UNIT – 2: DECISION MAKING

Meaning and Model of Decision-making

process;
Organizational decisions, factors affecting
Decisions in organizations.
Individual decisions – imperfect nature of
individual decisions.
Group decisions: techniques for improving
effectiveness of decisions.
 Definition of Decision Making

• Trewatha & Newport defines decision making process

as follows:, “Decision-making involves the selection of
a course of action from among two or more possible
alternatives in order to arrive at a solution for a given
problem”.
• As evidenced by the foregone definitions, decision
making process is a consultative affair done by a
committee of professionals to drive better functioning
of any organization. Thereby, it is a continuous and
dynamic activity that pervades all other activities
pertaining to the organization.
• Further, decision making process can be
regarded as check and balance system that
keeps the organisation growing both in
vertical and linear directions.
• No decision comes as end in itself, since it may
evolve new problems to solve. When one
problem is solved another arises and so on,
such that decision making process is
continuous and dynamic.
 Steps of the Decision Making Process

• The following are the seven key steps of the

decision making process.
• 1. Identify the decision. The first step in
making the right decision is recognizing the
problem or opportunity and deciding to
address it. Determine why this decision will
make a difference to your customers or fellow
employees.
• 2. Gather information. Next, it’s time to
gather information so that you can make a
decision based on facts and data. This requires
making a value judgment, determining what
information is relevant to the decision at
hand, along with how you can get it. Ask
yourself what you need to know in order to
make the right decision, then actively seek out
anyone who needs to be involved.
• 3. Identify alternatives. Once you have a clear
understanding of the issue, it’s time to identify
the various solutions at your disposal. It’s
likely that you have many different options
when it comes to making your decision, so it is
important to come up with a range of options.
This helps you determine which course of
action is the best way to achieve your
objective.
• 4. Weigh the evidence. In this step, you’ll need to
“evaluate for feasibility, acceptability and
desirability” to know which alternative is best,
according to management experts Phil Higson and
Anthony Sturgess.
• Managers need to be able to weigh pros and cons,
then select the option that has the highest
chances of success. It may be helpful to seek out a
trusted second opinion to gain a new perspective
on the issue at hand.
• 5. Choose among alternatives.
• When it’s time to make your decision, be sure
that you understand the risks involved with
your chosen route. You may also choose a
combination of alternatives now that you fully
grasp all relevant information and potential
risks.
• 6. Take action. Next, you’ll need to create a
plan for implementation. This involves
identifying what resources are required and
gaining support from employees and
stakeholders. Getting others onboard with
your decision is a key component of executing
your plan effectively, so be prepared to
address any questions or concerns that may
arise.
• 7. Review your decision. An often-overlooked
but important step in the decision making
process is evaluating your decision for
effectiveness. Ask yourself what you did well
and what can be improved next time.
• If you find your decision didn’t work out the
way you planned, you may want to revisit
some of the previous steps to identify a better
choice.
THE OODA LOOP….
 OODA…contd
• An important concept in the field of decision making is
the OODA Loop or the Observe-Orient-Decide-Act loop.
• The term and the concept were proposed by the
military strategist and member of the United States Air
Force, Colonel John Boyd.
• The theory underlying the OODA loop is that decision
making within our minds happens according to the way
in which the recurring loops of observation, orientation,
decision and action happen in response to a situation.
 OODA…contd
• The inputs from the environment are taken by means of
information, interaction with the environment and the
circumstances that unfold with the interaction.
• Then the orientation to the situation happens by means of the
individual’s internal processes and the perceived expectations
along with his or her own conditioning.
• Then the next stage where the decision has to be taken takes
over where the information from the situation meets the
individual’s thought processes leading to decision making
capabilities.
• Finally, the decision leads to the action where the decision is
actualized and made operational. The important thing to
remember about the OODA loop is that feedback is an integral
component of all stages with information flowing back and
forth between the individual and the situation.
 Individual Decision Making - Pros and Cons

• Individuals have a tendency to think and

question before performing.
• This is fruitful in analysis and forecasting of
individual’s behaviour. Individual decision
making has certain pros and cons, few of
which are mentioned below:
 Pros of Individual Decision Making

• An individual generally makes prompt decisions.

While a group is dominated by various people,
making decision-making very time consuming.
Moreover assembling group members
consumes lot of time.
• Individuals do not escape responsibilities. They
are accountable for their acts and performance.
While in a group it is not easy to hold any one
person accountable for a wrong decision.
• Individual decision making saves time, money
and energy as individuals make prompt and
logical decisions generally. While group
decision making involves lot of time, money
and energy.
• Individual decisions are more focused and
rational as compared to group.
 Cons of Individual Decision Making

• A group has potential of collecting more and

full information compared to an individual
while making decisions.
• An individual while making any decision uses
his own intuition and views. While a group has
many members, so many views and many
approaches and hence better decision making.
• A group discovers hidden talent and core
competency of employees of an organization.
• An individual will not take into consideration
every members interest. While a group will
take into account interest of all members of an
organization.
 ORGANIZATIONAL DECISIONS
• Corporate decision making happens at various
levels in organizations and can be top down or
bottom up.
• Top down decision making is done at the higher
levels of the hierarchy and the decisions are passed
down the corporate ladder to be implemented.
• On the other hand, bottom up decision making is
done by giving autonomy to the middle managers
and the line managers to take decisions based on
the conditions and circumstances existing in their
teams.
• It needs to be remembered that the middle
management is often called the “sandwich”
layer because they have to implement the
decisions made above and at the same time
have to decide about how to run the teams
and have to communicate them to the lower
levels as well.
• In any process of corporate decision making,
the actual implementers play a critical role
since the best laid plans of the top
management can go awry in case there is no
commitment from the middle management.
• Corporate decision making is also
characterized by consensus or the lack of it.
• The other aspect related to corporate decision
making is that many organizations thrive on
leaders who have a “halo” around them.
• In conclusion, corporate decision making is
successful as long as there is a “glue” to bind the
organization together in the form of charismatic
leaders or an organizational culture that values
coherence and imposes stability. Once any of
these conditions are removed, then the
organizations fall into a self-defeating trap
wherein the process of corporate decision making
is impaired leading to the loss of competitiveness
of the company.
 GROUP DECISIONS

• Group decision making is a type of participatory

process in which multiple individuals acting
collectively, analyze problems or situations, consider
and evaluate alternative courses of action, and select
from among the alternatives a solution or solutions.
• The number of people involved in group decision-
making varies greatly, but often ranges from two to
seven
• In organizations many decisions of consequence are
made after some form of group decision-making
process is undertaken.

• There are many methods or procedures that can be

used by groups. Each is designed to improve the
decision-making process in some way.
 Techniques for Group Decision Making Process More Effective

• 1. Brainstorming:
• This technique involves a group of people, usually
between five and ten, sitting around a table, generating
ideas in the form of free association. The primary focus is
on generation of ideas rather them on evaluation of
ideas.
• Brainstorming technique is very effective when the
problem is comparatively specific and can be simply
defined. A complex problem can be broken up into parts
and each part can be taken separately at a time.
• 2. Nominal Group Technique (NGT):
• Nominal group technique is similar to
brainstorming except that the approach is more
structured. Members form the group in name only
and operate independently, generating ideas for
solving the problem on their own, in silence and
in writing. Members do not interact with each
other so that strong personality domination is
avoided. It encourages individual creativity.
• The group coordinator either collects these written ideas
or writes then on a large black board for everyone to see
or he asks each member to speak out and then he writes
it on the black board as he receives it.
• These ideas are then discussed one by one in turn and
each participant is encouraged to comment on these
ideas for the purpose of clarification and improvement.
• After all ideas are discussed, they are evaluated for their
merits and drawbacks and each participating member is
required to vote on each idea and assign it a rank on the
basis of priority of each alternative solution.
• The idea with the highest aggregate ranking is selected as
the final solution to the problem.
• 3. Delphi Technique:
• This technique is the modification of the nominal group
technique, except that it involves obtaining the opinions of
experts physically separated from each other and
unknown to each other.
• This insulates group members from the undue influence of
others.
• Generally, the types of problems handled by this
technique are not specific in nature or related to a
particular situation at a given time..
• The steps in the Delphi technique are…
• 1. The problem is identified and a sample of
experts is selected. These experts are asked to
provide potential solutions through a series of
carefully designed questionnaires.
• 2. Each expert completes and returns the initial
questionnaire.
• 3. The results of the questionnaire are compiled at
a central location and the central coordinator
prepares a second questionnaire based on the
previous answers.
• 4. Each member receives a copy of the results along
with the second questionnaire.
• ADVERTISEMENTS:
• 5. Members are asked to review the results and
respond to the second questionnaire. The results
typically trigger new solutions or cause changes in
the original position.
• 6. The process is repeated until a consensus is
reached.
• The process is very time consuming and is primarily
useful in illuminating broad range, long term
complex issues such as future effects of energy
shortages that might occur.
• Didactic interaction:
• This technique is applicable only in certain
situations, but is an excellent method when
such a situation exists.
• The type of problem should be such that it
results in a yes-no solution. For example, the
decision may be to buy or not to buy, to merge
or not to merge, to expand or not to expand
and so on.
• Such a decision requires an extensive and
exhaustive discussion and investigation since a
wrong decision can have serious consequences.
• Since, in such a situation, there must be advantages as well
as disadvantages of either of the two alternatives, the
group required to make the decision is split into two sub-
groups, one favouring the “go” decision and the other
favouring the “no go” decision.
• The first group lists all the “pros” of the problem solution
and the second group lists all the “cons”. These groups meet
and discuss their findings and their reasons. After the
exhaustive discussions, the groups switch sides and try to
find weaknesses in their own original viewpoints. This
interchange of ideas and understanding of opposing
viewpoints results in mutual acceptance of the facts as they
exist so that a solution can be built around these facts and
opinions relating to these facts and thus a final decision is
reached.