Location via proxy:   [ UP ]  
[Report a bug]   [Manage cookies]                

Decision Making Econ 1

Download as pdf or txt
Download as pdf or txt
You are on page 1of 26

CHAPTER-6(Six)

CONCEPT OF DECISION
MAKING
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.
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,
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.
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.
i) Programmed Decisions are used for
structured or routing work.
Example of a programmed decision is the
reordering of standard inventory items.
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.
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


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.
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
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.
Steps in decision making are as follows:
1. Recognizing and defining the decision
situation.
2. Identifying alternatives.
3. Evaluating alternatives.
4. Selecting the best alternative.
5. Implementing the chosen alternative.
6. Following up and evaluating the results.
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.
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.
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.
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.
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.
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.
How does a manager
select an Alternative?
When selecting from among alternatives,
manager can use three basic approaches:
1. Experience.
2. Experimentation, and
3. Research and analysis.
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.
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.
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.
DECISION MAKING MODEL

▪ Classical Model of Decision-making


▪ Administrative Model of Decision-making
Group Decision Making In
Organizations
▪ Interacting group
▪ Delphi group
▪ Nominal group
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.
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.
▪ 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.

You might also like