PROBLEM IDENTIFICATION AND ANALYSIS

DEFFERENT TYPES OF TECHNIQUES AND

EFFECTIVELY SOLVING PROBLEMS.

Decision is the selection from among several

alternative courses of action. The definition of
decision involves following characteristics:
1.

Decision making is a process of

selection and the aim is to select best
alternative.

2. Decision is aimed at achieving the

objectives of the organization if it is
made in organizational context.

3.

It also involves the evaluation of available

alternatives because only through this
evaluation one can know the best
alternative.

4.

Decision making is a mental process because

the final selection is made after thoughtful
consideration.

5.

Decision involves rationality because through

decision one tries to better ones happiness.

6.

Decision making involves a certain

commitment. This commitment may be for
short run or long run depending upon the
type of decision.

 Steps in systematic decision making.

Recognize and define the problem or opportunity.
Identify and analyze alternative courses of action,

and estimate their effects on the problem or

opportunity.
Choose a preferred course of action.
Implement the preferred course of action.
Evaluate the results and follow up as necessary.

Decision environments include:

Certain environments.
Risk environments.
Uncertain environments.

1. Certain environments exist when information is sufficient to

predict the results of each alternative in advance of

implementation.Certainty is the ideal problem solving and decision
making environment.
2.Risk environments exist when decision makers lack complete

certainty regarding the outcomes of various courses of action, but

they can assign probabilities of occurrence.Probabilities can be
assigned through objective statistical procedures or personal
intuition.
3. Uncertain environments exist when managers have so little
information that they cannot even assign probabilities to various
alternatives and possible outcomes.ncertainty forces decision
makers to rely on individual and group creativity to succeed in
problem solving.

Uncertain environments also characterized by rapidly changing:

External conditions.

There are various ways of classifying decision in

an organization. These bases give five sets of
decisions.

Organizational Decision:
In an organization when an individual takes
decisions as an executive for the organization,
these are known as organizational decisions.

Personal Decision:
An executive can take decisions about himself
which are personal decisions. These decisions
normally affect personal life of the decisionmaker, though at many items they may affect
organization also, such as, leaving of the
organization by an individual.

Routine Decision

Routine decisions are taken in the context of

day-to-day operation of the organization. Mostly,
they are of repetitive nature and related with
the general functioning. They do not require
much analysis and evaluation and can be made
quickly.

strategic decisions

Strategic decisions are those which are taken

during the current time period, but whose
primary effect is felt during some future period.
Strategic
decisions
affect
organizational
structure, objective, facilities, and finances.
These decisions are mostly non-repetitive in
nature. Since they have fundamental effects on
the organization, they are taken after careful
analysis and evaluation of various alternatives.
These decisions are taken comparatively at
higher level of management.

Policy Decisions

Policy decisions are taken by top management in the

organization which determines the basic policies. The
policy decisions are very important and have longterm impact. These decisions provide help in
establishing the business such as deciding location of
plant, volume of production, sale and purchase
decisions, policy decisions regarding the employees,
etc. Policy decisions are sometimes published as
policy manual which become the basis for other
operative decisions.

Operative Decisions
Operative decisions are related with the day-to-day
operation of the business. Middle and lower level
managers who are more closely related with the
supervision of actual operations take these generally.
These decisions may be written or otherwise.

4.

Programmed
Decisions:

or

Non-Programmed

Such classification of decisions is made on the basis

of the use of operations research. Programmed
decisions are normally of repetitive nature and are
taken within the broad policy structure. These
generally have short-run impact and are taken by
lower level managers, such as, granting leave to an
employee, purchase of materials in normal routine,
etc.

Individual and Group Decisions.

This classification is based on the basis of persons

involved in the decision-making process.
i) Individual decisions are taken by a single individual.
These are taken in the context of routine or programmed
decisions where the analysis of various variables is simple
and for which broad policies are already provided.
Sometimes, important decisions are taken by single
individuals also.
ii) Group decisions are taken by a group constituted for
this specific purpose or by a standing committee. These
decisions are generally very important for the
organization. Group decisions have certain positive value
such as greater participation of individuals and quality in
decisions, and certain negative values such as delay in
decision-making process and difficulty in fixing the
responsibility of decisions.

Arriving at a decision implies that a manager has gone

though a series of systematically related steps. These
steps of the decision making process include (1)
determining the problem as related in objectives being
sought; (2) identifying alternative solutions; (3)
analyzing the possible outcomes of each alternative;
and (4) selection of an alternative for subsequent
implementation. Pictorially, this process is shown
below.

Analysis of
Future Possible
Outcomes or
Consequences*

List of
Alternatives

Y1A1

A1

Y2A1
Y3A1

Problem
X

Y1K2
A2

Y2A2

Y2A2
Y2A1

Comparison of
Outcomes to Determine
which Alternative Is
Selected

* Different alternatives will lead to different

possible outcomes or
Consequences.
This
can
be
expressed
symbolically as Y1A1; thus, the outcome
Y1 if alternative A1 is follows
Determining the precise problem to be solved is
the first and possibly most important step in the
decisional process. Every decision is directly
related to a problem. Time and effort should be
expanded only in gathering data and
information. One-way of zeroing in on the
correct problem is to ask.

To be most meaningful only viable and

realistic alternative should be included
in the listing. There are also time and
cost constraints that will restrict the
number of reasonable alternatives to
be selected. Psychological barriers may
also restrict the number of alternatives
that will be developed by a given
manager.

Good managers are innovators who depend heavily on

an ability to think creatively. All present and potential
managers should involve into the mental and
procedural aspects of creativity. The application of
creative ideas to managerial operations is often
difficult. Three reasons seem to be responsible for
this difficulty:

1.

The formal organization with its multiple levels of

administrative authority may act as a barrier.

2.

The desire for security on the part of some

managers may hinder the approval and
implementation of new ideas.

3.

When it appear that an organization is operating

successfully, managers may not be willing to

One creative technique used in identifying

alternative courses of action is referred to as
brainstorming. Basically, the approach seeks
to elicit ideas by pooling the efforts of several
people who either meet as a group, or work on
a problem by themselves.

Managers can never be sure of the actual outcome of

each alternative, uncertainty always exists.
Consequently, this step is a real change requiring
managers to call on present knowledge, past
experience, foresight, and scientific acumen.

The acute decision maker must recognize the strategic

or limiting factors creating a problem. Strategic
factors refer to those that are most important in
determining the action to be taken in solving a given
problem. An organization of strategic factors is also
important in analyzing alternative course of action. In
this way, the probability of making a more rational
selection from among alternative courses of action is
increased.

1.

There is no decisional problem until two or

more alternative courses of action are
available.

2.

Only one course of action can be selected.

However, any combination of actions can be
considered as a single action.

3.

A course of action is selected to either solve or

alleviate a problem. In order to choose an
action that will lead to a desirable solution, the
problem must be specified as clearly as
possible.

4.
A satisfactory decision implies that the
decision makes analyzed the alternatives and
judged a particular action to have the greatest
probability of solving the problem in a desirable
manner.
5.
The problem of measuring desirability has not
been solved, particularly when there are several
possible
outcomes
associated
with
each
alternative.
6.
In facing some managerial problems, the
monetary scale can be used to measure the values
in a problem. However, this scale is not
completely satisfactory and should be used with
care.

 Classical decision theory.

Views the decision maker as acting in a world of complete certainty.
The classical decision maker:
Faces a clearly defined problem.
Knows all possible action alternatives and their consequences.
Chooses the optimum alternative.
Is often used as a model of how managers should make decisions.
Applicability of Classical decision theory:
May not fit well in a chaotic world.
Can be used toward the bottom of many firms, even most high-tech firms.
Behavioral decision theory.
Accepts a world with bounded rationality and views the decision maker as acting only

in terms of what he/she perceives about a given situation.

Recognizes that human beings operate with:
Cognitive limitations.
Bounded rationality.
The behavioral decision maker:
Faces a problem that is not clearly defined.
Has limited knowledge of possible action alternatives and their consequences.
Chooses a satisfactory alternative.
Applicability of Behavioral decision theory:
Fits with a chaotic world of uncertain conditions and limited information.
Encourages satisficing decision making.

 The garbage can model.

A model of decision making that views problems,
solutions, participants, and choice situations as mixed
together in the garbage can of the organization.
In stable settings, behavioral decision theory may be

more appropriate.
In dynamic settings, the garbage model may be more
appropriate.

Implications of the garbage can model.

Choice making and implementation may be done by

different individuals.
Because of interpretation, there is a risk that the actual

implementation does not exactly match the choice.

Many problems go unsolved.

 Managers face complex choice processes.

Decision making information may not be available.
Bounded rationality and cognitive limitations affect

the way people define problems, identify

alternatives, and choose preferred solutions.
Most decision making in organizations goes beyond
step-by-step rational choice.
Most decision making in organizations falls somewhere
between the highly rational and the highly chaotic.
Decisions must be made under risk and uncertainty.
Decisions must be made to solve nonroutine
problems.
Decisions must must be made under time pressures
and information limitations.
Decisions should be ethical.