Decision Making

in organizations

MMH3
15.7.2019

09/02/2020
 Decision making is often viewed as the essence of leadership.
 Leaders in organizations make decisions- which can be routine,
vital or strategic decisions.
 Decision making is considered as one of the top jobs in an
organizations.
 Decisions are taken in files, in meetings, thru consultations, in
groups.
 Decisions can be influenced by many factors such as
organizational priorities, environmental factors, financial
resources, organizational capacity and internal and external
dynamics.
 Steps in Decision Making

 Step-1: Identification of or locating the problem, i.e. clearly

defining the objective-there may be competing priorities.
 Step-2: Getting related information and data and figuring
out tentative options.
 Step-3: Weighing the tentative steps by seeking opinion
from the experts, consultants, and subordinates i.e.
developing practical options.
 Step-4: Zeroing in on a particular option.
 Step-5 :Evaluate the efficacy of the decision reached at.
 Step-6: Getting the feedback and make necessary
modifications if situation so demands.
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 Levels of Decision Making
 Decision making is not a one shot job of the
chief executive, or the decision of one
individual in an organization.
 It requires among others a total teamwork
starting from the junior desk officer to the top
in the hierarchy depending on the nature of
decision making.

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 What kind of Decisions are taken?
 It can be a routine decision such as decisions
which are taken at lower levels repetitively.

 It cam be thru consultation along with

stakeholders such as different Ministries,
departments, beneficiary groups.
 Procurement, hiring firing, award of contract,
decision to build a mega bridge, or in case of
organizations launching a new program or
product.
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 Techniques for effective decision making:

 Trust your judgment and accept responsibility.

 Avoid paralysis by analysis.
 Avoid hasty or quick decisions.
 Manage the risks in decision-making.
 Consider the wider impact of decisions.

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Approaches to Decision Making

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Rational Decision Making Approach
 Rational Decision Making approach developed
by Herbert Simon
 Decisions are made at every level of
organization.
 Simon tried to uncover the inner dynamics of
a decision in order to see how multiplicity of
value premises determines the ultimate
decision making.

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 Simon breaks up the decision making process into three
phases - intelligence activity, design activity, and choice
activity.
 By intelligence, Simon referred to those activities by which
one scans the environment and identifies occasions to make a
decision,
 By design, he referred to finding or developing alternative
options;
 and by choice, he referred to finding or developing alternative
courses of action from those available options.
 In real life, these phases are not distinct, for analytical
purposes, they seem to constitute the basic elements of
decision making.
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 According to Simon, decision making involves choice
between alternative plan of actions, and the choice in turn,
involves logical coordination between fact and value
proposition.

 Simon’s decision making approach has another redeeming

feature which is rationality criteria.

 Simon was aware of the problem of having lofty targets in

decision making which he views, are in most cases, remain
unattainable and romantic at best. Hence, he has prescribed
a moderate level of rationality(bounded rationality).

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 Simon’s major component of decision-making approach is :

 Fact –value proposition in decision making- it views

decision making in an organization based n proper
coordination between fact and value proposition. Every
decision involves a combination of a fair amount of fact and
value proposition.

 Rationality criteria in decision making- another hall mark

of Simon’s decision making approach is the rationality
criteria. He ruled out the possibility of absolute rationality
in administrative decision making. He explains rationality
in terms of ‘means-end’ construct.
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 Simon views total rationality in an
administrative situation is almost impossible,
hence , he calls for a moderate level of
rationality or ‘bounded rationality’ based on a
point of ‘satisfycing’- meaning ‘satisfactory’
and ‘sufficing’.
 Therefore, for Simon a decision maker is more
a ‘satisfying man’ than a ‘maximizing’ man.

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 The Bargaining approach
 This approach suggests that conflicts are the rules in
decision making, which can not be resolved by
rational analysis. It calls for ‘partisan mutual
adjustments’- the pulling and hauling among
decision makers which offers the best hope for best
decision making.

 Science of Muddling thorough – Charles

E.Lindblom has presented a new conceptual
perspective of governmental decision making.
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 Administrators outline only a few incremental steps that are feasible,
the reality of administrative decisions are:

 First it is in incremental nature, that means administrative decisions are

not reached in a single go, but through small and calibrated steps,

 second, it is always incomprehensive, administrators can not take into

account the whole range of options available at their disposal,

 Third, decision making suffices rather than maximizes from among the
available options,

 Fourth, it rests on a pluralist conception of the public sector, in which

many contending interest groups compete for influence over policy
issues, continually forcing the administrator, as the person in the middle,
to secure agreement among the competing parties.
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Participative decision making approach
 This approach constitutes the heart of political democracy. It advocates
participation of general people,, who are going to be affected by those
decisions.

 Participative decision making is most effective where are large number

of stakeholders are involved and all from different walks of life.

 Coming together to make a decision which benefits everyone.

 When employees participate in the decision making process, they

improve understanding and perceptions among colleagues and superiors,

 It ensures the completeness of decision- making and increase team

members commitment for final decisions

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Public choice approach
 The basic assumption of public choice approach is that
human being is by nature ‘rational utility maximizer’ always
striving for self–interest.

 It assumes that bureaucrats are utility maximizers, who

deliberately increase the size of the government for their self
interest.

 The public choice theory calls for a transfer of governmental

duties to the private sector. It advocates privatization and
reduction of the inefficient governmental sector.

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Common errors in decision- making
 Nigro has identified five errors to decision making:
 Cognitive nearsightedness - this refers to the
inherent human tendencies to skirt crisis with the
satisfaction of immediate goals. Human beings are
always courting comfort with some short-term
benefits. To overcome this problem,
organizational problems should be looked at
holistically and assess long term gains rather than
short term benefits.

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 Over simplification: The oversimplification is another
common fallacy of decision- making. Decision makers
often over simplify the administrative reality to arrive
at comfortable decisions.

 Over reliance on one’s experience- This is perhaps the

most common problem of decision –making where
administrators rely more on personal experience and
judgment than on organizational goals.

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 Preconceived notions - the decision- making process is also
hampered by the preconceived notions of the decision-makers.
It occurs with pre-judgement of a situation by dint of some
dominant social constructions, stereotypes, and prejudices and
thereby arrive at a colored decision.

 Reluctance to decide- this inherent human tendency also poses a

huge challenge for decision –making. There is a natural
reluctance to decide as pointed by Chester I.Barnard(1956). It is
also associated with a tendency of evading the responsibility
and passing the same to others. Passing the buck is a common
administrative problem with decision making.

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 Class Exercise
 Students will divide in groups and take a
particular decision
 Explain the rationale for such decision taken.

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