Dr Zain Yusafzai

Decision Making

Chapter 6 (page 131-147)

What is decision making? Selection of a course of action from among alternatives. What is to be done, who is to do it, and when, where, and occasionally even how it will be done. Identifying and resolving the problems. The Process of Rational Decision Making Identification phase Development phase Selection phase Implementation Phase

The Rational Decision Making Process Identification Phase Development Phase Define the problem Identify constrains and criteria Diagnose the problem Develop alternatives Implementation Phase Selection Phase Gain acceptance Evaluate alternatives Implement the hoose the best alternative decision Monitoring and follow up The Rational Decision Maker Managerial decision ma!ing, is assumed rational. "y that we mean that managers ma!e consistent, value ma#imi$ing choices with in specific constraints Assumption of Rationality % decision ma!er who was perfectly rational would be fully ob&ective and logical. 'roblem clarity Goal orientation (nown options lear preferences onstant preferences Rationality in Decision Making Decisions must operate for the future !uture almost invaria"ly involves uncertainties Difficult to recogni#e all the alternatives Si$ Steps Managerial Decision Making Process
Principles of management oontz! "ehrich

Dr Zain Yusafzai

Decision Making

Chapter 6 (page 131-147)

). -. .. 0. 1. 2.

*ecognition of decision + re,uirement Diagnosis and analysis of causes Development /f %lternatives Selection of desired alternative Implementation /f chosen alternative Evaluation and feedbac!

%imited& 'r ()ounded& (Rationality % manager must settle for limited or 3bounded, 3rationality. 4imitations of information, time, and certainty limit rationality. 5hey sometimes allow their disli!e of ris!666their desire to 3play it safe7 *valuation of Alternatives Quantitative and Qualitative Factors +uantitative factors, 8actors that can be measured in numerical terms. 5ime 8i#ed and operating costs +uantitative& 'r Intangi"le& !actors 8actors that is difficult to measure numerically. 9uality of labor relations. *is! of technological change. 'olitical climate. Marginal Analysis omparing the additional revenue and the additional cost arising from increasing output. -ost.*ffectiveness Analysis %nalysis see!s the best ratio of benefit and cost Selecting an Alternative /three approaches0 1 *$perience, *eliance on past e#perience probably plays a larger part in decision ma!ing 2 *$perimentation, 5est is carried out in order to study what happens and to gain new !nowledge. Most e#pensive techni,ues. 8irst6production, or prototype, airplane is constructed and tested.

Principles of management oontz! "ehrich

Dr Zain Yusafzai

Decision Making

Chapter 6 (page 131-147)

5est a new product in a certain mar!et before e#panding its sale nationwide

Research and Analysis, Involves a search for relationship among critical variables, constrains. *e,uires brea!ing the problem into components Develop model simulating the problem Programmed and non.programmed decisions Programmed decisions, 'rogrammed decisions are used for structured or routine wor!. :sed for routine and repetitive wor!. Decision ma!ing by precedent. 4on.programmed Decisions ;on programmed decisions are used for unstructured, novel, and ill6 defined situations of a nonrecurring nature. Decision making under certainty& uncertainty and risk, -ertainty, %ll decisions are made in an environment of at least some uncertainty. Degree will vary from relative certainty to great uncertainty. 'eople are reasonably sure about 6 what will happen. When they ma!e a decision. 5he information is available 5ncertainty 'eople have only a meager database. Do not !now whether or not the data is reliable. :nsure about whether or not the situation may change. Risk Information may e#ist, but it may be incomplete. Estimate the ob&ective probability of an outcome. -reativity and Innovation -reativity, 5he ability and power to develop new ideas. Innovation, 5he use of new ideas

Principles of management oontz! "ehrich

Dr Zain Yusafzai

Decision Making

Chapter 6 (page 131-147)

The -reative Process /consist of four overlapping and interacting phases0 /10 5nconscious Scanning, *e,uires an absorption in the problems, which may be vague in the mind. /20 Intuitions, onnects the unconscious with the conscious. <.= Insight, 5he result of hard wor!. <0= %ogical !ormulation> Insight needs to be tested through logic or e#periment. %ccomplished by continuing to wor! on an idea or by inviting criti,ues from others. )rainstorming ;o ideas are ever critici$ed. 5he more radical the ideas are the better. 5he ,uantity of idea production is stressed. 5he improvement of ideas by others is encouraged. The -reative Manager Attri"utes reative people are in,uisitive? come up with new + unusual ideas 5hey are not satisfied with status ,uo 5hey are intelligent?rely on rational process? involve emotional aspects in problem solving 5hey are e#cited about problem solving to the e#tent of tenacity 5hey are aware of themselves?capable of independent &udgment 5hey ob&ect to conformity and see themselves as different Pro"lems reative people may cause difficulty for organi$ation 8re,uent change has undesirable effects :nusual ideas ?pursued stubbornly frustrate others reative people may be disruptive by ignoring policies, rules, regulations Managers must stri!e a balance between the two aspects of creative people

Principles of management oontz! "ehrich