decision making

66UNIT

DECISION DECISION MAKING MAKING

DECISION DECISION MAKING MAKING

Principles and Practices

of

Session No :1

© Copyright McGraw-Hill. All rights reserved. 2–2

OBJECTIVE OF THE UNITOBJECTIVE OF THE UNITOBJECTIVE OF THE UNITOBJECTIVE OF THE UNIT

To know the nature and purpose of To know the nature and purpose of decision making decision making

To know which are the different To know which are the different principles, types of the Decision making principles, types of the Decision making

To understand that management is To understand that management is basically the decision making science.basically the decision making science.

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• Meaning of decision-Meaning of decision-• A decision making is a choice between two or more A decision making is a choice between two or more

alternatives.alternatives.

• When a manager choose it means that he is deciding When a manager choose it means that he is deciding what to do on the basis of his logic and judgment.what to do on the basis of his logic and judgment.

• It does not require a wise manager when there is no It does not require a wise manager when there is no alternative. But when the alternatives are available it alternative. But when the alternatives are available it depends on the capacity and skill of the manager to depends on the capacity and skill of the manager to choose between the two alternatives. choose between the two alternatives.

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© Copyright McGraw-Hill. All rights reserved. 2–4Figure 2.1Source:

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Types of decisionTypes of decisionTypes of decisionTypes of decision

Programmed and non-programmed decisions- these are those decision that are made in accordance with some policy, rule or procedure. These are repetitive in nature. Ex.-pricing ordinary customers, payment of absent worker etc.non-programmed decision are those decision which are taken according to the situation arise. There is no any kind of procedure or rules to take such decisions. Ex.failng product line, supply of product stopped due to natural calamity, riots etc.The ability to provide good non programmed decision proves the efficiency of the manger


• Major and minor decisions-Major and minor decisions-the significance of the decisions are depend on the following the significance of the decisions are depend on the following

basis-basis-1.1.Degree of futurity of decision-Degree of futurity of decision- a decision which has a long a decision which has a long

range impact like bringing new technology, change in product range impact like bringing new technology, change in product line, replacement or promotion of employee these all are major line, replacement or promotion of employee these all are major decision.decision.

2.2.Impact of the Decision on other Functional Areas-Impact of the Decision on other Functional Areas- if the decision is affecting only one department then it is minor if the decision is affecting only one department then it is minor

decision ex. If account people want to change the format of decision ex. If account people want to change the format of account it affect only the finance dept.account it affect only the finance dept.

if the decision affects more than one dept then it will call if the decision affects more than one dept then it will call major decision ex. Change in HR policy, lay off in industry etc.major decision ex. Change in HR policy, lay off in industry etc.


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• Qualitative Factors that enter the Decision-Qualitative Factors that enter the Decision-

• the decision which involves some subjective values the decision which involves some subjective values like principle of conduct, ethical values, social and like principle of conduct, ethical values, social and political beliefs etc. Ex. Giving bribe to income tax political beliefs etc. Ex. Giving bribe to income tax officer.officer.

4. 4. Recurrence of Decisions-Recurrence of Decisions- the decision which are the decision which are rare and not taken earlier are major decision which rare and not taken earlier are major decision which should be taken at higher level and the decision which should be taken at higher level and the decision which occur again and again can take at lower levels.occur again and again can take at lower levels.

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• Routine and strategic decisions-Routine and strategic decisions- the routine decision like provision of air conditioning ,parking the routine decision like provision of air conditioning ,parking

facility, cafeteria service are the minor decisions. These all facility, cafeteria service are the minor decisions. These all decision are supportive decisions.decision are supportive decisions.

Strategic decision like lowering down pricing, change in Strategic decision like lowering down pricing, change in product line, installation of new machine are some of the major product line, installation of new machine are some of the major decisions.decisions.

• Individual and group decisions-Individual and group decisions- the decision taken by the decision taken by the individual are minor decision and the decision taken by the the individual are minor decision and the decision taken by the group are major decision. important and interdepartmental group are major decision. important and interdepartmental decisions are taken by the group of mangers.decisions are taken by the group of mangers.


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Advantages of group decisionAdvantages of group decisionAdvantages of group decisionAdvantages of group decision• 1.Increased acceptance by the employees.1.Increased acceptance by the employees.

• 2.Easier coordination.2.Easier coordination.

• 3.Easier communication.3.Easier communication.

• 4.More information processed.4.More information processed.

• Disadvantages of Group decisionsDisadvantages of Group decisions• 1.It takes longer time1.It takes longer time

• 2.Groups can be indecisive- blaming each other2.Groups can be indecisive- blaming each other

• 3. Group can compromise- it can compromise to the principles of 3. Group can compromise- it can compromise to the principles of the organization.the organization.

• 4. group can be dominated by the individuals.4. group can be dominated by the individuals.

• 5.group may have a prior commitment 5.group may have a prior commitment

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Types of Group techniques-Types of Group techniques-Types of Group techniques-Types of Group techniques-

• Nominal group techniques- Nominal group techniques- steps involved in steps involved in this techniques are as follows-this techniques are as follows-

• 1. Members saliently and independently write their 1. Members saliently and independently write their opinion on the problems .opinion on the problems .

• 2. then they present their ideas to the group. These 2. then they present their ideas to the group. These ideas are summarized and written on the black ideas are summarized and written on the black board.board.

• 3.then these ideas are discussed for evaluated.3.then these ideas are discussed for evaluated.

• 4. finally members give their rating to the ideas 4. finally members give their rating to the ideas through voting .through voting .

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• Delphi Techniques.Delphi Techniques.

In this techniques the members who are In this techniques the members who are located in different locations and they do not located in different locations and they do not know each other asked to send their opinion know each other asked to send their opinion on the problems. They fill a questionnaire two on the problems. They fill a questionnaire two times and then management take the decision times and then management take the decision on their responseon their response

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Simple and complex decision- when the factors to be considered for solving the problems are less the decision is simple and when they are more the decision is a complex one. In this we get four types of decisions-1.Decision in which the problem is simple and the outcome has a high degree of certainty is called mechanistic decisions.2. Decision in which the problem is simple and the outcome has a low degree of certainty is called judgmental decision. Decision in the field of markeging,investment etc.3.Decision in which the problem is complex and the outcome has a high degree of certainty is called analytical decision. ( Production decision )


Steps in decision makingSteps in decision makingSteps in decision makingSteps in decision making

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• 1.Recognising the problems-1.Recognising the problems-

it is necessary to first recognize the problems. the it is necessary to first recognize the problems. the reasons of the problems may as under: reasons of the problems may as under:

a.a. When there is a deviation from the past experience.When there is a deviation from the past experience.

b.b. When there is a deviation from the plan.When there is a deviation from the plan.

c.c. When other people bring problem to the manager.ex. When other people bring problem to the manager.ex. Customer complaints about late deliveries, workers Customer complaints about late deliveries, workers complains about poor working conditions.etc.complains about poor working conditions.etc.

d.d. When the competitor perform better than When the competitor perform better than organization. They are using new techniques for organization. They are using new techniques for selling.selling.



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2.Deciding priorities among Problems- The manager should not solve every problems himself. He should examine that problem correctly. Some problems can be solved at lower levels, higher levels. Some problems can be differed or delayed.Some problems can be left unsolved. Ex. Napoleon.

3. Diagnosing the problem- the manager should first diagnose the problem. He should examine the problem from all point of view. Ex. Problem of sales decline. Management may think that there is problem in selling techniques. But actually the problem my be in transportation of the goods.



• 4.Developing alternative solutions or course of 4.Developing alternative solutions or course of actionaction.-.-

for solving the problem manager may have many alternatives. for solving the problem manager may have many alternatives. He has to choose the best solution among these alternatives. He has to choose the best solution among these alternatives. Ex. To increase the production. he may have options like to start Ex. To increase the production. he may have options like to start a new plant, by new machines, to start new shift, to start a new plant, by new machines, to start new shift, to start overtime etc.while choosing the alternative a manager must overtime etc.while choosing the alternative a manager must consider following factors.consider following factors.

1. Feasibility of the solution.1. Feasibility of the solution.

2. Limiting factors2. Limiting factors

3. He can use his past experience.3. He can use his past experience.

4. He can copy his competitor4. He can copy his competitor

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..

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5.Measuring and comparing the consequences of the alternative solutions.-It involves the quality and acceptability of the solutions.Tangible and intangible consequences.Tangible consequences can be measured in terms of units. Such as cost of various alternatives etc.Intangible consequences are those which cannot be calculated. Ex.-effect of good labor relations, effect of some social events, effect of advertisements policy etc.The solutions must be accepted by all the employees.



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6.Converting the decision into effective action and follow up action.-The decision should be communicated to the concern dept. or employees.That decision should be accepted by everyone.If possible workers participation should be there in the decision making to avoid opposition


Difficulties in decision makingDifficulties in decision makingDifficulties in decision makingDifficulties in decision making

• 1 Incomplete information1 Incomplete information

• 2. Unsporting Environment- 2. Unsporting Environment- lack of motivation, lack of all round lack of motivation, lack of all round goodwill.etc. goodwill.etc.

• 3. Non acceptance by subordinates-3. Non acceptance by subordinates-

• 4. Ineffective communication4. Ineffective communication

• 5. Incorrect timing5. Incorrect timing

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Thank YouThank You

decision making

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