DECISION MAKING

BY: BHAVYA VERMA

SANDHYA UPADHYAYA
SHAGUN DHIR
SWATI VERMA
SUKRITI JHAMB
MEANING
DECISION MAKING IS A PROCESS OF SELECTION FROM A SET OF ALTERNATIVE
COURSES OF ACTION WHICH IS THOUGHT TO FULFILL THE OBJECTIVE OF THE
DECISION PROBLEM MORE SATISFACTORILY THAN OTHERS.

IT’S PROCESS CONSISTS OF 4 INTERRELATED PHASES -

❏ EXPLORATIVE PHASE
❏ SPECULATIVE PHASE
❏ EVALUATIVE PHASE
❏ SELECTIVE PHASE
DECISION MAKING IS A PARTICULAR TYPE OF
PLANNING

BOTH ARE MENTAL PROCESSES

BOTH ARE GOAL ORIENTED
ARE ONGOING OR CONTINUOUS PROCESSES
INVOLVES CHOICE AMONG CONTINUOUS COURSE OF ACTION
BOTH NEEDS INFORMATION ABOUT THE EXTERNAL AS WELL AS
EXTERNAL ENVIRONMENT OF ORGANISATION
CHARACTERISTICS OF DECISION MAKING
GOAL ORIENTED PROCESS
INVOLVES CHOICE
CONTINUOUS PROCESS
INTELLECTUAL PROCESS
DYNAMIC PROCESS
SITUATIONAL
PERVASIVE
 ROLE OF DECISION MAKING
Decision making underlines the entire process of
management because every managerial function
involves decisions.
Whatever manager does he does it through making
decisions and getting them implemented in a
effective manner.
The quality of decisions reflects the competence
and character of management and determines the
success of organisation.
PROGRAMMED INDIVIDUAL &
DECISION GROUP
TYPES OF DECISION
MANAGERIAL
DECISION

STRATEGIC
DECISION
 Types of Nature of Decision Techniques for making
Decision the decision
Programmed Repetitive & routine • Habit
A definite procedure has been • Standard operating procedures
worked out-decision decision do not • Organizational structures
have to be handled as if they were • Electronic data processing
new.

Non-programmed Novel, unstructured, and unusually Judgement, intuition and creative

consequential, no cut-and-dried thought, Selection and training of
method because the type of decision executives Complex computer
is new or complex, or because it is programs that “think” and solve
important enough to deserve problems in accordance with
customized treatment pre-determined rules
PROCESS OF RATIONAL DECISION-MAKING

1 2 3
IDENTIFY THE DIAGNOSE THE DISCOVER
PROBLEM PROBLEM ALTERNATIVES

4 5 6
EVALUATE SELECT THE BEST IMPLEMENTATI0N &
ALTERNATIVES ALTERNATIVE FOLLOW UP
 TRADITIONAL & SCIENTIFIC METHOD
OF DECISION-MAKING – A COMPARISON
TRADITIONAL METHOD SCIENTIFIC METHOD

1. Use of hunch & intuition 1. Use of information and reasoning

2. Trial and error approach 2. Systematic approach

3. Judgemental 3. Analytical

4. Traditional technique 4. Modern technique

5. No use of operations research techniques 5. Quantitative & operations research

techniques used
 Rational Decision
A method for systematically selecting among possible choices
that is based on reason and facts. In a rational decision making
process, a business manager will often employ a series of
analytical steps to review relevant facts, observations and
possible outcomes before choosing a particular course of action.

Models of decision
making

Economic man Administrative

model man model
COMPARISON BETWEEN ECONOMIC AND
ADMINISTRATIVE MAN MODELS
 BOUNDED RATIONALITY
Bounded rationality means rationality within limits or bounds set
by incomplete information, cognitive limitations of mind and
limited time available for taking the decision.
 Vaguely
Defined Inadequate
Imperfect Problems Goal
Knowledge Formulation

CAUSES OF
Environmental BOUNDED Limited Time
Dynamics RATIONALITY and Resources

Human
Power Politics
Limitations
 GROUP DECISION MAKING

➢When two or more managers at the same or at different levels

of authority jointly deliberate on the problem, identify and
evaluate the alternatives and arrive at a decision, it is called
group decision making.

➢In group decision making, the group members interact with each
other, discuss the problem and make a collective decision.

➢ For example, members of the board jointly take decisions such

as setting up a new factory, collaboration with a foreign
company, etc.
 GROUP DECISION MAKING
ADVANTAGES DISADVANTAGES

❖ Pooling of Information ❖ Costly

❖ Commitment to Decisions ❖ Compromise
❖ Increase in Morale ❖ Interpersonal Conflicts
❖ Creativity and ❖ Social Pressures
Innovativeness ❖ Conflicting Goals
❖ Risk Taking ❖ Fixing Responsibility
❖ Diverse Views ❖ Groupism
❖ Team Spirit
❖ Exploitation of Talent
 QUANTITATIVE TECHNIQUES
1.Marginal analysis 2.Cost-benifit analysis 3. Risk analysis 4. Linear
programming

1.To determine if an investment or It is a method to achieve the best

Risk analysis is the review of the risks
Marginal analysis is an examination of decision is sound – verifying whether its outcome (such as maximum profit or
associated with a particular event or
the additional benefits of an activity benefits outweigh the costs, and by how lowest cost) in a mathematical
action. It is applied to projects,
compared to the additional costs much; model whose requirements are
information technology, security issues
incurred by that same activity. It helps 2.To provide a basis for comparing represented by linear relationships.
and any action where risks may be
in profit maximization, the modified investments or decisions – comparing Linear programming is a special
analyzed on a quantitative and
version is called BREAK EVEN the total expected cost of each option case of mathematical programming
qualitative basis. Risk analysis is a
ANALYSIS. against their total expected benefits
component of risk management.
5.Operations research 6.Decision tree 7. Network analysis

Operations research (OR) is an analytical It involves analysis of a project into small

A decision tree is a decision
method of problem-solving and
support tool that uses a tree-like operations which are interconnected in
decision-making that is useful in the
management of organizations. In operations graph or model of decisions and logical order. PERT & CPM are most
research, problems are broken down into popular network.
their possible consequences,
basic components and then solved in
defined steps by mathematical analysis.Eg: including chance event outcomes,
probability theory, game theory etc. resource costs, and utility.
 QUALITATIVE TECHNIQUES
1.Brainstorming 2.Delphi method 3.Nominal group 4. Simulation
technique

Brainstorming is a group Here phenomena likely to occur

Here panel of experts are It is a group process involving
creativity technique by which is reproduced.The outcomes of
appointed , suggestions are problem identification, solution
efforts are made to find a each alternative is stimulated,it
invited anonymously which are generation, and decision
conclusion for a specific problem is based on probability factor.
then compiled and feedback is making.It can be used in groups
by gathering a list of ideas However it is a complex
provided inviting further of many sizes, who want to make
spontaneously contributed by its process.
suggestions. It is rpeated till their decision quickly, as by a
members vote, but want everyone's
opinions are emerged.
opinions taken into account.