BS INDT Tech Decision Making INDT 28 w3.pptx

INDT 28

1. Decision Making INDT 28 Industrial Organization and Management Practices

2. Decision Making 3.1 Definition of Decision 3.2 Importance of Decision Making 3.3 Elements of Decision Making 3.4 Decision Making Environments 3.5 Decision Making Process 3.6 Causes of Poor Decisions 3.7 Decision Making Skills 3.8 Types of Decisions 3.9 Risk, Ethics and Challenges in Decision Making

3. Definition of Decision A decision can be defined as a course of action purposely chosen from a set of alternatives to achieve organizational or managerial objectives or goals. Decision making process is continuous and indispensable component of managing any organization or business activities. Decisions are made to sustain the activities of all business activities and organizational functioning. Decisions are made at every level of management to ensure organizational or business goals are achieved. Further, the decisions make up one of core functional values that every organization adopts and implements to ensure optimum growth and drivability in terms of services and or products offered.

4. Importance of Decision Making Decision-making is an integral part of modern management. Essentially, Rational or sound decision making is taken as primary function of management. Every manager takes hundreds and hundreds of decisions subconsciously or consciously making it as the key component in the role of a manager. Decisions play important roles as they determine both organizational and managerial activities. Decision making is part of everyone’s life and all of us have to make decisions every moment. Right from choosing what to wear to what to eat to where we live and work and extending to whom we marry, decisions are an integral part of our lives.

5. Importance of Decision Making In an organizational context, it is worthwhile to note that decision making needs the right kind of information, the complete information and the ability to synthesize and make sense of the information. Decision-making is a vital part of any business and a key function of its success. ... Any decision made in a company is important, no matter how small it may be. When you are making a big decision in your company, be sure to have the right people involved so that you achieve the desired outcome without huge costs.

6. Elements of Decision Making The 5 Elements of an Effective Decision Making Process According to Peter Drucker these are the 5 elements of an effective decision making process. 1. The Problem Rationalization. The clear rationalization that the problem was generic and could only be solved through a decision that establishes a rule or a principle. Know the problem your solving. 2. The Boundary Conditions. The definition of the specifications that the answer to the problem has to satisfy, that is, of the “boundary conditions.” Know your range of options that will still count as success.

7. Elements of Decision Making 3. The Right Thing to Do. Before you decide what’s feasible, first figure out what the right thing to do is. 4. Action. Turn decisions into action. 5. Feedback. Get feedback on what’s working and what’s not. What’s important is that when it comes to making better decisions that you figure out a process that works for you, and helps you make better decisions, more consistently, and in a variety of scenarios, whether for work or in your personal life.

8. Decision Making Environments There are three types of environment in which decisions are made: Decision-making under Certainty: A condition of certainty exists when the decision-maker knows with reasonable certainty what the alternatives are, what conditions are associated with each alternative, and the outcome of each alternative. Under conditions of certainty, accurate, measurable, and reliable information on which to base decisions is available. The cause and effect relationships are known and the future is highly predictable under conditions of certainty. Such conditions exist in case of routine and repetitive decisions concerning the day-to-day operations of the business.

9. Decision Making Environments Decision-making under Risk: When a manager lacks perfect information or whenever an information asymmetry exists, risk arises. Under a state of risk, the decision maker has incomplete information about available alternatives but has a good idea of the probability of outcomes for each alternative. While making decisions under a state of risk, managers must determine the probability associated with each alternative on the basis of the available information and his experience.

10. Decision Making Environments Decision-making under Uncertainty: Most significant decisions made in today’s complex environment are formulated under a state of uncertainty. Conditions of uncertainty exist when the future environment is unpredictable and everything is in a state of flux. The decision-maker is not aware of all available alternatives, the risks associated with each, and the consequences of each alternative or their probabilities. The manager does not possess complete information about the alternatives and whatever information is available, may not be completely reliable. In the face of such uncertainty, managers need to make certain assumptions about the situation in order to provide a reasonable framework for decision-making. They have to depend upon their judgment and experience for making decisions.

11. Decision Making Process Identify Problems Requiring Decisions The first step in the process is to recognize that there is a decision to be made. Decisions are not made arbitrarily; they result from an attempt to address a specific problem, need or opportunity. Seek Information to Clarify Options Managers seek out a range of information to clarify their options once they have identified an issue that requires a decision. Managers may seek to determine potential causes of a problem, the people and processes involved in the issue and any constraints placed on the decision-making process. Brainstorm Potential Solutions Having a more complete understanding of the issue at hand, managers move on to make a list of potential solutions. This step can involve anything from a few seconds of though to a few months or more of formal collaborative planning, depending on the nature of the decision.

12. Decision Making Process Weigh the Alternatives There is always more than one option available for moving forward on a given issue or a new project (including, of course, the option of doing nothing). Compile a list of the pros and cons of each alternative, with a particular emphasis on the ease, speed and amount of resources needed for implementation. It pays to have the best information available before moving ahead to the decision-making phase. Choose an Alternative After your group weighs the pros and cons of each potential solution, seek additional information if needed and select the option they feel has the best chance of success at the least cost. Consider seeking outside advice if you have gone through all the previous steps on your own; asking for a second opinion can provide a new perspective on the problem and your potential solutions.

13. Decision Making Process Implement the Plan There is no time to second guess yourself when you put your decision into action. Once you have committed to putting a specific solution in place, get all of your employees on board and put the decision into action with conviction. That is not to say that a managerial decision cannot change after it has been enacted; savvy managers put monitoring systems in place to evaluate the outcomes of their decisions. Evaluate the Outcomes Even the most experienced business owners can learn from their mistakes. Always monitor the results of strategic decisions you make as a small business owner; be ready to adapt your plan as necessary, or to switch to another potential solution if your chosen solution does not work out the way you expected.

14. Causes of Poor Decisions 1. Misplaced objectives In an uncertain world, we make almost all of our decisions based on the perceived reward versus punishment. 2. Analysis paralysis Analysis paralysis is when we spend way too much time overthinking or over-analyzing a problem. 3. Waiting for more information Sometimes when we don’t have the data needed to make a decision, we choose to wait for it. We spend way too much time waiting.

15. Causes of Poor Decisions 4. Not thinking it through It’s important to collect facts and data, and to draw from our past experiences while making a decision. 5. Confusing luck with skill 6. Our own intelligence When you spend more than two decades of your life and a vast amount of your parents’ money on education, it’s difficult to accept that higher education and good decision making are two different things. Some educated people are good at making decisions, but not all.

16. Causes of Poor Decisions 7. Recent embarrassment 8. Misplaced focus on the individual player 9. Our environment Directly or indirectly, our environment has a huge impact on our decision making. Most of the time we don’t even know how we are being influenced because the environment influences us subconsciously. 10. Know it all attitude

17. Decision Making Skills 1. Identify critical factors which will affect the outcome of a decision. Being a strongly skilled decision-maker requires having excellent analytical and interpretive skills. These are used to determine the issues that must be addressed and accounted for in the deliberative and implementation phases. 2. Evaluate options accurately and establish priorities. Effective leaders can assess the quality of alternatives and explain the reasons behind that evaluation.

18. Decision Making Skills 3. Anticipate outcomes and see logical consequences. Adept strategists draw logical inferences in precisely defined and tightly structured contexts. This allows them to see the applications and the implications of all factors that shape and constrain decision making. Government regulations, policies, basic assumptions, core principles and protocols should be considered. 4. Navigate risk and uncertainty. The most accomplished managers judge the most probable and best justified inferences to draw in uncertain contexts. Information given may be uncertain or ambiguous, and the best inference is not a foregone conclusion. The future is always unknown.

19. Decision Making Skills 5. Reason well in contexts requiring quantitative analysis. Leaders must be able to analyze, interpret and evaluate vital information as presented in charts, graphs, text or tables. They must understand what the numbers mean and how this impacts their options.

20. Types of Decisions

21. Types of Decisions Strategic Decisions and Routine Decisions As the name suggests, routine decisions are those that the manager makes in the daily functioning of the organization, i.e. they are routine. Such decisions do not require a lot of evaluation, analysis or in-depth study. In fact, high-level managers usually delegate these decisions to their subordinates. Programmed Decisions and Non-Programmed Decisions Programmed decisions relate to those functions that are repetitive in nature. These decisions are dealt with by following a specific standard procedure. These decisions are usually taken by lower management.

22. Types of Decisions Policy Decisions and Operating Decisions Tactical decisions pertaining to the policy and planning of the firm are known as policy decisions. Such decisions are usually reserved for the firm’s top management officials. They have a long term impact on the firm and require a great deal of analysis. Organizational Decisions and Personal Decisions When an executive takes a decision in an official capacity, on behalf of the organization, this is an organizational decision. Such decisions can be delegated to subordinates.

23. Types of Decisions Individual Decisions and Group Decisions When talking about types of decisions, let us see individual and group decisions. Any decision taken by an individual in an official capacity it is an individual decision. Organizations that are smaller and have an autocratic style of management rely on such decisions. Group decisions are taken by a group or a collective of the firm’s employees and management. For example, decisions taken by the board of directors are a group decision.

24. Risk, Ethics and Challenges in Decision Making 1) The Prevention Principle   takes a highly cautious approach towards ethical decision making because it specifically relates to situations with certainty of negative outcomes. 2) The   Precautionary Principle   an approach to risk management and ethical decision making which seeks to prevent possible harms in cases where there is not yet scientific consensus on connections between cause and effect.  3) Prudent Vigilance  is an approach to risk which seeks to proceed with the potentially risky behavior while remaining vigilant of risks that might be developing or becoming more certain as one proceeds.

25. Risk, Ethics and Challenges in Decision Making 4) The Polluter Pays Principle  a risk standard which permits risk-taking behavior and then, if something goes wrong, assigns clean-up for the harms to those who created the harms. 5) The Gambler’s Principle counsels risk takers to avoid risking damages which, if they occurred, would be ethically unacceptable, ranging up to the largest technological disasters, including global catastrophic and existential risks. 6) The   Proactionary Principle   an approach to risk taking behavior which argues that innovation and technological progress should be pursued with speed.

26. References Prachi Juneja (2015), Decision Making in an Organizational Context , Management Study Guide J.D. Meier (2009), 5 Elements for Making Better Decisions , Sources of Insight Smriti Chand (2019), Decision Making Environments , Your Article Library David Ingram (2019), What Are the Steps in the Decision-Making Process of a Manager , Small Business Chronicles Vik Shukla (2020), Most Common Causes of Bad Decision Making and How to Get Better , Data Driven Investor Brian Patrick Green (2019), Six Approaches to Making Ethical Decisions in Cases of Uncertainty and Risk , Markkula Center for Applied Ethics, Santa Clara University