CHAPTER-6(Six)

1. CHAPTER-6(Six) CONCEPT OF DECISION MAKING

2. Decision Making & Decision Making Process Decision making is an act of choosing one alternative from among a set of alternatives. Decision making process indicates recognizing and defining the nature of a decision situation, identifying alternatives, choosing the “best” alternative, and putting it into practice.

3. DEFINITION OF DECISION MAKING Decision making is defined as the selection of a course of action from among alternatives: it is the core of planning. The process leading to making a decision might be though of as- i) premising, ii) identifying alternatives,

4. iii) evaluating alternatives in terms of the goal sought, and iv) choosing an alternative, that is, making a decision. Last of all we can say, Decision making is the act of choosing one alternative from among a set of alternatives.

5. TYPES OF DECISIONS: Managers must make many different types of decision. In general, most decision fall into one of two categories: programmed and non-programmed. • Programmed Decisions are used for structured or routing work. Example of a programmed decision is the reordering of standard inventory items.

6. ii) Non-programmed Decisions are used for unstructured, novel, and ill-defined situation of a nonrecurring nature. Examples, deciding whether to merge with another company, how to replace an executive who died unexpectedly, whether a foreign branch should be opened.

7. DECISION-MAKING CONDITIONS: Decision making is the act of choosing one alternative from among a set of alternatives. Most decision take place under conditions of certainty, risk, or uncertainty. The decision maker faces conditions of. Certainty Risk Uncertainty

8. 1.State of certainty: A condition in which the decision maker knows with reasonable certainty what the alternative are and what conditions are associated with each alternative. 2. State of risk: A condition in which the availability of each alternative and its potential payoffs and costs are all associated with probability estimates.

9. 3. State of uncertainty: A condition in which the decision maker does not know all the alternatives, the risks associated with each, or the consequences each alternative is likely to have

10. STEPS IN RATIONAL DECISION MAKING: A manager who really wants to approach a decision rationally and logically should try to follow the steps in rational decision making. These steps in rational decision making help keep the decision maker focused on facts and logic and help guard against inappropriate assumption and pitfalls.

11. Steps in decision making are as follows: • Recognizing and defining the decision situation. • Identifying alternatives. • Evaluating alternatives. • Selecting the best alternative. • Implementing the chosen alternative. • Following up and evaluating the results.

12. 1.Recognizing and defining the decision situation: Some stimulus indicates that a decision must be made. The stimulus may be positive or negative. Example-A plant manager sees that employee turnover has increased by 5 percent.

13. 2. Identifying alternatives: Both obvious and creative alternatives are desired. In general, the more important the decision, the more alternatives should be generated. `Example- The plant manager can increase wages, increase benefits, or change hiring standards.

14. 3. Evaluating alternatives: Each alternative is evaluated to determine its feasibility, its satisfactoriness, and its consequences. Example-Increasing benefits may not be feasible, Increasing wages and changing hiring standards may satisfy all conditions.

15. 4.Selecting the best alternative: Consider all situational factors and choose the alternative that best fits the manager’s situation. Example: Changing hiring standards will take an extended period of time to cut turnover, so increase wages.

16. 5.Implementing the chosen alternative: The chosen alternative is implemented into the organizational system. Example-The plant manager may need permission from corporate headquarters. The human resource department establishes a new wage structure.

17. 6. Following up and evaluating the results: At some time in the future, the manager should ascertain the extent to which the alternative chosen in step 4 and implemented in step 5 has worked. Example- The plant manager notes that, six months later, turnover dropped to its previous level.

18. How does a manager select an Alternative? When selecting from among alternatives, manager can use three basic approaches: • Experience. • Experimentation, and • Research and analysis.

19. 1.Experience: Reliance on past experience probably plays a large part than it deserves in decision making. Experienced managers usually believe, often without realizing it, that the things they have successfully accomplished and the mistakes they have made furnish almost infallible guides to the future. This attitude is likely to be more pronounced the more experience a manager has had and the higher he or she has risen in an organization.

20. 2.Experimentation: Experimentation is an obvious way to decide among alternatives is to try one of them and see what happens. Experimentation is often used in scientific inquiry. People often argue that it should be employed more often in managing and that the only way a manager can sure some plans are right especially in view of the intangible factors- is to try the various alternatives and see which is best.

21. 3. Research and analysis: One of the most effective techniques for selecting from alternatives when major decisions are involved is research and analysis. This approach means solving a problem by first comprehending it. It thus involves a search for relationship among the more critical of the variables, constraints, and premises that bear upon the goal sought. It is the pencil-and-paper approach to decision making.

22. DECISION MAKING MODEL Classical Model of Decision-making Administrative Model of Decision-making

23. Group Decision Making In Organizations Interacting group Delphi group Nominal group

24. CREATIVITY & INNOVATION An important factor in managing people is creativity. A distinction can be made between creativity and innovation. The term creativity usually refers to the ability and power to develop new ideas. On the other hand, Innovation usually means the use of these (new) ideas.

25. BRAINSTORMING Alex F. Osborn has been called the father of brainstorming. The purpose of the Brainstorming is to improve problem solving by finding new and unusual solutions. In the Brainstorming session, a multiplication of ideas is sought. The rules are as follows: • No ideas are ever criticized.

26. The more radical the ideas are, the better. • The quantity of idea production is stressed. • The improvement of ideas by others is encouraged. Brainstorming, which emphasizes group thinking, was widely accepted after its introduction.