1. Decision-making techniques
Winter Semester 2018/19
Introduction:
Basic concepts
MGR KAROLINA KULIŃSKA, LL.B.

2. decision making
The act of choosing one alternative from among a set of alternatives
decision-making process
Recognizing and defining the nature of a decision situation, identifying alternatives, choosing the “best” alternative, and putting into practice.

3. Types of decisions Programmed decisions
A decision that is a fairly structured decision or recurs with some frequency or both.
Nonprogrammed decisions
A decision that is relatively unstructured and occurs much less often than a programmed decision.

4. Decision-making conditions

5. Decision-making conditions
Decision-making under certainty
A condition in which the decision maker knows with reasonable certainty what the alternatives are and what conditions are associated with each alternative.
Decision-making under risk
A condition in which the availability of each alternative and its potential payoffs and costs are all associated with risks.
Decision-making under uncertainty
A condition in which the decision maker does not know all the alternatives, the risks associated with each, or the consequences of each alternative.

6. Rational perspectives on decision making
The Classical Model of Decision Making
A prescriptive approach to decision making that tells managers how they should make decisions; assumes that managers are logical and rational and that their decisions will be in the best interests of the organization.
When faced with a decision situation, managers should…
- Obtain complete and perfect infromation
- Eliminate uncertainty
- Evaluate everything rationally and logically
… and end up with a decision that best serves the interests of the organization.

7. Steps in the Rational Decision-Making Process
Details
Example
I. Recognizing and defining the decision situation
Some stimulus indicates that a decision must be made. The stimulus may be positive or negative.
A plant manager sees that employees turnover has increased by 5 %.
II. Identifying alternatives
Both obvious and creative alternatives are desired. In general, the more important the decision, the more alternatives should be generated.
The plant manager can increase wages, increase benefits, or change hiring standards.
III. Evaluating alternatives
Each alternative is evaluated to determine its feasibility, its satisfactoriness, and its consequences.
Increasing benefits may not be feasible. Increasing wages and hiring standards ma satisfy all conditions.

8. Steps in the Rational Decision-Making Process
Details
Example
IV. Selecting the best alternative
Consider all situational factors and choose the alternative that best fits the manager’s situation.
Changing hiring standards will take an extended period of time to cut turnover, so increase wages.
V. Implementing the chosen alternative
The chosen alternative is implemented into the organizational system.
The plant manager may need permission from corporate headquarters. The human resource department establishes a new wage structure.
VI. Following up and evaluating the results.
At some time in the future, the manager should ascertain the extend to which the alternative chosen in step IV and implemented in step V has worked.
The plant manager notes, that six moths later, turnover chopped to its previous level.

9. Evaluating Alternatives in Decision-Making Process

10. Behavioral perspectives on decision-making
The Administrative Model of Decision-Making A decision-making model that argues that decision makers (1) use incomplete and imperfect information, (2) are constrained by bounded rationality, and (3) tend to “satisfice” when making decisions. Bounded rationality A concept suggesting that decision makers are limited by heir values and unconscious reflexes, skills and habits. Satisficing This concept suggests that rather than conducting an exhaustive search for the best possible alternative, decision makers tend to search only until they identify an alternative that meets some minimum standard of sufficiency.

11. The Administrative Model of Decision-making
When faced with a decision situation managers actually…
- Use incomplete and imperfect information
- Are constrained by bounded rationality
- Tend to satisfice
… and end up with a decision that may or may not serve the interests of the organization.

12. Coalition
A political force in decision making which consists of an informal alliance of individuals or groups formed to achieve a goal.
Intuition
An innate belief about something without conscious consideration.
Escalation of Commitment
A decision maker is staying with a decision even when it appears to be wrong.
Risk Propensity
The extent to which a decision maker is willing to gamble when making a decision.

13. Group and team decision making
Interacting groups or teams
are the most common form of decision-making groups which consists of an existing group or newly formed team interacting and then making a decision.
Delphi groups
are sometimes used for developing a consensus of expert opinion from a panel of experts who individually contribute through a moderator.
Nominal groups
are a structured technique designed to generate creative and innovative ideas through the individual contributions of alternatives that are winnowed down through a series of rank-ordering of the alternatives to reach a decision.
MGR KAROLINA KULIŃSKA, LL.B.

14. Reason and the heart…
Antonio Damasio findings; Neuroscience and the decision making

15. Exercise
Lost at Sea

16. MGR KAROLINA KULIŃSKA, LL.B.
Homework
L. Buchanan & A. O’Connel, A Brief History of Decision Making, Harvard Business Review, 1/2006. Available at:
SOURCES: The presentation is based on the R.W. Griffin, Management, 12th ed. Pp
MGR KAROLINA KULIŃSKA, LL.B.