DECISION MAKING

DM is an integral part of every Managers job.

It is his primary responsibility and identity.
DM permeates every task of managers, exists in
every part of an organisation and associates with
every action.
Latin word decidere meaning Cutting away
It the process of examining your possibilities,
options, comparing them and choosing a course of
action.

It is the cognitive process, every DM process produces a

final choice . It can be an action or an opinion .
It begins when we need to do something but we do not
know what.
Therefore, DM is a reasoning process which can be
rational or irrational, and can be based on assumptions.
According to Hayens and Massie A decision is a course of action which is consciously
chosen for achieving a desired result

Through
Decision Making:
Direct
Organize
Direct
Control
Plan
Control
Organize
Plan

6 Cs of DM

Construct : clear picture of precisely what must be

Compile : a list of requirements that must be met.

decided.

Collect : information on alternatives that meet the

requirements
Compare : alternatives that meet the requirements.
Consider : the what might go wrong; factor with
alternative.
Commit : to a decision and follow through with it.

each

Characteristics/Nature of
Decision Making
1) Making Choices
2) Logical sequence
3) Involves rationality
4) A judgment
5) Narrowing choice
6) Iterative activity(recurring)
7) Action commitment
8) Purposive (means not ends)
9) Human and social process
10)Directed at solving problems

Importance of Decision
Making
1.

2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.

Heart of Administration
Synonymous with managing
Universal mark of a manager
First managerial skill and responsibility
Basis of managerial functions
Core of planning
Building sound organizational structure
Provides direction
Basis of effective control
Path to success
DecisivenessTo face challenges
Means to problem solving

Types of Decision Making

A. Organizational Decisions:

Managers have to make decision in official capacity.

These can be delegated to others

Non-organizational Decisions:

Managers have to make decision in their individual capacity.

These can not be delegated to others

B. Basic Decisions:

Unique and one-time which involve long range commitments

and huge investments.
These can be policy decisions made at higher levels

Routine Decisions:

Managers have made decision which have minor effect on the

welfare of the concern.
These are repetitive and require little thought.

C. Programmed Decisions: routine, almost automatic

process.

Managers have made decision many times before.

There are rules or guidelines to follow.
Example: Deciding to reorder office supplies.

Non-programmed Decisions: unusual situations that

have not been often addressed.

No rules to follow since the decision is new.

These decisions are made based on information, and a
mangers intuition, and judgment.
Example: Should the firm invest in a new technology?

D. Individual Decisions:

Made by manager in capacity as a manager.

Most of the decisions are taken by a single individual

Group Decisions:

As complexity increases major decision require exchange of

ideas
Individuals participate as group in reaching a decision.

E. Strategic Decisions:

Characterized as novel, complex and open ended

They involve establishing enterprise goals and selecting
strategies
Fall within the purview of top management

Tactical Decisions:

Are less important and routine type.

Situation is given and requirements are evident.
Only problem is to find economical adaptation of known
resources

Decision Making
Steps(process):

Essentials of sound DM/Guidelines for

DM
1.
2.
3.
4.
5.
6.
7.
8.

Set goals and find the facts

Sense of timing
Involvement of subordinates
Communicate effectively
Be flexible
Follow through
Diagnostic approach
Delegate wisely

Barriers/Problems in Good DM
1. Hasty - Making quick decisions without having
much thought.
2. Narrow D M is based on very limited
information.
3. Scattered - Our thoughts in making decisions
are disconnected or disorganized.
4. Fuzzy - Sometimes, the lack of clarity on
important aspects of a decision causes us to
overlook certain important considerations.

5. Heuristics - Aheuristicis a sort of mental

shortcut or rule of thumb that we utilize
when making a judgment or decision.
For example, gamblers often judge the probability
that they will win their next game based on whether
or not they won the last game.

6. Hindsight Bias tendency to look back and easily spot all the

signs leading up to a particular outcome. ("I-knew-it-all-along" )

For example, a gambler might mistakenly believe that they can

accurately predict the outcome of a game of cards.

7. Overconfidence- A tendency to overestimate our own

knowledge, skill, or judgment.

8. Illusory Correlation(stereotype) - Whenmaking decisions, we

sometimes see relationships that do not really exist.

For example, if you have a bad experience with a rude waitress,

you might mistakenly believe that all waitresses are rude.