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Hbo ppt decision making

  2. The square on the right is obviously larger in area than the one on the left, isn’t it? How about the circles? Which looks larger in circumference and diameter? The one on the right? Not so! If you measure them, you’ll see that they are identical in size.
  3. ISSUE: Identify the best location for new school site. If after evaluating each of the primary locations only one viable choice remains, then there is really no decision left to make. But if three locations each meet the basic requirements and have different relative strengths, the president will then have to make a decision from among the options. ** most of our interest relates to decision making**
  4. Basic Elements of DECISION MAKING . Goal . Courses of action outcomes . Information (available) Alternatives .. each has an outcome likely to occur .. Value of each outcome relative to goal . Decision maker chooses alternative on the basis of his her evaluation of the information
  5. Information Action Outcome Probabilities Value of Out- Comes Relative To Goals Choice of One alternative Alternative Actions Goals Action 1 Action 2 Action 3 Outcome 1.1 Outcome 1.2 Outcome 1.3 Outcome 2.1 Outcome 2.2 Outcome 3.1 Outcome 3.2 Outcome 3.3 Elements of Decision Making
  6. Decisions made in organizations can be classified according to: FREQUENCY - how often a particular decision situation recurs INFORMATION – are conditions describe how much information is available about the likelihood of various outcomes
  7. Types of DECISIONS on the frequency of recurrence 1. Programmed decision – recurs often enough for decision rules to be developed. - usually are highly structured : a. goals are clear and well known; b. decision-making procedure is already established; and c. sources and channels of information are clearly defined
  8. Types of DECISIONS on the frequency of recurrence 2. Nonprogrammed decision – when a problem or decision situation has not been encountered before, however, a decision maker cannot rely on previously established decision rules - requires problem solving (a special form of decision making in which the issue is unique – it requires developing and evaluating alternatives without the aid of a decision rule. ** one key element of nonprogrammed decisions is that they require good judgment on the part of leaders and decision makers.
  9. Characteristics Programmed Decisions Nonprogrammed Decisions Type of Decision Well structured Poorly structured Frequency Repetitive and routine New and unusual Goals Clear, specific Vogue Information Readily available Not available, unclear channels Consequences Minor Major Organizational level Lower levels Upper levels Time for solution Short Relatively long Basis for solution Decision rules, set procedures Judgment and creativity Characteristics of Programmed and Nonprogrammed Decisions
  10. Information required for DECISION MAKING 1. Complete certainty - when all alternative outcomes are known 2. Complete uncertainty - when all alternative outcomes are unknown 3. Condition of Risk (points between the two extremes) - the decision maker has some information about the possible outcomes and may be able to estimate the probability of their occurrence - the outcome of a given action is not known but has enough information to estimate the probabilities of various outcomes
  11. Information conditions Alternatives Probability of outcome occurring Outcome Goal: To Maximize Profit Certainty Promote Do not Promote 1.0 1.0 5,000 Php 500 Php 5,000 Php 500 Php Risk Promote Do not Promote Large market: 0.6 Small market: 0.4 Large market: 0.6 Small market:0.4 5,000 Php 500 Php 500 Php 150 Php 3000 Php 200 Php Expected value 6000 Php 300 Php 60 Php Expected value 360 Php Uncertainty Promote Do not promote ? ? ? ? ? ? Uncertain Uncertain Uncertain Uncertain Uncertain Uncertain Outcomes unknown Outcomes unknown Alternative Outcomes Under Different Information Conditions
  12. Approaches to DECISION MAKING Rational Approach - assumes that managers follow a systematic , step-by- step process from goals to implementation, measurement, and control. It further assumes the organization is dedicated to making logical choices and doing what makes the most sense economically and managed by decision makers who are entirely objective and have complete information. * actual decision making often is not wholly rational process
  13. Steps in Rational Approach 1. State the Situational Goal the rational decision-making process begins with the statement of a situational goal-that is a goal for a particular situation. 2. Identify the Problem the purpose of problem identification is to gather information that bears on the goal. If there is discrepancy between the goal and the actual state, action maybe stated.
  14. 3. Determining Decision Type decision makers must determine if the problem represents a programmed or a nonprogrammed decision. 4. Generate Alternatives decision makers may rely on education and experience as well as knowledge of the situation to generate alternatives
  15. 5. Evaluate Alternatives decision maker must examine each alternative for evidence that it will reduce the discrepancy between the desired state and the actual state. 6. Choose Alternative choosing consists of selecting the alternative with the highest possible payoff, based on the benefits, costs, risks, and uncertainties of all alternatives.
  16. 7. Implement the Plan implementation requires the proper use of resources and good managerial skills; the success depends on the leadership, the reward structure, the communications system, and group dynamics. 8. Control: Measure and Adjust the outcomes of the decision are measured and compared with the desired goal
  17. The BEHAVIORAL APPROACH - acknowledges the role and importance of human behavior in the decision-making process - decision makers operate with bounded rationality rather with the perfect rationality assumed by the rational approach
  18. BEHAVIORAL APPRAOCH is characterized by: 1. the use of procedures and rules of thumb – initially reduced uncertainty in decision making 2. suboptimizing - is accepting less than the possible outcome - - - frequently, it is not feasible to make the ideal decision in a real-world situation given organizational constraints 3. satisficing - is examining alternatives only until a solution that meets minimal requirements is found and then ceasing to look for a better one
  19. PERSONAL APPROACH - Janis-Mann concept called the conflict model (Irving Janis and Leon Mann) - based on research in social psychology and individual decision processes Characteristics of Personal Approach 1. it deals with important life decisions * marriage, schooling, career, and major organizational decisions
  20. Characteristics of Personal Approach 2. It recognizes that procrastination and rationalizations are mechanisms by which people avoid making difficult decisions and coping with the associated stress 3. It explicitly acknowledges that some decisions probably will be wrong and that the fear of making an unsound decision can be a deterrent to making any decision at all
  21. Characteristics of Personal Approach 4. It provides for self-reaction – comparisons of alternatives with internalized moral standards 5. It recognizes that at times the decision maker is ambivalent about alternative courses of action
  22. Start: Challenging or negative feedback or an opportunity Additional information about losses from continuing unchanged Q. 1. are the risks serious if I don’t make a change? Unconflicted Adherence Information about losses from changing signs of more information available and of other unused resources Q.2. are the risks serious if I do make a change? Unconflicted Change Q.3. is it realistic to hope to fid a better solution? Defensive Avoidance Information about deadline and time pressure Q. 4. is there sufficient time to search and dileberate? Hypervigilance Vigilance End: Incomplete search appraised, and contingency planning End: thorough search/apprai sed,and contingency planning Antecedent Conditions Mediating Processes Consequences No No No No Maybe or Yes Maybe or Yes Maybe or Yes Maybe or Yes
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