MBA management

Definition of Decision Making


A decision is a choice made between two or more available alternatives decision making is a process of choosing the best alternative for reaching objectives decision making is covered in the planning section of this text managers must also make decision when performing the other three managerial function-organizing, influencing, and controlling- the subject requires a separate chapters.

Managers make decision affecting the organization daily and communicate that decision to other organizational members. Not at all managerial decision is equal significance to the organization, some affect the large number of organization members, cost a great deal of money to carry out, or have a long term effect on the organization.

Types of Decision Making


There are two types of decision making:

- Programmed decision making
- Nonprogrammed decision making

Programmed decision making - Programmed decisions are routine and repitative, and the organization typically develops specific ways to handle them. A programmed decision might involve determining how product will be arranged on the selves of the supermarket. For this kind of routine, repetitive problem, standard-arrangement decisions are typically made according to established management guidelines.

Nonprogrammed decision making - Nonprogrammed decision, in contrast is typically on shot decision that are usually less structured than programmed decision. An example of the type of nonprogrammed decision that more and more and more managers are having to make is whether a supermarket should carry an additional type of bread.

Objects of Decision Making


Problem finding - Problem finding, as part of the intelligence phase, in conceptually defined as finding a difference between some existing situation and some desired state. This is compared to reality, difference and identified and the difference are evaluated as to whether they constitute a problem.

Organizational models

1. Historical models in which the expectation is based on an extrapolation of past experience.

2. Planning models in which the plan is expectation.

3. Models of other people in the organization, such as superiors, subordinates, other departments etc.

4. Extra organizational models in which expectations are derived from competition, customers and professional organization.

Problem formulation
There is always a significant danger, when a problem is identified, as solving the wrong problem. The purpose of problem formulation is to clarify the problem, so that design and choice activities operate on the right problem.

1. Determining the boundaries i.e. clearly identifying what is included in the problem.

2. Examining changes that may have precipitated the problem.

3. Factoring the problem into smaller sub problems.

4. Focusing on the controllable elements.

Development of alternative - A significant part of the process of decision making is the generated of alternatives to be considered in the choice phase. The act of generating alternative is creative and creativity may be taught. Basic creativity may be also be enhanced by alternative generation procedure and support mechanisms. The creative process requires that there be adequate knowledge of the problem area and its boundaries domain knowledge and motivation to solve the problem.

Advantages of Decision Making


Life is full of difficult decision for us to make, and no matter how simple we try to make our lives, how many self help books or articles we read, how much we try to learn from other people’s experience, etc.we always end up confronted with a hard decision to make. There simply is no escape from it.

Group Decision Making


Abstract
Many managers like to believe that they are accomplished in such group decision making processes as action planning goal setting and problem setting and problem solving. However their ability to implement such techniques effectively is often hindered by their lack of understanding of the dynamics of these group decision making processes. As a result these managers often end up perpetuating problems that they themselves create through their insensitivity to the needs of other group members.

Decision by lack of response (the plop method)
The most common – and perhaps least visible- group decision making method is that in which someone suggest an idea and before anyone else has said anything about it someone else suggests another idea until the group eventually finds one it will act on.

Decision by authority rule
Many groups start out with-or quickly set up-a power structure that makes it clear that the chairman or someone else in authority will make the ultimate decision. The group can generated ideas and hold free discussion but at any time the chairman may say that having heard the discussion, he or she has decided upon a given plan.

Decision by minority rule
One of the most often heard complaints of group members is that they feel railroaded into some decision usually this feeling result from one , two, or three people employing tactics that produce decision and therefore must be considered decision but which are taken without the consent of the majority. A single person can enforce a decision particularly if he or she is in some kind of chairmanship role by not giving opposition an opportunity to build up.

Decision by majority rule (voting and polling)
More familiar decision making procedures are often taken for granted as applying to any group situation because they reflect our political system. One simple version is to poll everyone’s opinion following some period of discussion. If the majority of participants feel the same way, it is often assumed that is the decision. The other method is the more formal one of stating a clear alternative and asking for votes in favor of it, votes against it, and abstentions.

The better way
Because there are time constrains in coming to a group decision and because there is no perfect system, a decision by consensus is one of the most effective methods. Unfortunately, it is also quit important to understand that consensus is not the same thing as unanimity. Rather it is states of affairs where communication have been sufficiently open and the group climate has been sufficiently supportive to make everyone in the group feel that they have had their fair chance to influence the decision.

What are the actual steps in a decision made by a group?

1. Identify the problem
2. Clarify the problem

Phases of Decision Making Process


Phase 1 - Identification
This is the first phase in the decision making process. It involves identification and the clear definition and formulation of the problem. In this phase a written problem statement is prepared, which specifies the nature and magnitude of the problem. It is necessary to determine how important and urgent the problem is not well defined, the decision instead of solving the problem may complicate it. This phase requires the manager to use his imagination, experience and judgment in order to identify the real nature of the problem.

Phase 2 - Analysis
The second phase of the decision making process involves determining the causes and scope. The problem should be classified to determine the futurity, periodicity and impact of the decision required as well as limiting or strategic factor relevant to the decision. The most important part in this phase is to find out the real cause or source of the problem. Analyzing the real problem implies knowing the cause of gap between what is and what should be and understanding the problem in relation to the objectives of organization. In some cases all the required information might not be available. In such a case, the manager has to judge the risk involved in the decision.

Phase 3 - Search
After defining and analyzing the problem, the next phase of the decision making process involves the search for the several possible alternatives. A problem can be solved in several ways all of which are not equally good. A wide range of alternative should be prepared this also increase the manager’s freedom of choice. This is done in order to ensure effective decision making but it is advisable for the manager to limit his discovery of those alternative which are strategic or critical to the problem.

Phase 4 - Selection
The forth phase of the decision making process deals with comparing and scrutinizing the various developed alternative to identify the pros and cons of each. Also this phase requires certain criteria like feasibility, cost, organizational goals, risk, timing, economy of effort, limitation of sources etc.

Phase 5 - Selection
The last phase is the most critical part of the decision making process. A wrong choice would negate all effort made in the previous steps. The judgment may be influenced by the intuition and personal value system of the decision maker. The selected solution must be acceptable to those who must implement it and who are affected by it.

Models of the Decision Making Process


Models are the tools of the decision making process which help the managers to assess the situations before they have happened by mimicking the real experiences and situation, without the expense of developing the situation for real. Here the decision makers use simulation to try to mimic the way that the firm or elements within the firm, will respond to changes in operating characteristics sometimes mathematical techniques such as queuing theory or linear programming are applied to mimic the real life situation.

Models can be classified into various categories

- Conceptual models
- Iconic models
- Analog models
- Schematic models

Conceptual models
Conceptual models are those formed through our experience, knowledge and intuition. They are further subdivided as

- Descriptive models - Verbal models - Mental models

Descriptive models represent a higher level of conceptualization and may be articulated and communicated.

Iconic models
Iconic models are those that resemble what they represent, although the properties of an iconic model may not be the same as those of the real system it represent iconic models include physical and pictorial models.

Analog models
Analog models are those that are built to act like real system, although they look different from what they represent. These models employ one set of properties to represent some other set of properties possessed by the real system. An artificial kidney dialysis machine that provides life support is an example of an analog model.

Symbolic models
Symbolic models use symbols to designate the components of a system and relationship among those components. They are abstract models in which symbols are substituted for systems characteristics.

They are of three types:

- Graphical representation
- Schematic models, and
- Mathematical equations

Steps in the process of Decision Making


1. Identifying and diagnosing the real problem
Understanding the situation that sets the stage for decision making by a manager is an important element in decision making. Pre determined objectives past acts and decision and environment consideration provide the structure for current decisions. Once this structure is laid, the manager can proceed to identify and determine the real problem.

2. Discovery of alternatives
The next step is to search for available alternatives and assess their probable consequences. But the number of forces reacting upon a given situation is so large and varied that management would be wise to follow the principle of the limiting factor. That is management should limit itself to the discovery of those key factors which are critical or strategic to the decision involved.

3. Analysis and evaluation of available alternatives
Once the alternatives are discovered, the next stage is to analyze and compare their relative importance. This calls for the listing of the pros and cons and different alternatives in relation to each other. Management should consider the element of risk involved in each of them and also the resources available for the implementation.

4. Selection of alternatives to be followed
Defining the problem, identifying the alternatives and their analysis and evaluation set the stage for the manager to determine the best solution. In this matter, a manager is frequently guided by his past experience. If the present problem is similar to one faced in the past, the manager has a tendency to decide on the basis past experience is a useful guide for the decision in the present. But it should not be followed blindly. Changes in the circumstances and underlying assumption of decisions in the past should be carefully examined before deciding a problem on the basis of experience.

5. Communicate of the decision and its acceptance by the organization
Once decision is made, it needs to be implemented. This calls for laying down derivative plans and they communicate to all those responsible for initiating action on them. It will be better if the manager takes into account beliefs, attitude and prejudices of people in the organization and is also aware of his own contribution to implantation of the decision. It is further required that subordinates are encouraged to participate in decision making process so that they feel committed and morally bound to support the decisions.

Information System


An information system differs from other kinds of system in that its objectives is to monitor/document the operations of some other system which we can call a target system an information system cannot exist without such a target system.

Areas of work
Information system has a number of different areas of work:

- Information system strategy
- Information system management
- Information system development

Each of which branches out into a number of sub disciplines, that overlap with other science and managerial disciplines such as computer science, pure and engineering sciences, social and behavioral sciences and business management.

Types of Information Systems
Information system can be classified in many ways, but for our purposes here, we will consider their classification based on the model of processing, on the system objectives, and on the nature of interaction of the system with its environment.

Individual and Organizational Decision Making Process


Meaning
Decisions taken by a single individual are called individual decision. Organizational decisions are those taken by a group of persons. Organizational decision making is considered better because the knowledge and imagination of a group is better than individual. Organization decision making also factors co-operation and co-ordination in the organization. But group decision are those which an executive takes in his official capacity and on behalf of the organization.

Models
There are three models in decision making process they are as follows:

(i) Rational Model
Rational model is based on optimal choice that would maximize value for the organization. The manager is assumed to be an objective, totally informed person who would select the most efficient alternative, and maximize whatever amount and type of the values.

(ii) Administrative Model
The quest for a more realistic description of organization decision makes a variation called administrative. This model allows decision makers with different degree of motivation and find shortcut for acceptable solution. Under this model no optimizing if decision making instead satisfaction by choosing the best from two or more when a decision has been made, the solution to the problem is found to be acceptable than ornaganisation institutionalized the procedure called standard operating procedure. Its rules, progress and routine are invoked by manager to gain time and avoid problems that occur. Sops are not always the time savers as they are supposed to be. Problems are broken down and assigned to specialized units within the organization that develop goals. These goals are termed as sub goals that may not agree with the overall goals. This phenomenon is called local responsibility.

(iii) Political Model
The contrast to the rational model, players in the political model often referred to as incremental do not focus on a single issue but on many intra organizational problem that reflect their personal goals. This concept of decision making as a political process empathizes the natural multiplicity of goals, value and interest in a complex environment. The political model views decision making as a process of conflict resolution and census building and decision as products of compromise.

Features

1. Decision making is a process of selection, which aim to result a best alternative.

2. It aims to achieve the objectives of the organization.

3. It involves the evolution of alternative, only through evaluation one can come to know the best alternative.

4. Decision making is a mental process, because the final selection is made after a thorough consideration.

5. It involves certain commitments.

Components of Decision Support System


A Decision Support System consist of two major sub-system- human decision making and computer system. Interpreting a Decision Support System as only a computer hardware and software system is a common misconception. An unstructured or semi structured decision by definition can not be programmed because its precise nature and structure are elusive and complex Simon 1960. the function of a human decision maker as a component of Decision Support System is not to enter data to build a database, but to exercise judgment or intuition throughout the entire decision making process. Imagine a manager who has to make a five year production planning decision, the first step to the decision making process begins with the creation of a decision support model using an integrated Decision Support System program Decision Support System generator such as Microsoft excl lotus 1-2-3 interactive financial system IFPS/personal or

Express /PC the user interface sub-system or dialogue generation or management system is the getaway to both database management system and model-based management system.DBMS are set of computer programs that create and manage the database, as well as control access to the data stored within it. The DBMS can be either an independent program or embedded with in a Decision Support System generator to allow user to create a data base file that is to be used as an input to the Decision Support System. DBMS is a set of computer program embedded within a Decision Support System generator that allow user to create, edit, update, and/ or delete a model. Users create models and associated database file to make specific decision the created model and database are stored in the model base and database in the direct assess storage device such as hard disks. From a user’s view point the user interface subsystem in the only part of Decision Support System components with which they have to deal.

Today’s decision support system generator provide the user with a wide variety of interface modes styles menu based interaction mode command language style question and answer interaction natural language processing based dialogue, and graphical user interface use icon, button, pull down menus, bars and boxes extensively and have become the most widely implemented and versatile type. The interface system allows users access to.

1. The data sub-system:
(a) database
(b) database management software; and

2. The model sub-system:
(a) model base
(b) model base management software.

Function of Decision Support System


Decision Support System provide varying analysis without much programming efforts and usually directed towards non technical users/manager. Managers main use for a Decision Support System include searching retrieving and analyzing decision relevant data to allow them to summarize main points which assist them in making more informed and educated decisions. Users often search for correlation between data without rewriting the underlying MIS or software application and most Decision Support System allows graphic capability which not only allows Trent analysis and alternative scenarios to answer what if queries consequently, Decision Support System supports both tactical and strategic decision and are employed to leverage manager’s expertise in a certain field.

Decision Support System varies in scope- some are intended for multiple users more common nowadays and other is stand alone units common in the past in addition to that, Decision Support System can take a many different forms and can be used in many different ways i.e. some Decision Support System focus on modes. Other on data and other on communication the better the manager understand the different categories, scope and uses of Decision Support System the better he will be able to specify requirements for a Decision Support System that he wants to implement or buy.

Decision Support System provides varying analysis without much programming efforts and is usually directed towards non technical users/managers. Managers main uses for a Decision Support System include searching retrieving and analyzing decision relevant data to allow them to summarize main points which assist them in making more informed and educated decision user often search for correlation between data without rewriting the underlying MIS or software application and most Decision Support System allows graphic capability which not only allows trend analysis and reporting for top executive, but also assists managers in mapping out conjoint analysis and alternative scenario to answer what is quires. Consecuenlty, Decision Support System support both tactical and strategically decision and are employed to leverage manager’s expertise in a certain field.

Decision Support System varies in scope- some are intended for multiple users more common nowadays and other is stand alone units common in the past. In addition to that’ can take on many different forms can be used in many different ways i.e. some Decision Support System focus on models, other on communication the better the manager understand the different categories, scope and uses of Decision Support System the better he will be able to specify requirement for a Decision Support System that he wants to implement or buy.
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Review Questions
  • 1. What is decision making?
  • 2. Define decision making.
  • 3. Write about objectives of decision making.
  • 4. Write an essay about decision making.
  • 5. What are the advantages of decision making?
  • 6. What is the purpose of decision making?
  • 7. What are the tangible factors that are to be considered while evaluating the alternatives?
  • 8. Which technique is most prominently used for evaluation of alternatives?
  • 9. Briefly explain the various steps in the process of decision making.
  • 10. What are the various elements that provide a structure for the current decisions?
  • 11. What are also called the strategic factors in the process of decision making?
  • 12. What are the advantages of experimentation as a basis for final decisions?
  • 13. Is decision making process really needed in an organization?
  • 14. What are the models of decision making process?
  • 15. Which decision making process lead the organisation with good co-ordination and control?
  • 16. List out the features of decision making process.
  • 17. What are the advantages of group decision making process?
  • 18. Can an organisation go smooth by the decisions at earlier time?
  • 19. What are the five phases of the decision-making process?
  • 20. What do you mean by the term models of decision-making?
  • 21. List and explain the various models of the decision-making?
  • 22. Explain symbolic models.
  • 23. What are the various benefits of employing models in the decision-making process?
  • 24. What are the mathematical equations?
  • 25. Briefly explain the conceptual models and the various types of conceptual models.
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