Decision Making Process in

Organizations
Definition:
Decson makng s a conscous process of makng choces
among one or more aternatves wth the ntenton of
movng toward some desred state of affars.
The Six-Step Rational Decision-Making
Model
1. Defne the probem.
2. Identfy decson crtera
3. Weght the crtera
4. Generate aternatves
5. Rate each aternatve on each crteron
6. Compute the optma decson
Part 1 Introdction
1!Define the pro"le#
Defne the Probem: The frst step towards a decson-
makng procedure s to defne the probem. Obvousy,
there woud be no need to make a decson wthout
havng a probem. So, the frst thng one has to do s to
state the underyng probem that has to be soved. You
have to ceary state the outcome that you desre after
you have made the decson. Ths s a good way to start,
because statng your goas woud hep you n carfyng
your thoughts.
$!Identif% decision criteria
Once a decson maker has defned the probem, he or
she needs to dentfy the decson crtera that w be
mportant n sovng the probem. In ths step, the
decson maker s determnng whats reevant n makng
the decson.
Ths step brngs the decson makers nterests, vaues,
and persona preferences nto the process.
Identfyng crtera s mportant because what one
person thnks s reevant, another may not.
Aso keep n mnd that any factors not dentfed n ths
step are consdered as rreevant to the decson maker.
&!'eight the criteria
The decson-maker weghts the prevousy dentfed
crtera n order to gve them correct prorty n the
decson.
(!)enerate alternati*es
The decson maker generates possbe aternatves that
coud succeed n resovng the probem. No attempt s
made n ths step to apprase these aternatves, ony to
st them.
+!Rate each alternati*e on each criterion
The decson maker must crtcay anayze and evauate
each one. The strengths and weakness of each
aternatve become evdent as they compared wth the
crtera and weghts estabshed n second and thrd
steps.
,!-o#pte the opti#al decision
Evauatng each aternatve aganst the weghted crtera
and seectng the aternatve wth the hghest tota
score.
.ss#ptions of Model
1.Problem clarity. (The decson maker s assumed to have
compete nformaton regardng the decson stuaton.)
2.Known options (Identfy a the reevant crtera and can
st
a the vabe aternatves. The decson maker s aware of
a the
possbe consequences of each aternatve.)
3.Clear preference (The crtera and aternatves can be
ranked
and weght to refect ther mportance)
4.Constant preferences (The specfc decson crtera are
constant and that weghts assgned to them are stabe
over tme)

Part $ - I#pro*ing -reati*it% in
Decision Making
-reati*e Potential - Get out of the psychoogca ruts
most us get nto and earn how to thnk about a probem
n dvergent ways.
Three--o#ponent Model of -reati*it%
/xpertise (The foundaton of a creatve work)
knowedge of a sub|ect were necessary condtons for us
to be abe to make creatve contrbutons to the feds.
The potenta for creatvty s enhanced when ndvduas
have abtes, knowedge, profcences, and smar
expertse n ther feds of endeavor.
-reati*it% Skills (The abty to use anaoges to see
the famar n a dfferent ght. Appy an dea from one
context to another)
Integence, ndependence, sef-confdence, rsk takng,
and nterna ocus of contro, toerance for ambguty
and perseverance n the face of frustraton.
Intrinsic task #oti*ation (The desre to work on a
task)
nterestng, nvovng, exctng, satsfyng, or personay
chaengng these factor woud be affect the task
motvaton. Ths woud turns creatvty potenta nto
actua creatve deas.
0i*e organizational factors can i#pede staff
creati*it%:
1. Expected Evaluation |Focusng on how staffs work s
gong to be evauated|
$1 Surveance |Beng watched whe staff are workng|
&. Externa motvators |Emphaszng externa, tangbe
rewards|
(. Competton |Facng wn-ose stuatons wth peers|
+. Constraned choce |Beng gven mts on how staff
can do ther work.|
Part & - 2o3 Decisions .re .ctall% Made in
Organization
Peope are usuay content to fnd an acceptabe or
reasonabe souton to ther probem rather than optma
one. Consequenty, decson makers generay make
mted use of ther creatvty. Choces tend to be
confned to the neghborhood of the probem symptom
and to the neghborhood of the current aternatve.
"Most sgnfcant decsons are made by |udgment,
rather than by a defned prescrptve mode."
4onded Rationalit%
when a staff consdered whch coege to attend, they
w not ook every vabe aternatve nor dentfy a the
crtera that were mportant n decson.
Instead of optmzng, staff probaby "satsfed".
When faced wth a compex probem, most peope
respond by reducng the probem to a eve at whch t
can ready understand. The mted nformaton-
processng capabty of human bengs makes t
mpossbe to assmate and understand a the
nformaton necessary to optmze. So peope satsfed;
that s, they seek soutons that are satsfactory and
suffcent.
Because the capacty of the human mnd for formuatng
and sovng compex probems s far too sma to meet
the requrements for fu ratonaty, ndvduas operate
wthn the confnes of "onded rationalit%. They
construct smpfed modes that extract the essenta
features from probems wthout capturng a of ther
compexty. Indvduas can then behave ratonay wthn
the mts of the smpe mode.
Once a probem s dentfed, the search for crtera and
aternatves begns. But the st of crtera s key to be
far from exhaustve. The decson maker w dentfy a
mted st made up of the more conspcuous choces.
These are the choices that are easy to find and that
tend to be highly visible. In most cases, they will
represent familiar criteria and previously tried-and-true
solutions.
Once ths mted set of aternatves s dentfed, the
decson maker w begn revewng them. But the
revew w not be comprehensve - not a of the
aternatves w be carefuy evauated. Instead, the
decson maker w begn wth aternatves that dffer
ony n a reatvey sma degree from the choce
currenty n effect.
Foowng aong famar and w-worn paths, the
decson maker proceeds to revew aternatves ony
unt he or she dentfes an aternatve that s "good
enough" - one that meets an acceptabe eve of
performance.
The frst aternatve that meets the "good enough"
crteron ends the search. So the fna souton
represents a satsfyng choce rather than an optma
one.
The order n whch aternatves are consdered s crtca
n determnng whch aternatve s seected. Remember,
n the fuy ratona optmzng mode, a aternatves are
eventuay sted n a herarchy of preferred order.
Because a aternatves are consdered, the nta order
n whch they are evauated s rreevant. Every potenta
souton gets a fu and compete evauaton. But ths
snt the case wth bounded ratonaty. If we assume
that a probem has more than one potenta souton, the
satsfyng choce w be the frst acceptabe one the
decson maker encounters. Decson makers use smpe
and mted modes, so they typcay begn by
dentfyng aternatves that are obvous, ones wth
whch they are famar, and hose not too far from the
status quo.
Soutons that depart east from the status quo and
meet the decson crtera are most key to be seected.
A unque and creatve aternatve may present an
optmzng souton to the probem, but ts unkey to be
chosen because an acceptabe souton w be dentfed
we before the decson maker s requred to search very
far beyond the status quo.
Intition
"Sometmes youre |ust got to go wth your gut feeng,"
Intiti*e decision #aking s an unconscous process
created out of dsted experence. They based on the
experence to recognze patterns and custers of the
probem to make a decson. Experence aows the
expert to recognze a stuaton and draw on prevousy
earned nformaton assocated wth that stuaton to
arrve qucky at a decson. The resut s that the
ntutve decson maker can decde rapdy wth what
appears to be very mted nformaton.
Identif%ing Pro"le#s
Probems that are vsbe tend to have a hgher
probabty of beng seected than ones that are
mportant.
1.Easy to catch a decson makers attenton.
2.Decson maker want to appear competent and "on top of
probems".
Ths desre motvates DM to focus on probems that are
vsbe to others
If a decson maker faces a confct between seectng a
probem that s mportant to the organzaton and one
that s mportant to the decson maker, sef-nterest
tends to wn out. Ths tendency aso s reated to the
ssue of vsbty. Its usuay n a decson makers best
nterest to attack hgh-profes probems. It conveys to
performance s ater revewed, the evauator s more
key to gve a hgh ratng to someone who has been
aggressvey attackng vsbe probems than to someone
whose actons have been ess obvous.
De*eloping .lternati*es
snce decson makers rarey seek an optma souton,
but rather a satsfyng one, we shoud expect to fnd a
mnma use of creatvty n the search for aternatves.
And that expectaton s generay on target.
Efforts w be made to try to keep the search process
smpe. It w tend to be confned to the neghborhood of
the current aternatve. More compex search behavor,
whch ncudes the deveopment of creatve aternatves,
w be resorted to ony when a smpe search fas to
uncover a satsfactory aternatve.
Decson maker avod the dffcut task of consderng a
the mportant factors, weghng ther reatve merts and
drawbacks, and cacuatng the vaue for each
aternatve.
Instead, they make successve mted (ncrementa)
comparsons. Ths branch approach smpfes decson
choces by comparng ony aternatves that dffer n
reatvey sma degree from the choce currenty n
effect. Ths approach aso makes t unnecessary for the
decson maker to thoroughy examne an aternatve
and ts consequences; one need nvestgate ony hose
aspects n whch the proposed aternatve and ts
consequences dffer from the status quo.
It acknowedges the non-comprehensve nature of
choce; n other words, decson makers make
successve comparsons because decsons are never
made forever and wrtten n stone, but rather they are
made and remade endessy n sma comparsons
between narrow choces.
Making -hoices
In order to avod nformaton overoad, decson makers
rey on heurstcs, or |udgmenta shortcuts, n decson
makng.
1..*aila"ilit% 2eristic
The tendency for peope to base ther |udgments on
nformaton that s ready avaabe to them. Events that
evoke emotons, that are partcuary vvd, or that have
occurred recenty tend to be most avaabe n our
memory.
|When dong annua performance apprasas, tend to
gve more weght to recent behavors of an empoyee
than to those of 6 months ago|
2.Representati*e 2eristic
decson makers tend to assess the kehood of an
occurrence by tryng to match t wth a pre-exstng
category.
|Frequenty predct the performance of a new product by
reatng t to a prevous products success|
3./scalation of -o##it#ent
tendency to escaate commtment when a decson
stream represents a seres of decsons. Escaaton of
commtment s an ncreased commtment to a prevous
decson n spte of negatve nformaton.
They "throw good money after bad" to demonstrate that
ther nta decson wasnt wrong and to avod havng to
admt they made a mstake. Peope try to appear
consstent n what they say and do. Increasng
commtment to prevous actons conveys consstency.
|"I have a ot nvested n the reatonshps."
"I have to go back and compete some defcences f I
changed to work on a degree n other feds."|
Indi*idal Difference
11 Decision-Making St%les
The foundaton of the mode s the recognton that
peope dffer aong two dmensons. The frst s ther
3a% of thinking (ntutve and creatve). The other
dmenson addresses a persons tolerance for
a#"igit%. Some peope have a hgh need to structure
nformaton n ways that mnmze ambguty; others are
abe to process many thoughts at the same tme.
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%.nal%tical -oncept
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Directi*e 4eha*iora
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'a% of Thinking
5Ratona ->
Intutve!
Peope usng the directi*e stye have ow toerance for
ambguty and seek ratonaty. They are effcent and
ogca. But ther concern for effcency resuts n ther
makng decsons wth mnma nformaton and
assessng few aternatves. Drectve types make
decson fast, and they focus on the short run.
- The anal%tical type has a much greater toerance for
ambguty than do drectve decson makers. They
desre more nformaton and consder more aternatves
than do drectves. Anaytca managers woud be best
characterzed as carefu decson makers wth the abty
to adapt or cope wth new stuatons.
- Indvdua wth a conceptal stye tend to be very
broad n ther outook and consder many aternatves.
Ther focus s ong range, and they are very good at
fndng creatve soutons to probems.
- A "eha*ioral stye decson maker who work we
wth others. Theyre concerned wth the achevements
of peers and subordnates. Theyre receptve to
suggestons from others and rey heavy on meetngs
for communcatng. Ths type of manager tred to avod
confct and seeks acceptance.
Some managers rey amost excusvey on ther
domnant stye; more fexbe managers can make shfts
dependng on the stuaton.
6e*el of Moral De*elop#ent
Mora deveopment s reevant n decson makng
because many decson have an ethca dmenson. An
understandng of ths concept can hep you see how
dfferent peope mpose dfferent ethca standards on
ther decsons.
Lev
e
Stage/ Descrpton
Pre-
conventona
1 Stckng to rues to avod physca
punshment
2 Foowng rues ony when ts n your
mmedate nterest
Conventona 3 Lvng up to what s expected by peope
cose to you
4 Mantanng conventona order by fufng
obgatons to whch your have agreed
Prncped 5 Vaung rghts of others; and uphodng non-
reatve vaues and rghts regardess of the
ma|ortys opnon
6 Foowng sef-chosen ethca prncpe even
f they voate the aw
Part ( Organizational -onstraints
The organzaton tsef constrans decson makers. They
shape ther decsons to refect the organzatons
performance evauaton and reward system and
organzatonay mposed tme constrants. Prevous
organzatona decsons aso act as precedents to
constran current decsons.
Perfor#ance /*alation
Decson maker are strongy nfuenced n ther decson
makng by the crtera by whch they are evauated.
|If a dvson manager beeves that the manufacturng
pants under hs responsbty are operatng best when
he hears nothng negatve, we shoudnt be surprsed to
fnd that hs pant managers spend a good part of ther
tme ensurng that negatve nformaton doesnt reach
the dvson boss.|
|If a coege dean beeves that an nstructor shoud
never fa more than 10 percent of her students - to fa
more refects on the nstructors abty to teach - we
shoud expect that new nstructor, who want to receve
favorabe evauatons, w decde not to fa too many
students.|
Re3ard S%ste#
What choces are preferabe n terms of persona payoff?
If the organzaton rewards rsk averson, managers are
key to make conservatve decsons.
|Genera Motors consstenty gave out promotons and
bonuses to manager who kept a ow profe, avoded
controversy, and were good team payers. The resut
was that GM managers became very adept at dodgng
tough ssues and passng controversa decsons on to
commttees|
S%ste#-I#posed Ti#e -onstraints
Organzatons mpose deadnes on decsons.
A host of decsons have to be made qucky n order to
stay ahead of the competton and keep customers be
made qucky n orders to stay ahead of the competton
and keep customers satsfed.
And amost a mportant decsons come wth expct
deadnes. These condtons create tme pressures on
decson makers and often make t dffcut, f not
mpossbe, to gather a the nformaton they mght ke
before havng to make a fna choce. The ratona mode
gnores the reaty that, n organzatons decson come
wth tme constrants
2istorical Precedents
Ratona decson makng takes an unreastc and
nsuated perspectve. It vews decson as ndependent
and dscrete events. But that snt they way t I n the
rea word! Decsons arent made n a vacuum. They
have a context. In fact, ndvdua decsons are more
accuratey characterzed as ponts n a stream of
decsons.
Decsons made n the past are ghost that contnuay
haunt current choces.
Its common knowedge that the argest determnng
factor of the sze of any gven years budget s ast
years budget.
Choces made today, therefore, are argey a resut of
choces made over the years.
-ltral Differences
The ratona mode does not acknowedge cutura
dfferences. But, we need to recognze that the cutura
background of the decson maker can have sgnfcant
nfuence on hs or her seecton of probems, depth of
anayss, the mportance paced on ogc and ratonaty,
or whether organzatona decsons shoud be made
autocratcay by an ndvdua manger or coectvey n
groups. (Lke |apan Manager s more group-orented.
Before makng an mportant decson, they coect a
arge amount of nformaton, whch s then used n
consensus-formng group decsons.)
Some cutures emphasze sovng probems; others focus
on acceptng stuatons as they are. Probem-sovng
decson maker beeve that they can and shoud change
stuatons to ther beneft.
Part + /thics in Decision Making
7tilitarian criterion
Decsons are made soey on the bass of ther
outcomes or consequences.
The goa of t s to provde the greatest good for the
greatest number. Ths vew tends to domnate busness
decson makng. (Effcency, productvty, and hgh
profts)
Right criterion
Ths ca on ndvduas to make decsons consstent wth
fundamenta bertes and prveges as set forth n
documents such as the B of Rght.
An emphass on rghts n decson makng means
respectng and protectng the basc rghts of ndvduas.
8stice criterion
Ths requres ndvdua to mpose and enforce rues
fary and mpartay so there s an equtabe dstrbuton
of benefts and costs.
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