Management Thorey and

parctice
Spring 2010

Submitted by

Farheen Sarfraz

Submitted To
Sir Irshad_ul_haq

Allama Iqbal open university

1
 Table content
1 Definition
Types of decision making
2 stages of decision making
3 programmed and non-programmed decision making
4 approaches of decision making
5 assumptions of decision making
6 rational decision making
7 components of decision making
8 effects if decision making
9 Decision making Strategies
10 Bound Rationality
11 Process of intuition of decision making
12 Steps of decision making
1 3 Errors of decision making
14 Better decision making
15 Recommendations
16 ConclusionsAbstract

Page | 2
 Abstract
The authors present a multi-level framework for conceptualizing and
designing measurement systems to improve decision-making in the
treatment and prevention of child and adolescent mental health
problems as well as the promotion of well-being. Also included is a
description of the recommended drivers of the development and
refinement of these measurement systems and the importance of the
architecture upon which these measurement systems are built. The
authors conclude with a set of recommendations for the next steps for
the field.

Abstract

Framework for Measurement Feedback

Systems

o Information Technology Architecture Versus

Measurement Feedback Systems
o Summary
o References

It has been documented across a wide array of domains that

knowledge of results is a critical ingredient in facilitating
change (e.g., Kluger and Denisi 1996). However, for
knowledge of results to be fed back to change agents (i.e.,
practitioners and policymakers), a rigorous, reliable, and
valid measurement system must be in place and routinely
utilized.
Recently, Bickman (2008) made a compelling argument for a
measurement feedback system (MFS) for individual child
Page | 3
and adolescent mental health practitioners and underscored
the barriers to large-scale adoption. In this paper, we build on
Bickman’s work by describing a framework for the different
levels for which measurement systems are needed, the
features or characteristics that should drive the development
or refinement of such systems, and the importance of the
architecture upon which these measurement systems are
built. Throughout, we make recommendations for the next
steps that will be needed before we are able to make
significant progress in the accomplishment of these goals.
Some Definitions
A good place to start is with some standard definitions of decision
making.

1. Decision making is the study of identifying and choosing

alternatives based on the values and preferences of the decision
maker.

Making a decision implies that there are alternative choices to be

considered, and in such a case we want not only to identify as many of
these alternatives as possible but to choose the one that (1) has the
highest probability of success or effectiveness and (2) best fits with our
goals, desires, lifestyle, values, and so on.

2. “Decision making is the process of sufficiently reducing

uncertainty and doubt about alternatives to allow a reasonable
choice to be made from among them.:

This definition stresses the information-gathering function of decision

making. It should be noted here that uncertainty is reduced rather than
eliminated. Very few decisions are made with absolute certainty
because complete knowledge about all the alternatives is seldom
possible. Thus, every decision involves a certain amount of risk. If
there is no uncertainty, you do not have a decision; you have an

Page | 4
algorithm--a set of steps or a recipe that is followed to bring about a
fixed result.

Kinds of Decisions
There are several basic kinds of decisions.

1. Decisions whether. This is the yes/no, either/or decision that must

be made before we proceed with the selection of an alternative. Should
I buy a new TV? Should I travel this summer? Decisions whether are
made by weighing reasons pro and con. The PMI technique discussed
in the next chapter is ideal for this kind of decision.

It is important to be aware of having made a decision whether, since

too often we assume that decision making begins with the identification
of alternatives, assuming that the decision to choose one has already
been made.

2. Decisions which. These decisions involve a choice of one or more

alternatives from among a set of possibilities, the choice being based on
how well each alternative measures up to a set of predefined criteria.

3. Contingent decisions. These are decisions that have been made but
put on hold until some condition is met.

For example, I have decided to buy that car if I can get it for the right
price; I have decided to write that article if I can work the necessary
time for it into my schedule. OR even, We'll take the route through the
valley if we can control the ridge and if we detect no enemy activity to
the north.

Most people carry around a set of already made, contingent decisions,

just waiting for the right conditions or opportunity to arise. Time,
energy, price, availability, opportunity, encouragement--all these
factors can figure into the necessary conditions that need to be met
before we can act on our decision. Some contingent decisions are
unstated or even exist below the awareness of the decision maker.
These are the type that occur when we seize opportunity. We don't
walk around thinking,

Decision Making is a Recursive Process

Page | 5
A critical factor that decision theorists sometimes neglect to emphasize
is that in spite of the way the process is presented on paper, decision
making is a nonlinear, recursive process. That is, most decisions are
made by moving back and forth between the choice of criteria (the
characteristics we want our choice to meet) and the identification of
alternatives (the possibilities we can choose from among). The
alternatives available influence the criteria we apply to them, and
similarly the criteria we establish influence the alternatives we will
consider. Let's look at an example to clarify this.

Suppose someone wants to decide, Should I get married? Notice that

this is a decision whether. A linear approach to decision making would
be to decide this question by weighing the reasons pro and con (what
are the benefits and drawbacks of getting married) and then to move to
the next part of the process, the identification of criteria (supportive,
easy going, competent, affectionate, etc.). Next, we would identify
alternatives likely to have these criteria (Kathy, Jennifer, Michelle,
Julie, etc.). Finally we would evaluate each alternative according to
the criteria and choose the one that best meets the criteria. We would
thus have a scheme like this:

Key point, then, is that the characteristics of the alternatives we

discover will often revise the criteria we have previously identified.

The Components of Decision Making

The Decision Environment
Every decision is made within a decision environment, which is defined
as the collection of information, alternatives, values, and preferences
available at the time of the decision. An ideal decision environment
would include all possible information, all of it accurate, and every
possible alternative. However, both information and alternatives are
constrained because the time and effort to gain information or identify
alternatives are limited. The time constraint simply means that a
decision must be made by a certain time. The effort constraint reflects
the limits of manpower, money, and priorities. (You wouldn't want to
spend three hours and half a tank of gas trying to find the very best
parking place at the mall.) Since decisions must be made within this
constrained environment, we can say that the major challenge of
decision making is uncertainty, and a major goal of decision analysis is
to reduce uncertainty. We can almost never have all information needed

Page | 6
to make a decision with certainty, so most decisions involve an
undeniable amount of risk.

The fact that decisions must be made within a limiting decision

environment suggests two things. First, it explains why hindsight is so
much more accurate and better at making decisions that foresight. As
time passes, the decision environment continues to grow and expand.
New information and new alternatives appear--even after the decision
must be made. Armed with new information after the fact, the
hindsighters can many times look back and make a much better
decision than the original maker, because the decision environment has
continued to expand.

The second thing suggested by the decision-within-an-environment

idea follows from the above point. Since the decision environment
continues to expand as time passes, it is often advisable to put off
making a decision until close to the deadline. Information and
alternatives continue to grow as time passes, so to have access to the
most information and to the best alternatives, do not make the decision
too soon. Now, since we are dealing with real life, it is obvious that
some alternatives might no longer be available if too much time passes;
that is a tension we have to work with, a tension that helps to shape the
cutoff date for the decision.

Delaying a decision as long as reasonably possible, then, provides three

benefits:

1. The decision environment will be larger, providing more

information. There is also time for more thoughtful and extended
analysis.
2. New alternatives might be recognized or created. Version 2.0 might
be released.
3. The decision maker's preferences might change. With further
thought, wisdom, and maturity, you may decide not to buy car X and
instead to buy car Y.

And delaying a decision involves several risks:

1. As the decision environment continues to grow, the decision maker

might become overwhelmed with too much information and either
make a poorer decision or else face decision paralysis.

2. Some alternatives might become unavailable because of events

occurring during the delay. In a few cases, where the decision was
Page | 7
between two alternatives (attack the pass or circle around behind the
large rock), both alternatives might become unavailable, leaving the
decision maker with nothing. And we have all had the experience of
seeing some amazing bargain only to hesitate and find that when we go
back to buy the item, it is sold out.

3. In a competitive environment, a faster rival might make the decision

and gain advantage. Another manufacturer might bring a similar
product to market before you (because that company didn't delay the
decision) or the opposing army might have seized the pass while the
other army was "letting the decision environment grow."

The Effects of Quantity on Decision Making

Many decision makers have a tendency to seek more information than
required to make a good decision. When too much information is
sought and obtained, one or more of several problems can arise. (1) A
delay in the decision occurs because of the time required to obtain and
process the extra information. This delay could impair the effectiveness
of the decision or solution. (2) Information overload will occur. In this
state, so much information is available that decision-making ability
actually declines because the information in its entirety can no longer
be managed or assessed appropriately. A major problem caused by
information overload is forgetfulness. When too much information is
taken into memory, especially in a short period of time, some of the
information (often that received early on) will be pushed out.

The example is sometimes given of the man who spent the day at an
information-heavy seminar. At the end of the day, he was not only
unable to remember the first half of the seminar but he had also
forgotten where he parked his car that morning.

(3) Selective use of the information will occur. That is, the decision
maker will choose from among all the information available only those
facts which support a preconceived solution or position. (4) Mental
fatigue occurs, which results in slower work or poor quality work. (5)
Decision fatigue occurs where the decision maker tires of making
decisions. Often the result is fast, careless decisions or even decision
paralysis--no decisions are made at all.

The quantity of information that can be processed by the human mind

is limited. Unless information is consciously selected, processing will
be biased toward the first part of the information received. After that,
the mind tires and begins to ignore subsequent information or forget
Page | 8
earlier information. (Have you ever gone shopping for something
where you looked at many alternatives--cars, knives, phones, TVs--
only to decide that you liked the first one best?)

Approaches to Decision Making

There are two major approaches to decision making in an organization,
the authoritarian method in which an executive figure makes a decision
for the group and the group method in which the group decides what to
do.

1. Authoritarian. The manager makes the decision based on the

knowledge he can gather. He then must explain the decision to the
group and gain their acceptance of it. In some studies, the time
breakdown for a typical operating decision is something like this:

make decision, 5 min.; explain decision, 30 min.; gain acceptance, 30

min.

2. Group. The group shares ideas and analyses, and agrees upon a
decision to implement. Studies show that the group often has values,
feelings, and reactions quite different from those the manager supposes
they have. No one knows the group and its tastes and preferences as
well as the group itself. And, interestingly, the time breakdown is
something like this:

group makes decision, 30 min.; explain decision, 0 min.; gain

acceptance, 0 min.

Clearly, just from an efficiency standpoint, group decision making is

better. More than this, it has been shown many times that people prefer
to implement the ideas they themselves think of. They will work harder
and more energetically to implement their own idea than they would to
implement an idea imposed on them by others. We all have a love for
our own ideas and solutions, and we will always work harder on a
solution supported by our own vision and our own ego than we will on
a solution we have little creative involvement with.

There are two types of group decision making sessions. First is free
discussion in which the problem is simply put on the table for the

Page | 9
group to talk about. For example, Joe has been offered a job change
from shift supervisor to maintenance foreman. Should he take the job?

The other kind of group decision making is developmental discussion

or structured discussion. Here the problem is broken down into steps,
smaller parts with specific goals. For example, instead of asking
generally whether Joe should take the job, the group works on sub
questions: What are Joe's skills? What skills does the new job require?
How does Joe rate on each of the skills required? Notice that these
questions seek specific information rather than more general
impressionistic opinions.

Developmental discussion (1) insures systematic coverage of a topic

and (2) insures that all members of the group are talking about the same
aspect of the problem at the same time.

Some Decision Making Strategies

As you know, there are often many solutions to a given problem, and
the decision maker's task is to choose one of them. The task of
choosing can be as simple or as complex as the importance of the
decision warrants, and the number and quality of alternatives can also
be adjusted according to importance, time, resources and so on. There
are several strategies used for choosing. Among them are the following:

1. Optimizing. This is the strategy of choosing the best possible

solution to the problem, discovering as many alternatives as possible
and choosing the very best. How thoroughly optimizing can be done is
dependent on

A. importance of the problem

B. time available for solving it
C. cost involved with alternative solutions
D. availability of resources, knowledge
E. personal psychology, values

Note that the collection of complete information and the consideration

of all alternatives is seldom possible for most major decisions, so that
limitations must be placed on alternatives.

2. Satisfying. In this strategy, the first satisfactory alternative is chosen

rather than the best alternative. If you are very hungry, you might
choose to stop at the first decent looking restaurant in the next town
Page | 10
rather than attempting to choose the best restaurant from among all (the
optimizing strategy). The word satisficing was coined by combining
satisfactory and sufficient. For many small decisions, such as where to
park, what to drink, which pen to use, which tie to wear, and so on, the
satisficing strategy is perfect.

3. Maxima. This stands for "maximize the maximums." This strategy

focuses on evaluating and then choosing the alternatives based on their
maximum possible payoff. This is sometimes described as the strategy
of the optimist, because favorable outcomes and high potentials are the
areas of concern. It is a good strategy for use when risk taking is most
acceptable, when the go-for-broke philosophy is reigning freely.

4. Maximin. This stands for "maximize the minimums." In this

strategy, that of the pessimist, the worst possible outcome of each
decision is considered and the decision with the highest minimum is
chosen. The Maximin orientation is good when the consequences of a
failed decision are particularly harmful or undesirable. Maximin
concentrates on the salvage value of a decision, or of the guaranteed
return of the decision. It's the philosophy behind the saying, "A bird in
the hand is worth two in the bush."

As you read this procedure, remember our discussion earlier about the
recursive nature of decision making. In a typical decision making
situation, as you move from step to step here, you will probably find
yourself moving back and forth also.

1. Identify the decision to be made together with the goals it should

achieve. Determine the scope and limitations of the decision. Is the
new job to be permanent or temporary or is that not yet known (thus
requiring another decision later)? Is the new package for the product to
be put into all markets or just into a test market? How might the scope
of the decision be changed--that is, what are its possible parameters? .

2. Get the facts. But remember that you cannot get all the facts. Get as
many facts as possible about a decision within the limits of time
imposed on you and your ability to process them, but remember that
virtually every decision must be made in partial ignorance. Lack of
complete information must not be allowed to paralyze your decision. A
decision based on partial knowledge is usually better than not making
the decision when a decision is really needed.

3. Develop alternatives. Make a list of all the possible choices you

have, including the choice of doing nothing. Not choosing one of the
Page | 11
candidates or one of the building sites is in itself a decision. Often a
non decision is harmful as we mentioned above--not choosing to turn
either right or left is to choose to drive into the bridge. But sometimes
the decision to do nothing is useful or at least better than the
alternatives, so it should always be consciously included in the decision
making process.

4. Rate each alternative. This is the evaluation of the value of each

alternative. Consider the negative of each alternative (cost,
consequences, problems created, time needed, etc.) and the positive of
each (money saved, time saved, added creativity or happiness to
company or employees, etc.). Remember here that the alternative that
you might like best or that would in the best of all possible worlds be
an obvious choice will, however, not be functional in the real world
because of too much cost, time, or lack of acceptance by others.

5. Rate the risk of each alternative. In problem solving, you hunt

around for a solution that best solves a particular problem, and by such
a hunt you are pretty sure that the solution will work. In decision
making, however, there is always some degree of uncertainty in any
choice. Will Bill really work out as the new supervisor? If we decide to
expand into Canada, will our sales and profits really increase? If we let
Jane date Fred at age fifteen, will the experience be good? If you decide
to marry person X or buy car Y or go to school Z, will that be the best
or at least a successful choice?

Risks can be rated as percentages, ratios, rankings, grades or in any

other form that allows them to be compared. See the section on risk
evaluation for more details on risking.

6. Make the decision. If you are making an individual decision, apply

your preferences (which may take into account the preferences of
others). Choose the path to follow, whether it includes one of the
alternatives, more than one of them (a multiple decision) or the
decision to choose none.

Bounded rationality is the notion that in decision making, rationality

of individuals is limited by the information they have, the cognitive
limitations of their minds, and the finite amount of time they have to
make decisions. It was proposed by Herbert Simon as an alternative
basis for the mathematical modeling of decision making, as used in
economics and related disciplines; it complements rationality as
optimization, which views decision making as a fully rational process
of finding an optimal choice given the information available.[1] Another
Page | 12
way to look at bounded rationality is that, because decision-makers lack
the ability and resources to arrive at the optimal solution, they instead
apply their rationality only after having greatly simplified the choices
available. Thus the decision-maker is a satisficer, one seeking a
satisfactory solution rather than the optimal one.[2]

Some models of human behavior in the social sciences assume that

humans can be reasonably approximated or described as "rational"
entities (see for example rational choice theory). Many economics
models assume that people are on average rational, and can in large
enough quantities be approximated to act according to their
preferences. The concept of bounded rationality revises this assumption
to account for the fact that perfectly rational decisions are often not
feasible in practice due to the finite computational resources available
for making them.

Rational analysis or “muddling through”?

Early studies of policy making highlighted two extreme approaches to

decisions: a rational, analytical approach which leads inexorably to the
“right” solution, and a less organised approach, often called “muddling
through”, in which objectives are never specified, remedial action is
taken when it becomes essential, and more important decisions are
dependent on the power struggles between interest groups. While this
second model can be seen at work in many of today’s cities, it is
unlikely to be effective in tackling the challenges of unsustainability
which we face. Equally an extreme reliance on analysis is inappropriate
in a situation in which priorities and preferences differ and outcomes
are uncertain. We have therefore looked for practical approaches
between these extremes.

Which approaches have been used?

Cities differ in the ways in which they make decisions, but their
approaches have often developed over time, rather than being formally
prescribed. In our surveys we suggested three broad approaches:
vision-led; plan-led; and consensus-led, and asked our cities to indicate
which one or two of these best characterised their approach.

Vision-led approaches usually involve an individual (typically the

mayor or committee leader) having a clear view of the future form of
city they want, and the policy instruments needed to achieve that
vision. The focus then is on implementing them as effectively as
possible. Relatively few cities have a visionary leader in this sense, but
Page | 13
there is evidence that in the past those which do have made the most
progress.

Which approaches do cities adopt?

Few of the cities in the PROSPECTS survey considered that they

adopted any one of these approaches alone. The most common
approach is a mix of plan-led and consensus-led decision-making. The
least common were those which focus primarily on visions or plans.

Which approach is best?

There is no simple answer to this question. There are some useful

references on decision-making which consider the alternatives, but no
clear agreement between them. However, there are some obvious
pitfalls. A vision-led approach is critically dependent on the individual
with the vision. If he or she leaves office, it may prove very difficult to
avoid completely abandoning the strategy. A plan-led approach can
become unduly dependent on professional planners, who may lose sight
of the needs of politicians and stakeholders. A consensus-led approach
may, unless agreement can be quickly reached and sustained, lead to
delay and inaction. Not surprisingly, therefore, most cities adopt a
mixed approach

The "Process" of Intuition and Decision

Making
Approaches to decision making can be quite diverse,
ranging from classical, rationalistic, decision making
processes to a less structured, intuitive, decision making
style.

Rational decision making processes consist of a

sequence of steps designed to rationally develop a
desired solution. Intuitive decision making is almost the
opposite, being more instinctive, subjective and
subconscious in nature.

One of the principle assumptions of the rational decision

making process is that human beings make rational
decisions. However, this is not always the case! There
are usually wide ranging factors which determine our
decisions, many of which are not rational. This is especially so
Page | 14
when we remember that management is about dealing with people. In
addition, many situations require decisions to be made with incomplete
and/or insufficent information. Often management requires quick decision
making, or judgements made under pressure.

It is in this context that a more intuitive approach often develops. All

except the most mechanistic of rational decisions must include some
element of subjective judgement. Our decisions are based on judgements
which are affected by a range of factors including our experiences, values,
attitudes, and emotions.

Judgement heuristic decision making uses simple rules and

approximate short cuts to help us arrive at decisions. Drawing particularly
on our experiences and attitudes, it does this by helping us to cut through
the excessive information that can overload and delay decisions.

Whilst useful in helping us to simplify complex situations, we must also

remember that the subjective nature of heuristic decision making must also
introduce elements of bias. This can be illustrated in the different types of
judgement heuristics. For example:

Representative heuristics –

where judgements are made on the basis of things with which we are
familiar, or inferred from "representative" characteristics;

Anchor heuristics - where decsions are based on an anchor like a

"value" and then adjustments are made from that start point;

Availability heuristics - where judgements are built on the information

that is readily available, or on easily recalled memory/experience.

"Sometimes making a decision is hard not because it is unpopular, but

because it comes from your gut and defies a 'technical' rationale. Much
has been written about the mystery of gut, but it's really just pattern
recognition, isn't it. You've seen something so many times you just know
what's going on this time. The facts may be incomplete or the data
limited, but the situation feels very, very familiar to you."

Welch captures the essence of intuition and decision making. In contrast to

rational decision making, intuitive decisions are less structured and involve
feelings and perceptions rather than analysis and facts. Welch's approach
summarizes other theoretical elements of intuition and decision making.
These include:

Pattern recognition - where configurations and relationships are

recognised in information and events;

Similarity recognition - where similarities and differences, in past and

present situations, are identified;

Page | 15
 Sense of salience - recognizing (or assuming) the importance of events
and information, and the affect this has on judgments.

Making "Sense" of Intuition and Decision

Making
As managers trained or educated to be rational thinkers, we may be wary of
combining intuition and decision making. However, academic research into
decision making theory indicates there is a sound logic in reconciling the
two. This is particularly important when we remember that decision making
is rarely a precise, safe, fully informed process. Though not useful in every
situation, whererever there is any ambiguity or doubt in our decision
making, then there may be a place for intuitive thinking.

An interesting area of development relating to intuition and decision

making, is the work on sense making from organizational theorist Karl
Weick. Weick's work relates to our discussion of rational and intuitive
perpsectives, particularly the inclination of managers to think rationally
about decisions. This despite the fact that these decisions are based as
much on what they don't know as on what they know! In such circumstances
there is much to be said for decision making informed by intuition or
heuristics. Weick suggests:

"When people create maps of an unknowable, unpredictable world, they

face strong temptations towards either over confident knowing or overly
cautious doubt. Wisdom consists of an attitude towards one's beliefs,
values, knowledge, and information that resists these temptations
through an on-going balance between knowing and doubt".

"The essence of wisdom is in knowing that one does not know, in the
appreciation that knowledge is fallible, in the balance between knowing
and doubting."

. He argues that "decisions made very quickly can be every bit as good as
decisions made cautiously and deliberately."

What are the Steps Involved in Decision Making?

Step 1: The first step involved in a decision making process is to understand

the importance of making the decision. You would have to make a list of some
important factors like -

• Time required to make the decision

• Result of making a good and a bad decision
• People who would help you
• Who will face the consequences of the decision?
• Affect of the decision on you and the people around you
• What will happen if the decision is not made?

Page | 16
Step 2: Every decision is made to achieve some kind of goal or objective. So,
the next step would involve charting down the goals that you want your
decision to achieve. At this stage, it is also necessary to make a note of the
consequences that are not desirable once the decision is made.

Step 3: For a person to make a decision, he or she has to be confronted with

two or more options. If there is no option, making a decision would be
impossible. So, the third step requires you to make a draft stating the options
that are available to you. One can also create some options that do not exist
in reality. Doing this may help you find some solution to your problem and
make the decision process a little easier.

Step 4: Step 4 is where you have to analyze the different options in detail.
Your analysis would be on the basis of what would be the result of each
option available to you. You can take the help of different people at this stage,
asking them to give their opinion on each option. Here, you would be able to
recognize certain options that require more research or contemplation. This
stage is a filtration process where the options that seem to be irrelevant
should be taken out of the list and only the best possible ones retained.

Step 5: At this step, you have to develop some criteria, according to which
you have to compare the various options available to you. These criteria are
conditions that would help you in evaluating the different options and would
aid you in taking the decision.

Step 6: Once you have decided on the criteria, it is time for analysis of each
option according to the set conditions. Make a table, where the criteria
appears in columns and options appear in rows. Rate each option with a
numerical digit, as per how it would be beneficial for each criteria.

Step 7: After rating the available options according to criteria, at the seventh
step, try to combine different options that are available to you and see
whether you can come up with a better solution, instead of just choosing one
option. You also have to summarize the results you got for each option to
make the final decision.

Step 8: This is the final stage, where you have to make the ultimate decision.
Before you do this it is important to go through all the steps and recheck all
the information. This would be beneficial for delaying the time of taking the
final decision, if you find any missing information. One very important thing
that you have to keep in mind is that every decision you take would have
some level of risk. Knowing the potential risk involved in the decision one
makes would aid in preparing for the problem that arises with the decision.

These 8 steps to decision making process are essential decision making

techniques that would prevent one from choosing the wrong option. This is
also an important way of learning proper decision making skills that would
assist you in every decision you make.
1. Compare and contrast programmed and nonprogrammer decision-
making in organizations and give two realistic business examples of
each of these

Page | 17
 two types of decision-making.
Programmed and non-Programmed

Programmed decision are decisions that have been made so many times
in the past that managers have developed rules or guideline to be
applied when certain situations are expected to occur. Programmed
decision making is used when an inventory manager of mc Donald's
decides to order beef patty stocks because the stocks are three-quarters
empty. Programmed decisions making are a routine that you make
every time so that the organization run smooth. Managers can develop
rules and guidelines to regulate all routine organizational activities.
Most decisions are related to daily activities.

On the other hand, nonprogrammer decisions are made in response to

unusual opportunities and threats. Nonprogrammer decision making is
used when mc Donald's are deciding to invest in new deep fryers. It is
a no routine decision making. This means it is made for big decisions
that will affect an organization for a long time. This type of decision
making does not need rules or guidelines to be followed because the
situation is unexpected or uncertain. For example if mc Donald's plans
to launch a new line of menu, they will have to make decision base on
their intuition and reasoned judgments.

In programmed decision making there will be no error in the decisions

because it is a routine and managers usually have the information they
need to create rules and guidelines to be followed by others.
Nonprogrammer decision making are likely to have error because it
causes more problems for managers and is inherently challenging.
Managers must rely on their intuition to quickly respond to a pressing
concern.

Sometimes programmed decision making can cause error. But it is

minor to nonprogrammer decision making . Errors cause by
nonprogrammer decision making can affect an organization badly.

STEPS FOR MAKING A MAJOR

DECISION

Objectives Focus for Action Steps

Page | 18
 Choosing a
Major

ASSESS

Identify the Has content Read the university catalog

Decision to that I enjoy
be made Talk to people in the departments you are
and Matches my considering about their programs
Outcomes interests,
Desired values and Make a career counseling appointment
skills
What do I Meet with a career counselor to discuss
want in a Can lead to your interests values and skills and take
major? a career in appropriate inventories
which I am
interested

EXPLORE

Gather Results of self Summarize your assessment results

Information assessment
and Identify Attend a "Choosing a Major" workshop
Alternatives Information
about majors Read about different majors and related
What at careers in the Career Information Center or on
information Southeastern the Internet
do I need? Louisiana
University Talk to alumni and other people working in
occupations that interest you
Information
about Take one or more classes in order to "sample"
possible a major
careers fields

Likelihood of
satisfying
desired
outcomes

DECIDE

Weigh Probability of Discuss what you have found in your

Evidence succeeding in exploration with a career counselor and your
and Choose major and/or

Page | 19
among getting into family
Alternatives graduate or
professional Make a tentative or definite decision
What will school
lead to my
achieving my Academic
desired ability and
outcomes? motivation

Ability to
finance
education

ACT

What action Know how Declare your major

should I and where to
take? declare your
major

Common biases and errors in decision

making process
COMMON BIASES AND ERRORS IN DECISION-MAKING
PROCESS

In addition to engaging in bounded rationality, an accumulating body of

research tells us that decision makers allow systematic biases and errors
to creep into their judgments. These come out of attempts to shortcut
the decision process. To minimize effort and avoid difficult trade-offs,
people tend to rely too heavily on experience, impulses, gut feelings,
and convenient rules of thumb.? In many instances, these shortcuts are
helpful. However, they can lead to severe distortions from rationality.
The following highlights the most common distortions.

Overconfidence Bias: It been said that no problem in judgment and

decision making is more prevalent and more potentially catastrophic
than overconfidence

From an organizational standpoint, one of the more interesting findings

related to overconfidence is that those individuals whose intellectual
and interpersonal abilities are weakest are most likely to overestimate

Page | 20
their performance and ability. So as mangers and employees become
more knowledgeable about an issue, the less likely they are to display
overconfidence. Overconfidence is most likely to surface when
organizational members are considering issues or problems that are
outside their area of expertise.

Anchoring Bias: The anchoring bias is a tendency to fixate on initial

information as a starting point. Once set, we then fail to adequately
adjust for subsequent information. The anchoring bias occurs because
our mind appears to give a disproportionate amount of emphasis to the
first information it receives. So initial impressions, ideas, process, and
estimates carry undue weight relative to information received later.

.Confirmation Bias: The rational decision-making process assumes

that we objectively gather information. But we dont We selectively
gather information. The information bias represents a specific case of
selective perception. We seek out information that reaffirms our past
choices, and we discount information that contradicts past judgments.
We also tend to accept information at face value that confirms our
preconceived views, while being critical and skeptical of information
that challenges these views.

Availability Bias: Many more people suffer from fear of flying than
fear of driving in a car. The reason is that many people think flying is
more dangerous. If flying on a commercial airline was as dangerous as
driving, the equivalent of two 747s filled to capacity would have to
crash every week, killing all aboard, to match the risk of being killed in
a car accident. But the media give a lot more attention to air accidents,
so we tend to overstate the risk of flying and understate the risk of
driving.

This illustrates an example of the availability bias, which is the

tendency for people to base their judgments on information that is
readily available to them. Events that evoke emotions, that are
particularly vivid, or that have occurred more recently tend to be more
available in our memory. As a result, we tend to be prone to
overestimating unlikely events like an airplane crash. The availability
bias can also explain why managers, when doing annual performance
appraisals, tend to give more weight to recent behaviors of an employee
than those behaviors of six or nine months ago.

Escalation of Commitment Error: Another distortion that

creeps into decisions in practice is a tendency to escalate commitment
when a decision stream represents a series of decisions. Escalation of
Page | 21
commitment refers to staying with a decision even when there is clear
evidence that i wrong. An example of this is of my friend, who has
been dating a woman for about four years. He admitted that things were
going too well in their relationship; he informed me that he was going
to marry the woman. A bit surprised by his decision, I asked him why.
He responded: I have a lot invested in the relationship! A?

How Do Managers Make Decisions?

The quick answer: leaders just do. Managers who’ve yet to

achieve true leadership have a tough time making decisions for a
number of reasons including: analysis paralysis; fear of failure;
fear of success; fear of ridicule; and others.

Leaders, on the other hand, have no problem making decisions.

They would prefer that their subordinates made the bulk of the
decisions, but they’re ready to step up and make decisions when
warranted.

True leaders do not worry about how their decisions – right or

wrong – might reflect upon themselves; they are only concerned
with the welfare of the organization and their team. The bottom
line on decisions: leaders stand behind their decisions and the
decisions of their subordinates.

How Might They Make Better Decisions?

This is the Holy Grail of management: how to make better

decisions. There really is no better change a struggling manager
can make than one that affects their ability to make sound
decisions. So how does a manager begin making better
decisions? To answer this, let’s look briefly at why managers
make bad decisions.

While selfishness, pride and an overactive ego all lead to bad

decisions by sub-par managers, well-meaning managers most
often make poor decisions because they consider too much
input; too much data.

Main Conclusions
Page | 22
The theories examined in this paper illustrate three different types of
decision making; each of them influences the process of decision
making in an organization differently. The descriptive decision theory
concentrates on the immediate solutions, while the normative decision
theory has an idealistic standpoint - opposites of extreme. The
behavioral decision making theory acts as a middle-man where its main
purpose is to be the mediator between the descriptive and normative
decision theory. In spite of their differences, all three theories share one
common feature: rational decision in any give circumstances.

Recommendations
In order to run a successful organization, management has to
understand the different theories behind decision-making process. Even
though the theories are bounded by rationality, each theory values
teamwork, diversity, and ethics at different levels. Thus, different levels
of managements use different types of decision making process for the
survival of the company. It is important to clearly distinguish the
theories' boundaries and limitations to successfully decide which
variables are important at each level of an organization.

Limitations, Conclusions and Recommendations:

The three theories of decision making are generally different, but they
all share one common goal: making rational decisions. While the
descriptive theory focuses on how things are, the normative theory
concentrated on how things should be in a philosophical way.
Behavioral theory, on the other hand, stands in the middle of
descriptive and normative theory in order to counter-balance their
strengths and weaknesses of decision making. There is no right or
wrong method to decision making because it all depends on the type of
management, type of an organization structure, and the goals. In a large
organization, it is necessary to have all of the three theories available to
achieve both the short and long term goals set by the company:
successful organization should deploy all legal and ethical tools in
order to maximize efficiency and effectiveness. This will ensure the
greatest possible platform for organizational success and survival,
which in turn creates a platform for responsible corporate governance
and increased satisfaction of all stakeholders.

Page | 23