DECISI

ON
MAKIN
G
Presented by
Syed Huzaifa Akbar
 TABLE OF CONTENTS
01
INTRODUCTION
02
MANGERIAL
DECISION MAKING
03
TYPE OF DECISION
MAKING

04
SYTLE OF DECISION
MAKING
05
BIASES & ERROR IN
06
ETHICS IN DECISION
MAKING
DECISION MAKING
 WHAT IS DECISION MAKING ?
◂ Decisions are choices made from two or more alternatives.
◂ The decision making process is a set of steps that include
identifying a problem, selecting an alternative, and evaluating
the decisions effectiveness.
◂ Decision making is the one truly distinctive characteristic of
managers.
◂ Decision making identifying and choosing solutions that lead
to a desired end result
MANGERIA
L
DECSION
MAKING
There are six Managerial
Decision Making Steps
 Managerial Decision Making
o Establishing the Objective:
◂ The first step in the decision making process is to establish the
objective of the business enterprise
◂ Typically, a manager realizes some discrepancy between the current
state (the way things are) and a desired state (the way things ought to
be).
◂ Such discrepancies may be detected by comparing current
performance against
I. Past performance
II. The current performance of other organizations or units
III. Future expected performance as determined by plans
 Managerial Decision Making
o Alternative Solutions

Ready-made solutions Custom-made solutions

Ideas that have been seen or tried New, creative solutions designed
before specifically for the problem
 Managerial Decision Making
o Evaluating Alternatives
◂ Involves determining the value or adequacy of the alternatives that
were generated.
◂ This requires, the collection and analysis of the relevant data
◂ Some data will be available within the various departments of the
firm itself, the other may be obtained from the industry and
government.
◂ Which solution will be the best?
◂ The crucial role of a business manager is to determine optimal course
of action and he has to make a decision under these constraints.
 Managerial Decision Making
o Making the Choice

Maximizi Optimizin
ng g
 A decision Achieving the
realizing the best possible
best possible balance
outcome among
Satisficin several goals
g
Option that
acceptable,
although not
necessarily
the best
 Managerial Decision Making
o Implementing the Decision
◂ Determine how things will look when the decision is fully
operational.
◂ List the resources and activities required to implement each step.
◂ Assign responsibility for each step to specific individuals.
◂ What unintended benefits or opportunities could arise?
◂ Changes in it may become necessary from time to time in response in
changes in conditions or firm’s operating environment
 Managerial Decision Making
o Evaluating the Decision
Positive Feedback
Feedback that suggests the decision is
working implies that the decision
should be continued and applied
elsewhere in the organization.
Negative feedback
Feedback means that either
implementation will require more
time, resources, effort, or there
requires changes or the decision
was a bad one
Types of
Decision
Making
There are eight types of
Decision Making
 Types of Decision Making
o Programmed Decision

◂ Programmed decisions are repetitive in nature

◂ Such decisions deal with simple, common, frequently occurring
problems that have established procedures
◂ These decisions are taken based on the existing policy, rule or
procedure of the organization.
◂ E.g. purchase orders, sanctioning of different types of leave,
increments in salary, etc. 
 Types of Decision Making
o Non-programmed Decision

◂ Non-programmed decisions are not routine in nature.

◂ They are related to exceptional situations for which there are no
established procedure.
◂ A careful analysis is made by the management before taking a policy
decision.
◂ These problems have to be handled in a different way
◂ .E.g.  Issues relating to declining market share, increasing
competition, etc.
 Types of Decision Making
o Operational and Strategic Decision
◂ Operational or tactical decisions relate to the present issues or
problems. 
◂ The main purpose is to achieve high degree of efficiency. Better
working conditions, prudent use of existing resources, better
maintenance of the equipment, etc.
◂ While, expanding the scale of operations, entering new markets,
striking alliances with other companies, etc. are strategic
◂ Usually, routine decisions are taken by managers at the lower levels,
while strategic decisions are taken by top level managers.
◂ The focus in the operational decisions is on the short-run or
immediate present 
 Types of Decision Making
o Organizational and Personal Decisions:

◂ Decisions taken by managers in the ordinary course of business in

their capacity as managers are organizational decisions
◂ For example: decisions regarding introducing a new incentive system,
transferring an employee, reallocation or redeployment 
◂ On the other hand, managers do take some decisions which are purely
personal in nature
◂ For example: the manager’s decision to quit the organization, though
personal in nature, may create some problems for the organization.
Style of
Decision-
Making
 Style of Decision Making
o Directive Decision Making

◂ The directive decision-making style uses quick, decisive thinking to

come to a solution
◂ The manager solves the problem to the information he posses.
◂  A directive decision maker has a low tolerance for unclear or
ambiguous ideas.
◂ They are focused on the task and will use their own knowledge and
judgment to come to a conclusion with selective input from other
individuals.
 Style of Decision Making
o Analytical Decision Making

◂ The manger doesn’t have ample information to make effective

decision so he obtains information.
◂ Analytical decision-makers carefully analyze data to come up with a
solution.
◂  These decision-makers are task-oriented, but have a high tolerance
for ambiguity..
◂ Analytical decision-makers take time to compile data and evidence
before they come to a conclusion.
 Style of Decision Making
o Conceptual Decision Making

◂ Those who make decisions with a conceptual style are big

picture thinkers who are willing to take risks.
◂ They are social-oriented and take time to consider big ideas and
creative solutions..
◂  They are social-oriented and take time to consider big ideas
and creative solutions.
◂ Conceptual decision-makers look forward to what could happen
if the decision is made. Their conclusions come from visualizing
different opportunities and outcomes for the future.. 
 Style of Decision Making
o Behavioral Decision Making

◂ A behavioral style of decision-making focuses on relationships more

than the task.
◂ It evaluates the feelings of others as part of their decision-making
process. 
◂  Behavior decision-makers have a low tolerance for ambiguity and a
social focus as they evaluate solutions.
◂ These decision-makers rely on information from others to guide what
they choose. They are persuasive communicators who value decisions
based on a team consensus.
Biases and
Errors in
Decision-
Making
 Biases and Errors in Decision-
Making
o Overconfidence Bias

◂ A tendency by which an individual feels overconfident that their

response to a particular question
◂ Its to hold a false and misleading assessment of our skills, intellect, or
talent which isn’t present
◂ for example, 70% correct when in reality the answer provided is just
50% correct
◂ The cause of such overconfidence of decision or judgment is due to
weaknesses in intellectual and interpersonal abilities of leaders within
organization
 Biases and Errors in Decision-
Making
o Anchoring Bias
◂ Another tendency of managers to settle on first information instead of
allowing subsequent information to be factored into the decision.
◂ Such biases often suffice in area of negotiation when one’s ability to
ignore a situation is compromised.
◂ For example, if you first see a T-shirt that costs $1,200 – then see a
second one that costs $100 – you’re prone to see the second shirt as
cheap. Whereas, if you’d merely seen the second shirt, priced at $100
 Biases and Errors in Decision-
Making
o Confirmation Bias
◂ Occurs when managers seek information that reaffirms their past
choices and overlook those information that provides counterviews
◂ Managers prefer information that confirmed their preconceived views
instead of those that challenge them in critical and skeptical ways..
◂ For example, people who support or oppose a particular issue will not
only seek information to support it, they will also interpret news
stories in a way that upholds their existing ideas.
 Biases and Errors in Decision-
Making
o Availability Bias
◂ Tendency for manager to base judgment or decision information that
is readily available.
◂ The reliance on those things that we immediately think of to enable
quick decisions and judgments.
◂ That reliance helps us avoid laborious fact-checking and analysis
◂ Example, there are more car accidents as research found as oppose to
plane crashes. However, the media seems to emphasize plane crashes
instead of car accidents
 Biases and Errors in Decision-
Making
o Hindsight Bias
◂ The term hindsight bias refers to the tendency people have to view
events as more predictable than they really are.
◂ Before an event takes place, while you might be able to offer a guess
as to the outcome, there is really no way to actually know what's
going to happen.
◂ People often recall their predictions before the event as much stronger
than they actually were.
◂ Example, students often experience hindsight bias during the course
of their studies. As they read their course texts, the information may
seem easy. "Of course," students often think after reading the results
of a study or experiment.
         Ethics
in Decision
Making
Ethics in Decision Making