Chapter 6 Decision Making

1. Chapter 6Decision Making 6.1 The Nature of Management decisions 6.2 The decision making process 6.3 Decision-making Techniques

2. 6.1 – The Nature of Management Decisions • There are differences between management and scientific decisions • Management decisions usually affect many more people and need to be made in a changing and uncertain environment • Anyhow, the process used for scientific decision making is similar to management decision making

3. Management Decision • the steps are: • definition of the problem • gathering facts related to the problem • comparing these with right and wrong criteria based on knowledge and experience • and then taking the best course of action • Management decision making, however, is often an art rather than a science. The conventional theories of decision making do not always apply

4. Main characteristics of management decision making • The problem is often ill defined or unpredictable because of being related to human behaviour • Management problems are usually much wider in scope than technical problems, and affect many more people and functions • Gathering information on which to base a management decision is often a hazardous process. The problem is continually changing, due to market or people considerations • The management decision, like the scientific one, is essentially one of choosing between several alternatives. This may not be easy to do as the consequences of each alternative are often difficult to predict

5. Main characteristics of management decision making (contd) • There is rarely a ‘best’ solution in management problems • It is highly probable that what is considered to be the best solution today may turn out to be the worst choice in the future • Once a decision has been made it requires consensus and commitment from the people who are affected and who are to implement the solutions • Following implementation the decision must be continually monitored to see whether it is still valid in a changing environment. • The process of managements decision making cannot be learned, except the experience and judgment • Decision making styles are often affected by the organization in which a manager operates

6. Two categories of Decisions • Routine decisions: • Examples of routine decisions are the purchase of materials. These can usually be defined by a set of rules and are often automated, for example by computers • it can be delegated • which occur infrequently. • which also usually have a major impact on the organization • usually needs the involvement of senior management

7. 6.2 – The decision making process • Is this decision necessary? The first task is to identify whether a decision is really required • No decision should normally be taken if the problem is likely to go away on its own • It is important, however, to make the decision on whether to act or not to act • Half a decision is much worse than no decision at all • Having decided that a decision is needed, the next step is to define the problem

8. The decision making process (contd) • The problem needs to be broken down into understandable terms and small units • The true cause of the problem should be sought • whether corrective action or a new strategy is needed • Problems are usually of two types, routine or unique • Managers must see things from other’s perspective, not just assume that their own solution is right • Management styles can vary between perceptive (sensitive) and receptive (accessible) information gathering, and between systematic and inquire information analysis

9. The decision making process (contd) • There is no one best cognitive style, and usually if a team is working on a problem it is better to have members with a mix of styles • It is important to know what the best solution is so that the impacts of any compromises, introduced at the next stage, are known • The implementation factors now need to be built into the decision • The final stage in the decision-making process is carrying out the actions • Once a decision is implemented the results from it must be constantly monitored. This will provide feedback on the original problem, which may need to be redefined

10. 6.3 – Decision-Making Techniques • Decision trees and tables • Decision-making techniques usually adopt a two stage process: • Determine the method to arrive at a decision, such as whether to involve others or not • Arrive at the decision

11. The Vroom-Yetton Model • Vroom and Yetton proposed a set of possible management decision-making styles • These styles range from very autocratic (dictatorial) to democratic • If several alternatives are equally good then the choice is usually made on the basis of the least amount of effort (person-hours) involved

12. 7 questions of Vroom-Yetton model • Is one solution likely to be much better than any other: Quality solution? • Have enough information to make a quality solution? • Know what info is missing & where to find it? • Is commitment to the decision important for its implementation? • Will others accept the solution if not involved in decision-making process? • Do all the other people share in the same goal? • Will there be a conflict between the affected people regarding alternative solutions?

13. The Kepner-Tregoe Method A series of steps to be followed when analyzing a problem • Specify the problem both in terms of what it is and what it is not. For example, if the problem is only found to occur between certain hours • Identify the differences (distinctions) between what the problem is and what it is not. For example, what happens between that time and does not occur at other times? • Look for the causes (solutions) that explain these differences • Test the cause (solution). Compare what actually happened with what was expected to happen • If the proposed cause (solution) explains what actually happened and what did not happen, without requiring too many assumptions, then it is correct