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DECISION MAKING A managerial focus. Management decision making  “Managerial decision making is synonymous with the whole process of management” (Simon.

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Presentation on theme: "DECISION MAKING A managerial focus. Management decision making  “Managerial decision making is synonymous with the whole process of management” (Simon."— Presentation transcript:

1 DECISION MAKING A managerial focus

2 Management decision making  “Managerial decision making is synonymous with the whole process of management” (Simon 1977) Three phases of decision making:  Intelligence  Design  Choice

3 Simon’s Three Phases INTELLIGENCE PHASE:  Problem identification and ownership  Problem definition  Data collection/ search DESIGN PHASE:  Formulation of a means to analyse the options  Identification of criteria and constraints for the choice  Evaluation of the alternatives CHOICE:  Selection of the best or appropriate option  Plan for implementation

4 Computerised Support INTELLIGENCE PHASE: data search and collection Reporting systems Demand and exception reports Monitoring/ tracking facilities DESIGN PHASE: method formulation Modelling software (mathematical, statistical) e.g. linear programming packages (optimisation problems) project management; forecasting packages (“what if”; “goal seeking” analysis) CHOICE PHASE: selection of appropriate option understanding the solution offered selecting the appropriate course of action

5 Decision Support Framework (Gorry and Scott Morton 1971) Matrix combines Simon’s decision making steps and Anthony’s taxonomy of levels of information requirements STRUCTURED DECISIONS- more likely to be operational ‘programmed’, repetitive, routine, clearly defined problem, standard solution(s) apply UNSTRUCTURED- more likely to be strategic ‘unprogrammed’ ad hoc, one-off, ‘fuzzy’, not clearly defined, no objective right solution, intuition required SEMI-STRUCTURED- tactical/ middle managers? in between the two extremes, most business problems are not purely structured or unstructured

6 Later additions to the framework NOVELTY DIMENSION:- first time decisions vs familiar decisions SPECIFICITY DIMENSION:- specific, targeted decisions vs general, wide reaching decisions OUTCOME STATE:- Certainty vs Uncertainty (how much ‘risk’)

7 Characteristics of rational decision making: Clear, U nambiguous objective e.g minimise the cost Objective can be quantified Outcomes and alternatives are known Alternatives expressed in terms of objectives Alternatives ranked Best is chosen i.e the cheapest option

8 Human Decision Making Usually there are Multiple objectives, priorities. Also:  Objective versus Subjective rationality?  Selective perception memory bias Stereotyping-understanding how representative is your own experience Seeing ‘correlations’ where limited observations Interpretation of probability and risk Self-fulfilling prophesies  Pressure for consistency  Accepting the ‘Problem statement’ as given  Hindsight affect Simon’s concept of ‘Bounded Rationality’, ‘Satisficing’

9 Decision styles:  Autocratic vs Democratic  Heuristic vs Analytic Heuristic: action oriented, trial and error, intuitive, spontaneous, waits for feedback Analytic: theory oriented, planned systematic approach, uses formal analysis to test the outcomes  What affects our personal style? The way we think, perceive Our values The types of information we prefer How reliable is our own ‘personal style’?


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