Decision making- concept,types,process,techniques and principles

Notes of Decision Making

1. Presented By: Ms. Rupali Sharma MAIC, Raipur Decision Making: Concept, Types, Process, Techniques and Principles of decision making

2. “Hear one person before you answer, several before you decide” - Danish Maxim

3. Synopsis Concept Definition Characteristics/Feature Importance or Role Types of managerial decision Decision making Process Decision making techniques Principles of decision making

4. CONCEPT The word ‘decision’ has been derived from the Latin word ‘ decidere ’ which means a cutting away or cutting off, or in a practical sense. ‘To decide’ means “to come to a conclusion” The main objective of decision is to give effective result which is help to organization to for achieve its goal.

5. A decision involves a cut alternatives between those th at are desirable, and those are not desirable. The decision is a kind of choice of a desirable alternative. Lopez has defined a decision as follows: “ A decision represents judgment; a final resolution of a conflict of needs, means, or goals; and a commitment to action made in face of uncertainty and complexity.

6. Decision making is a process to arrive at a decision. The process by which an individual or organization selects one position or action from several alternatives.

7. The decision-making process, in a business context, is a set of steps taken by managers in an enterprise to determine the planned path for business initiatives and to set specific actions in motion. Ideally, business decisions are based on an analysis of objective facts, aided by the use of business intelligence ( BI ) and analytics tools.

8. Decision making includes

9. Aspects of decision making In decision making, three aspects of human behavior are involved:

10. Characteristics Or Features Goal-oriented process Evaluation of the available alternatives Selection process Continuous process Responsibility of managers

11. Characteristics Or Features Pervasive Intellectual exercise because the final selection is made after thoughtful consideration. Art as well as science Involves a certain commitment (short run or long run)

12. Basic problems of decision making Correctness of decision ( accuracy of information and ability of the decision-maker) The decision environment ( a good environment encourages managers to take decisions with confidence instead of avoiding them.) Timing of decisions ( If the decisions are not taken at the right time, they will not serve any purpose)

13. Effective communication of decision ( if the decisions are properly communicated, the implementation would not be difficult.) Participation in decision-making ( Employees who are likely to be affected by a decision should be encouraged to take part in arriving at the final decision) Implementation of decision ( For implementation, not merely effective communication but also good incentives and motivation of subordinates are essential.)

14. Types of managerial decisions

15.   Programmed and non programmed decisions Programmed decisions Programmed decisions are those which are normally repetitive in nature and are taken as a routine job and responsibilities. These types of decisions are made by middle level management in accordance with some policies, rules and procedures. They have short term impact. For example: – granting a leave to an employee, purchasing office materials etc.

16. Non-programmed Non-programmed decisions relate to difficult situations for which there is no easy solution. Non-programmed decisions are non repetitively taken by top executives. They need to collect data and analyze then and forecast the strategic plans. For example, opening of a new branch of the organisation or a large number of employees absenting from the organisation or introducing new product in the market, etc.

17.   Major and Minor decisions Among different decisions some decisions are considerably more important than others and are prioritized. They are called major decisions. Major decisions are taken by top management.  For example, replacement of man by machine, diversification of product etc some of the remaining decisions are considerably less important than others and are not so prioritized. They are minor decisions. Minor decision taken by office superintendent. For example, store of raw materials etc.

18.   Routine and strategic decisions Routine decisions are those decisions which are considered as tactical decisions. They are taken frequently to achieve high degree of efficiency in the organizational activities. Routine decisions are related to the general functioning of the organisation . They do not require much evaluation and analysis and can be taken quickly. For example, parking facilities, lighting and canteen etc. Strategic decisions are those which are related to lowering the prices of products, changing the product etc. they take more fund and degree of partials. Strategic decisions are important which affect objectives, organisational goals and other important policy matters. These decisions usually involve huge investments or funds.

19. Organizational and personal decision Organizational decision is taken by top executives, for official purpose. They affect the organizational activities directly. Authority is also delegated. When an individual takes decision as an executive in the official capacity, it is known as organisational decision.  Personal decisions are concerned to an employee. The executives whenever takes the decisions personally that is known as personal decisions. If decision is taken by the executive in the personal capacity (thereby affecting his personal life), it is known as personal decision.

20.   Individual and group decisions When a single employee is involved in decision making it is called individual decision.   when the decision is of group taken in a large organization where important and strategic decisions are taken the it is a group decision. The main aim in taking group decisions is the involvement of maximum number of individuals in the process of decision­- making.

21. Policy and operating decisions Policy decisions are taken by top level management to change the rules, procedures, organizational structure etc and they have a long term effect. Operational decisions are taken by lower level management which have short term effect and which affect the day to day operation of the organization. Decisions concerning payment of bonus to employees are a policy decision. On the other hand if bonus is to be given to the employees, calculation of bonus in respect of each employee is an operating decision.

22. Decision-making process

23. Specific Objectives The need for decision making arises in order to achieve certain specific objectives. The starting point in any analysis of decision making involves the determination of whether a decision needs to be made. This may not be considered truly as the first step of decision process but provides framework for further decisions.

24. Identification of problem A Problem is the gap between present and desired state of affairs on the subject-matter of decision . In management, a problem exists whenever one faces a question whose answer involves doubt and uncertainity .

25. Search for alternatives A problem can be solved in several ways, however, all the ways are not equally satisfying. Therefore, the decision maker must try to find out the various alternatives available in order to get the most satisfactory results of a decision. A decision maker can use several sources for identifying alternatives: His own past experience, Practices followed by others, Using creative techniques

26. Evaluation of alternatives For evaluation two approaches can be followed: (a) constraint on alternatives (b) grouping of alternatives of similar nature (a) constraint on alternatives : The decision maker develops a list of limits that must be met by a satisfactory solution. He may treat these limits as constraints, that is, he may check proposed alternatives against limits, and if an alternative does not meet them, he can discard it.

27. (b) grouping of alternatives of similar nature : in this approach, the various alternatives can be grouped into classes on some specific criteria important to decision making. A representative alternative from one group may be selected for future analysis. Then having found the group that shows up the best, decision maker can concentrate on alternatives within this group.

28. Choice of alternative Choice aspect of decision making is related to deciding the most acceptable alternative which fits with the organisational objectives. In choosing an alternative, we can follow three approaches : Experience Experimentation Research and analysis

29. Action Once the alternative is selected, it is put into action. Implementation of decision requires the communication to subordinates, getting acceptance of subordinates over the matters, and getting their support for putting the decision into action.

30. Results When the decision is put into action, it brings certain results. Results provide indication whether decision making and its implementation is proper.

31. Effective Decision Three aspects of effective decision :-

32. Techniques of Decision making

33.  Brainstorming “The best way how to have a good idea is to have many ideas” Means of generating ideas. Can be used to identify alternatives, obtain a complete list of items and to solve problems.

34. Nominal group technique In a nominal group technique, the team divides itself into smaller groups and generates ideas. Possible options are noted down in writing and the team members further discuss these to narrow down the possible choices they would like to accept. Team members then discuss and vote on the best possible choice. The choice that receives the maximum votes is accepted as the group decision.

35. Delphi method In Delphi technique of decision making, members do not have face-to-face interaction for group decision. The decision arrived at through written communication in the form of filling up questionnaires often through mail.

36. In this method of decision-making, the facilitator allows team members to individually brainstorm and submit their ideas. Other team members do not know the owner of the ideas.  The facilitator then collects all the inputs and circulates them among others for modifying or improving them.  This process continues until a final decision is made. In the above example, you can have a facilitator who collects strategies and passes them on to the others without revealing to whom the strategy belongs. Later, the facilitator collects the improvised strategies and chooses the best one.

37. Multi-voting It starts with a round of voting where an individual casts his vote for the shortlisted options. Each individual can cast one vote at a time. The options with the maximum number of votes are carried to the next round. This process is repeated until a clear winning option is obtained. The strategy that receives the maximum number of votes is considered final.

38. Electronic meeting Here, the decision-making process takes place virtually with the help of technology. Skype call with the client. 

39. Principles of decision making Principle of Alternatives Distinguish between  real  options and  false  options. Differentiate between risk and uncertainty. Draw up your ideal criteria  before  looking at available options. Participation of employees.

40. THANK YOU