1. Decision Making
Types of decision
Steps in rational decision making
Planning
Definition and characteristics
2. Decision Making
Defination:
Decision Making is the process of
choosing the best alternative for
reaching objectives
Managers make decisions affecting the
organization daily and communicate
those decisions to other organizational
members
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3. Effective decision making
A major activity of management is the making of decisions.
Decisions need to be timely. There are times when a decision has to be
made. Even if it turns out not to be the best decision it can be better than
not making a decision at all.
Decisions often have to be made when there is insufficient information.
Decisions involve taking risks. Effective decision making involves
gathering what information is known, identifying the options, assessing
the risks and making the best decision
with the information available in a timely manner.
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4. When do decisions need to be made
Situations include:
• Determining the project strategy/approach
• Resolving project issues
• Developing estimates
• Making purchases
• Interviewing and selecting project team members
• Selecting external suppliers
• Handling disagreements and conflict resolution
• Scheduling work and allocating resources to tasks
• Managing meetings
6. The decision making process
Four simple steps:
1. Gather the facts
2. Identify a number of alternatives
3. Assess the alternatives
4. Decide
Where quick decisions need to be made, these steps can
be done mentally “on the fly” or by one person. When
time allows and the decision is important, more people
can be involved and a more thorough decision making
process used.
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7. Rational Decision Making
8-step Process
1. Identification of problem
2. Identification of Decision Criteria
3. Allocation of weights to criteria
4. Development of alternatives
5. Analysis of alternatives
6. Decide on an alternative
7. Implementation of decision
8. Evaluation of decision
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8. The Decision-Making Process
Allocation of
Problem Identification of Weights to Development of
Identification Decision Criteria Criteria Alternatives
“My salespeople Price Reliability 10 Acer
need new computers” Weight Screen size 8 Compaq
Warranty Warranty 5 Gateway
Screen type Weight 5 HP
Reliability Price 4 Micromedia
Screen size Screen type 3 NEC
Sony
Toshiba
Analysis of Selection of an Implementation
Alternatives Alternative of an Alternative
RSWWPS
Acer 4 3 4 3 2 6 Acer 125 Evaluation
Compaq 3 4 5 2 6 7 Compaq 142 Gateway
of Decision
Gateway 9 6 7 7 8 2 Gateway 246
Effectiveness
HP 3 5 6 7 6 5 HP 174
Micromedia 2 2 3 4 5 4 Micromedia 103
NEC 3 45 6 7 2 NEC 151
Sony 7 56 4 2 8 Sony 192
Toshiba 3 45 6 7 3 Toshiba 154
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11. Single, well-
defined goal
is to be achieved
All alternatives Problem is
and clear and
consequences unambiguous
are known
Rational
Decision Final choice
Preferences Making will maximize
are clear
payoff
Preferences
No time or cost
are constant
constraints exist
and stable
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12. Bounded Rationality
behave rationally within the parameters
of a simplified decision-making process
that is limited by an individual’s ability
to process information
satisfice - accept solutions that are “good
enough”
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13. Intuitive decision
making
Based on “gut feeling”
subconscious process of making
decisions on the basis of experience,
values, and emotions
does not rely on a systematic or
thorough analysis of the problem
generally complements a rational
analysis
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14. Types of Problems & Decisions
Well-Structured Problems - straightforward,
familiar, and easily defined
Programmed Decisions - used to address
structured problems
minimize the need for managers to use discretion
facilitate organizational efficiency
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15. Types of Problems and
Decisions
Poorly-Structured Problems - new,
unusual problems for which information is
ambiguous or incomplete
Nonprogrammed Decisions - used to
address poorly- structured problems
produce a custom-made response
more frequent among higher-level managers
Procedure, Rule, & Policy
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16. Types of Problems & Level In
the Organization
Ill-structured Top
Nonprogrammed
Type of Decisions Level in
Problem Organization
Programmed
Decisions
Well-structured Lower
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17. Things to consider . . .
Certainty – how certain is a particular
outcome?
Risk – how much risk can you take?
expected value - the conditional return from
each possible outcome
Uncertainty – Limited information
prevents estimation of outcome
probabilities for alternatives.
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18. What to do?
maximax choice – optimistic
maximizing the maximum possible payoff
taking the best of all possible cases
maximin choice – pessimistic
maximizing the minimum possible payoff
taking the best of the worst cases
minimax - minimize the maximum “regret”
(difference between what you get and the
best case) 18
19. Decision-Making Styles
Dimensions of Decision-Making Styles
Value orientations
Task and technical concerns
People and social concerns
Tolerance for ambiguity
Low tolerance: require consistency and order
High tolerance: multiple thoughts
simultaneously
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20. Decision-Making Styles
Analytical
Directive Behavioral
• Prefer complex Conceptual
• Prefer simple, • Concern for their
problems • Socially oriented
clear solutions organization
• Carefully analyze • Humanistic and
• Make decisions • Interest in helping
alternatives artistic approach
rapidly others
• Enjoy solving • Solve problems
• Do not consider • Open to
problems creatively
many alternatives suggestions
• Willing to use • Enjoy new ideas
• Rely on existing • Rely on meetings
innovative
rules
methods
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21. Decision Making Styles
High
Analytical Conceptual
Directive Behavioral
Low
Tasks and Technical People and Social
Concerns Concerns
Value Orientation
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22. Gather the facts
Guidelines
• Write down a statement of what needs to be decided.
• Is the decision statement clear and precise? If not refine
the statement.
• Is the need for the decision a result of an underlying
problem, which also needs to be addressed?
• Are there assumptions underlying the decision that need
to be clarified and possibly challenged?
• Is the decision part of a bigger decision that needs to be
made, or can this decision be decomposed into smaller
decisions?
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23. Identify alternatives
Guidelines
• Identify as many alternatives as possible.
• Use brainstorming if appropriate.
• Do not filter out alternative options at this stage
- assume they can all be made to work.
• When you have generated lots of ideas, consider each one to
see if it is a viable alternative.
• Shortlist the viable alternatives.
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24. Decision making behaviour
People tend to adopt a particular decision making approach as a result
of factors such as:
• their own personality
• their current mood
• the organisational culture
• the personality of the person/people they are dealing
with
• the nature of the relationship they have with the
people they are dealing with
• time pressure and perceived level of stress
Being aware of these influences can result in better decision
making, by adopting the best decision making approach for
each situation.
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26. Helpful hints
Don’t: Do:
– Make assumptions Clearly identify the decision to
be made
– Procrastinate
Involve people qualified to help
– Jump to conclusions
in the decision making
– Make uninformed decisions
Identify the context of the
– Favour one decision prior to decision (the bigger picture)
gathering the facts and
Identify all alternatives
evaluating the alternatives
Assess each alternative
– Allow only technical people to
make the decisions Assess the risks
– Attempt to make a decision in Consider your “gut feel”
isolation of the context
Make the decision
– Let emotion override and stick to it
objectivity
27. Identify alternatives
Guidelines
• Identify as many alternatives as possible.
• Use brainstorming if appropriate.
• Do not filter out alternative options at this stage
- assume they can all be made to work.
• When you have generated lots of ideas, consider each one to
see if it is a viable alternative.
• Shortlist the viable alternatives.
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28. Advantages and Disadvantages of Group-
Aided Decision Making
Advantages Disadvantages
1. Greater pool of knowledge 1. Social pressure
2. Different perspectives 2. Minority domination
3. Greater comprehension 3. Logrolling
4. Increased acceptance 4. Goal displacement
5. Training ground 5. “Groupthink”
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30. Decision making behaviour
People tend to adopt a particular decision making approach as a result
of factors such as:
• their own personality
• their current mood
• the organisational culture
• the personality of the person/people they are dealing
with
• the nature of the relationship they have with the
people they are dealing with
• time pressure and perceived level of stress
Being aware of these influences can result in better decision
making, by adopting the best decision making approach for
each situation.
31. Decision making approaches
Approaches* to decision making situations:
• Withdrawing: holding off making the decision.
• Smoothing: focusing on areas of agreement and
ignoring areas of difference.
• Compromising: trying to come up with a decision that
provides some degree of satisfaction for all parties.
• Confronting/problem solving: working through the
issues.
• Forcing: executing a particular decision knowing
agreement has not been reached.
*Adapted from D Billows, Project Manager’s KnowledgeBase,
31 2nd edition, 2004, The Hampton Group.
32. Decision making approaches
Skilled project managers and business analysts
select the best approach appropriate to the situation.
Withdrawing:
• Withdraw to gather more information and perspective
• Only a stop gap measure
• Useful in “cooling down” an overheated situation
• Taking time out (“sleep on it”) before final decision
Smoothing:
• Relationship focused rather than solution focused
• Avoids dealing with the issues
• Can be useful in reducing the emotional tension where the
decision is of low importance.
• Does not provide a long-term solution
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33. Decision making approaches
Compromising:
• Bargaining to get an acceptable agreement
• Falls short of the best decision
• Can be useful in resolving negotiation deadlocks
Confronting/problem solving:
• Direct approach
• Identifies alternatives and works through the issues
• Time-consuming
• Most likely method to develop the best solution
Forcing:
• Used when an urgent decision is required or as a last resort
• Necessary for situations when decision making is blocked
• May result in reluctance in execution of decision if not
handled well.
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