Chapter 3-decision Making 2017 665i5f

Chapter 3 The Nature of Decision Making

Learning objective 3.1 Definition of decision making 3.2 Types of decision making 3.2.1 Programmed decision 3.2.2 Non-programmed decision 3.3 Types of condition under decision making 3.4 The rationale of decision making 3.5 Decision making process 3.6 Group decision making techniques

LO 3.1 Definition of decision making

• “The process through which managers identify and resolve problems

and capitalize on opportunities” • The process by which a course of action is selected as the way to deal

with a specific problem

LO 3.2 Types of decision making Types of Decision Making

Program

 It is structured.  A repetitive decision that can be handled by a routine approach  Example: Rules & regulations

NonProgram  Deals with unique, unusual or exceptional problem. It is unstructured and requires higher level management Non-routine decision making that occurs in response to unusual, unpredictable opportunities and treat Example: Government’s decision to prevent H1N1 by stopped all the travelling outside country

LO 3.3 Types of condition under decision making

• Decision maker know exactly what will happen and able to predict the outcome precisely

Certainty

Uncertainty

• E.g.: If you put RM1000 in bank under fixed deposit or a year at 5% interest, then interest earned will be RM50 after 1 year

• A condition under which there is not full knowledge of the problem and reasonable probabilities for alternative outcomes cannot be determined. • A situation in which a decision maker has neither certainty nor reasonable probability about the outcome

Cont..

Risk

• Refer to future conditions that are not always known in advance • Decision maker is able to estimate the likelihood of certain outcome based on personal experience or secondary information • Some information is available, but it is not enough to answer all questions about the outcomes

Ambiguity

• Means the goals to be achieved or problem to be solved is unclear, alternatives are difficult to define and information about outcomes is not available.

LO 3.4 The rationale of decision making – Investigate the situation • Define problem • Diagnose causes • Identify decision objectives

– Develop alternatives • Seek creative alternatives • Do not evaluate yet

LO 3.4 The rationale of decision making – Evaluate alternative & select the best one • Evaluate alternative: Time required, costs involved, risk involved, benefits or advantages & limitation • Select the best alternative

– Implement & monitor • Plan implementation- review the plan periodically • Monitor implementation & make necessary adjustment

LO 3.5 Decision making process

Identifying opportunities and diagnosing problems

Identifying objectives

Generating alternatives

• Managers regularly review data related to their areas of responsibility, including both outside information and reports and information from within the organization

• Reflect the results the organization wants to attain. Both the quantity and quality of the desired results should be specified because these aspects of the objectives will ultimately guide the decision maker in selecting the appropriate course of action • Objectives can be short range or long range

• Alternatives – Strategies that might be implemented in the decisionmaking situation • Creativity and imagination are often required in this step

Cont… • Assess the value or relative advantages or disadvantages of each alternative under consideration Evaluating alternatives

Reaching decisions

• Making a final choice • The best decisions are often based on careful judgments, making a good decision involves carefully examining all the facts, determining whether sufficient information is available, and finally selecting the best alternatives

• When decisions involve taking action or making changes, choosing ways to put these actions or changes into effect become an essential managerial task Choosing • The key to effective implementation are: implementatio • a) Sensitivity to those who will be affected by the decision n strategies • b) Proper planning and consideration of the resources necessary to carry out the decision

Cont…

Monitoring and evaluating

• No decision-making process is complete until the impact of the decision has been evaluated • Managers must observe the impact of the decision and take further action if it becomes necessary

LO3.6 Group decision making techniques

1) Brainstorming – A technique used to enhance creativity that encourages group to generate as many novel ideas as possible on a given topic without evaluating them • Can enhance creativity by overcoming pressures for conformity that can retard the development of creative decision-making • Focuses on generating ideas rather than on choosing an alternative

Cont…

2) Nominal group technique (NGT) – A structured process designed to stimulate creative group decisionmaking in which agreement is lacking or the have incomplete knowledge concerning the nature of the problem • Individual list their ideas on the specific problem and present the ideas at one time, without discussion • ’ ideas are recorded so that everyone can see them • After all ’ ideas are presented, the group discusses the ideas to clarify and evaluate them

Cont…

3) Delphi technique – An approach that uses the experts to make predictions and forecasts about future events without meeting face-to-face • Using survey instruments or questionnaires, a group leader collects written expert opinions on a topic

Group Decision Making Advantages & Disadvantages Advantages

Disadvantages

1. More information and knowledge are available.

1. The process takes longer than individual decision making, so it is costlier.

2. More alternatives are likely to be generated.

2. Compromise decisions resulting from indecisiveness may emerge.

3. More acceptance of the final decision is likely.

3. One person may dominate the group. 4. Groupthink* may occur.

4. Enhanced communication of the decision may result. 5. Better decisions generally emerge. * a process in which bad decisions are made because the different of a group do not express their individual opinions about a plan, proposal, etc. but only say what they think the rest of the group would agree with

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