Decision Making in Organizations - BBA 420 Lecture 11, Study notes of Organization Behaviour

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Decision Making in Organisations -

BBA 420

Lecture 11

Topic ObjectivesTopic Objectives

After studying this topic, students should be able to define ,

illustrate and discuss the following concepts:-

Decision Making

Types of Decision Making

Categories of Decision Making

Models for Decision Making

Factors that Evaluate the Level of Creativity in Decision

Making

Individual and Group Decision Making

Decision Making Process

Decision Making Styles

Importance of decision making in Organisations

DefinitionsDefinitions

 What is a Decision  the act of making up your mind about something  the act or process of deciding to do something

Definitions (2)Definitions (2)

 What is Decision Making Decision-making is the act of choosing between two or more courses of action. In the wider process of problem-solving, decision-making involves choosing between possible solutions to a problem

Programmed Decisions  (^) Decisions related to structured situations, where the problem is more or less routine and repetitive in nature are known as programmed decisions

For example, before you come to class, you make simple and habitual decisions such as what to wear, what to eat, and which route to take as you go to and from home and school. Granting leave to an employee.

Non ProgrammedNon Programmed

Decisions Decisions

 These decisions are taken in unstructured situations which reflect novel, ill-defined and complex problems.  The problems are non-recurring or exceptional in nature. Since they have not occurred before, they require extensive brainstorming.

Routine and StrategicRoutine and Strategic decisions decisions

 Routine decisions are

related to the general

functioning of the

organisation.

 They do not require much

evaluation and analysis

and can be taken quickly.

 Ample powers are

delegated to lower

ranks to take these

decisions within the broad

policy structure of the

organisation.

 (^) Strategic decisions are important which affect objectives, organisational goals and other important policy matters.  (^) These decisions usually involve huge investments or funds. These are non- repetitive in nature and are taken after careful analysis and evaluation of many alternatives. These decisions are taken at the higher level of management.

Tactical(Policy) & OperationalTactical(Policy) & Operational Decisions Decisions

Decisions pertaining to

various policy matters of

the organisation are policy

decisions.

These are taken by the top

management and have long

term impact on the

functioning of the concern.

For example, decisions

regarding location of plant,

volume of production and

channels of distribution

(Tactical) policies, etc. are

policy decisions

Operating decisions relate to day-to-day functioning or operations of business. Middle and lower level managers take these decisions. An example may be taken to distinguish these decisions. Decisions concerning payment of bonus to employees are a policy decision. On the other hand if bonus is to be given to the employees, calculation of bonus in respect of each employee is an operating decision.

Models for DecisionModels for Decision

Making Making

1. The rational decision-making model
2. The bounded rationality model of decision making
3. The intuitive decision-making model

Models of Decision MakingModels of Decision Making (Continued) (Continued)

rational

decision-

making

model

when making a decision, you may want to make sure that you establish your decision criteria before you search for alternatives. This would prevent you from liking one option too much and setting your criteria accordingly. ( Car Online)

bounded

rationality

model

According to this model, individuals knowingly limit their options to a manageable set and choose the first acceptable alternative without conducting an exhaustive search for alternatives.. (Job Offer)

intuitive

decision-

making

model

This has emerged as an alternative to other decision making processes. This model refers to arriving at decisions without conscious reasoning. A total of 89% of managers surveyed admitted to using intuition to make decisions at least sometimes and 59% said they used intuition often.

Individual and GroupIndividual and Group Decision Making Decision Making  Individual decision-making is where an individual makes a decision without involvement of a group.  Group Decision Making is the collective activity wherein several persons interact simultaneously to find out the solution to a given statement of a problem. In other words, group decision making is a participatory process wherein multiple individuals work together to analyze the problem and find out the optimum solution out of the available set of alternatives

Pros and Cons of IndividualPros and Cons of Individual and Group Decision Making and Group Decision Making  (^) An individual generally makes prompt decisions, while a group is dominated by various people, making decision-making very time consuming. Moreover, assembling group members consumes lots of time.  (^) Individuals do not escape responsibilities. They are accountable for their acts and performance. In a group, it is not easy to hold any one person accountable for a wrong decision.  (^) Individual decision-making saves time, money and energy as individuals usually make prompt and logical decisions, says Juneja, while group decision-making involves lot of time, money and energy.  (^) A group has the potential to collect more complete information, compared to an individual, while making decisions.  (^) An individual uses his own intuition and views. A group has many members, so its many views and many approaches result in better decision-making.  (^) A group discovers the hidden talent and core competency of employees of an organization.  (^) An individual will not take into consideration every member's interest , while a group will take into account interest of all members of an organization.

Steps in Decision MakingSteps in Decision Making

A good-decision-maker has to follow certain

steps in decision making. They are :

1. Identify the problem and define it.

2. Develop objectives.

3. Seek the facts and identify the problem.

4. Develop a model.

5. Evaluate the alternatives.

6. Select the best alternative

7. Implement the decision or plan a course of

action.

Decision Making StylesDecision Making Styles

 Every leader prefers a different way to contemplate a decision. Each style is a different method of weighing alternatives and examining solutions.  Directive,  Analytical,  Conceptual and  Behavioral.