective
Factors Affecting Decision
Making
 Perceptions

 Priority

 Acceptability

 Risk

 Resources

 Goals

 Value

 Demands

 Style

 Judgement
6 C’s of Decision Making

 Construct : a clear picture of what exactly need to be

decided

 Compile : a list of requirements what must be met

 Collect :information on alternates that meets the

requirement

 Compare : compare alternates that meet the requirements

 Consider : what might go wrong with each factor

 Commit : to a decision and follow through with it

(Case study : Beauty 4 U)

Perception

 Perception is a process by individual organization and interprets the sensory

perceptions in order to give meaning to the environment
Creativity in Decision
Making

 Plays an important role in rational decision

making

 Helps in producing novel ideas

 Three component model of creativity says

that :
 Expertise forms the basis of all creative ideas
 Creative Thinking skills is needed to use analogies
Cultural Difference

 Cultures differ in terms of orientation, the

importance rationality , their ability to solve
problems.

 Some cultures emphasize solving problems while

others focus on accepting as they are

 Egyptians managers are slow and more deliberate

in making decisions than Americans take
decisions rationally no matter how intuitive one is

 In Iran rationality is not defined its not important

to appear rational
Factors Affecting
Perception
Rational Decision Making

 Define the problem

 Identify the decision criteria

 Allocate weights to the criteria

 Develop the alternatives

 Evaluate the alternatives

 Select the alternative

Assumptions in Rational
Model

 Problem is clear and unambiguous

 Known options

 Clear preferences

 Constant preferences

 No time or cost constraint

 Maximum payoff
Bounded Rationality

 People respond to complex situation by reducing the

problem to a level at which it can be readily
understood

 The capacity of the human mind for formulating and

solving complex problems is very low therefore the
individuals operate from Bounded Rationality

 Individuals construct simplified models to extract

essential information from the problem without
capturing their complexities.
Decision Making Styles
Organizational Constraint

 Performance Evaluation : managers are

strongly influenced in their decision making by
the criteria by which they would be judged

 Reward Systems : organizations reward

systems influences decision making

 Formal Regulation: companies have policies

and procedures, rules and regulations in order
to standardize behavior and in the process limit
choices for decision making
Organizational
Constraint..contd

 Self Imposed Time Constraint : organizations

impose deadlines on decision which creates
time pressures which sometimes makes it
impossible to gather al the required
information for making final decision

 Historical Precedents : decisions made in the

past are like ghosts that haunt the current
choice
Groupthink

 Groupthink, a term coined by social psychologist

Irving Janis (1972), occurs when a group makes faulty
decisions because group pressures lead to a
deterioration of “mental efficiency, reality testing,
and moral judgment”

 A group is especially vulnerable to groupthink when

 its members are similar in background
 the group is insulated from outside opinions
 when there are no clear rules for decision making
Groupthink…..contd

 Janis has documented eight symptoms of groupthink: 

 Illusion of invulnerability –Creates excessive optimism that

encourages taking extreme risks

 Collective rationalization – Members discount warnings and do

not reconsider their assumptions

 Belief in inherent morality – Members believe in the rightness

of their cause and therefore ignore the ethical or moral
consequences of their decisions

 Stereotyped views of out-groups – Negative views of “enemy”

make effective responses to conflict seem unnecessary
Groupthink…contd

 Direct pressure on dissenters – Members are under pressure not

to express arguments against any of the group’s views

 Self-censorship – Doubts and deviations from the perceived

group consensus are not expressed

 Illusion of unanimity – The majority view and judgments are

assumed to be unanimous

 Self-appointed ‘mindguards’ – Members protect the group and

the leader from information that is problematic or contradictory
to the group’s cohesiveness, view, and/or decisions