Decision

A judgment that
affects
a course of action

Moments of decision are critical

because they shape our destiny

Decision making
The process of identifying a
set of feasible alternatives and
from these, choosing a course
of action.

When Decisions are Needed

1. The current state of affairs has fallen
short of a goal or ideal.
2. A problem or crisis may arise that
requires managerial action.
3. An opportunity may present itself.
4. In order to maintain the status quo.
5. There is a need to be proactive as
managerial entrepreneurs.

Decision Making
Intelligence gathering

Definition of problem
Data gathered on scope
Constraints identified

Design phase

Alternatives identified and assessed

Choice

Selection of an alternative

Implementation
Monitoring

Decision Making, Choice Making,

and Problem Solving
Decision Making
Choice Making

Step 1
Recognizing
the need
for a
decision

Step 2
Generating
alternative
solutions

Step 3
Evaluating
the
alternatives

Step 4
Choosing an
alternative

Step 5
Implementing
the chosen
alternative

Step 6
Monitoring
and maintaining the
solution

Problem Solving

FIGURE 91
91

Decision Characteristics
Degree of Certainty and Decision
Uncertainty
Risk
Certainty
Making
Unawareness of all alternatives
Unawareness of outcomes even for
known alternatives
Decision requires creativity and
willingness to take risk in the
face of uncertainty

Circumstances
Completely
Unknown

Awareness of all alternatives

Unawareness of outcomes for
each alternative
Decision requires educated
guesses for alternative
outcomes

Level of Certainty

Awareness of all alternatives

Awareness of all outcomes
related to each alternative
Decision can identify the best
solution

Circumstances
Completely
Known

FIGURE 92
92

Degree of Certainty and Decision Making

Problem Structure
Structured problem
A problem whose nature and context are well
defined.
The desired end state is clear and the
course of action to get to the end state is
clear.

Unstructured problem
A problem characterized by a lack of
problem and context definition.
The desired end state is not clearly
understood, and therefore the appropriate
course of action is unknown.

Types of Decisions
Programmed decision
Routines (predetermined courses of action)
employed to deal with frequently occurring
situations.

Nonprogrammed decision
The process of addressing unique
or novel situations confronting
the organization.

Decision Characteristics (contd)

10

Decision Characteristics (contd)

Sources of conflicts in decision making
The psychological make-up (i.e., history, biases,
preferences, etc.) of decision makers can
create intra-individual conflicts with job
requirements.
Interpersonal (individual-to-individual
and group-to-group) conflicts may require
compromises in the decision making process.

11

Decision Characteristics
(contd)
Politics
The use of power to achieve and/or protect ones
self-interests in the presence of other interest
groups through:

Building coalitions
Bargaining
Trading support across issues at different points in time
Working to achieve control of key organizational positions
Controlling critical organizational resources

12

Types of Decisions
Means decision
Concerns, procedures or actions
undertaken to achieve particular goals;
it specifies how a goal is to be reached.

Ends decision
Focuses on the articulation
of a desired goal (outcome).

13

Types of Decisions (contd)

Other Types of Decisions
Functional decisionrelates to one of the
organizations functions marketing, production, etc.)
Job content decisionrelates to the inherent nature
of the work performed by an individual or work group.
Job context decisionrelates to issues that surround
the job, but are not part pf the job per se.

14

Decision levels
Strategic decisionidentifies the ends and
means
associated with the positioning of an
organization
in its external task environment.
Managerial (tactical) decisionspecifies how an
organization intends to integrate its institutional
level with its technical core, and how it will
coordinate the diverse work systems within the
technical core.
Operating decisiondeals with the day-to-day
operation of an organization.

15

Decision Strategies
Outcome Preferences
Agree
Agree

Disagree

Computational

Compromise

Judgmental

Inspirational

Belief
About
Causation
Disagree

16

FIGURE 93
93

Contingency Approaches
to Decision Making
Thompson and Tudin Model
Computation decision-making approach
reliance on an expert for guidance

Judgmental decision-making approach

reliance on the majority rule of experts

Compromise decision-making approach

reliance on a decision negotiated among competing groups

Inspirational decision-making approach

reliance on creativity and intuition (inspiration)

17

Problems in the DecisionMaking Process

Misunderstanding a situation

Incomplete or poorly organized information

Difficulty in applying meaning to abstract information
Limited or selective perception of the situation
Mistaking symptoms for the problem itself

Rushing the decision-making process

Limiting the search for alternatives
Inadequately evaluating courses of action
Using the wrong decision-making process

18

Models of Individual
Decision Making
A classical (rational/economic)
decision making model.
Objective rationalitythe notion that
decision makers are completely informed
of all alternatives and their probabilities
and consequences, are infinitely sensitive,
and therefore they will make decisions
based on fact and rational thought.

19

Models of Individual
Decision Making
A behavioral (administrative) decision making model.
Bounded rationalitythe tendency of decision makers to
behave rationally within the limits of their information
processing capabilities and within the context of their
attitudes and emotions.
They cannot be aware of all
alternatives, consequences and
probabilities, and therefore will
make satisficing decisions by
choosing the first satisfactory
solution that they identify.

20

Other Approaches to
Decision Making
Muddling through
Using an incremental approach to decision making
by making small adjustments to the status quo
over longer periods of time.

Garbage can approach

Managers haphazardly mix
problems, solutions, alternatives,
and participants together in hopes
that they will connect on some level.

21

Individual Differences
Cognitive
in
Decision
Making
Cognitive
Attributes
Attributes

(Judgmental)
(Judgmental)
Intelligence
Intelligence
Learning
Learning
Remembering
Remembering
Thinking
Thinking

Decision
Making

Personality
Personality
Attributes
Attributes
(Style)
(Style)
High
HighRisk
Risk
Dogmatic
Dogmatic
Impatient
Impatient
Competitive
Competitive
Tolerance
Tolerancefor
for
Ambiguity
Ambiguity
(avoiders,
(avoiders,
solvers,
solvers,
seekers)
seekers)

22

Control- and Involvement-Oriented

Management and
Organizational
Decision
Making
Mechanistic organizations
Centralized; decision making
Environmental
concentrated at upper levels;
Change
top-down decision making;
no-low participation
Dynamic
Stable
Simple

Low
Uncertainty

Moderate
Uncertainty

Environmental
Complexity

Complex

Moderate
Uncertainty

High
Uncertainty

Organic Organizations
Delegated, decentralized,
participative decision
making; individual and/or
group decision making

23

FIGURE 99
99

Decision Making

The funny side

24

Six Thinking Hats

"Six Thinking Hats" is a technique that
helps you look at important decisions from
a number of different perspectives.
It helps you make better decisions by
pushing you to move outside your habitual
ways of thinking. As such, it helps you
understand the full complexity of a
decision, and spot issues and opportunities
which you might otherwise not notice.
25

White Hat:
With this thinking hat, you focus on the
data available. Look at the information you
have, and see what you can learn from it.
Look for gaps in your knowledge, and
either try to fill them or take account of
them.
This is where you analyze past trends, and
try to extrapolate from historical data.

26

Red Hat:
Wearing the red hat, you look at the
decision using intuition, gut reaction,
and emotion. Also try to think how
other people will react emotionally,
and try to understand the intuitive
responses of people who do not fully
know your reasoning.
27

Black Hat:
When using black hat thinking, look at things
pessimistically, cautiously and defensively. Try to see
why ideas and approaches might not work. This is
important because it highlights the weak points in a
plan or course of action.
It allows you to eliminate them, alter your approach, or
prepare contingency plans to counter problems that
arise. Black Hat thinking helps to make your plans
tougher and more resilient. It can also help you to spot
fatal flaws and risks before you embark on a course of
action.
Black Hat thinking is one of the real benefits of this
technique, as many successful people get so used to
thinking positively that often they cannot see problems
in advance, leaving them under-prepared for
difficulties.

28

Yellow Hat:
The yellow hat helps you to think
positively. It is the optimistic
viewpoint that helps you to see all the
benefits of the decision and the value
in it, and spot the opportunities that
arise from it. Yellow Hat thinking
helps you to keep going when
everything looks gloomy and difficult.
29

Green Hat:
The Green Hat stands for creativity.
This is where you can develop
creative solutions to a problem. It is
a freewheeling way of thinking, in
which there is little criticism of
ideas.

30

Blue Hat:
The Blue Hat stands for process control.
This is the hat worn by people chairing
meetings. When running into difficulties
because ideas are running dry, they may
direct activity into Green Hat thinking.
When contingency plans are needed, they
will ask for Black Hat thinking, and so on.

31

Situation too complicated . . . ?

Just stop thinking !

32