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Chapter 2 of Engineering Management by Roberto Medina
Citation preview
Decision Making:The Essence of Managers’ Job
Introduction
The Decision-making process
Decision-making models
Decision Styles
A discussion on Group Decisions
Key Topics
Part I
Introduction
Organizations are systems
Involve people, structure and a common purpose
Have limited resources
Need to perform a series of functions to meet its objectives
Organizations
Managers are responsible for effective and efficient execution of these organizational functions.
A typical manager performs a number of functions that are categorized as:
• Interpersonal
• Informational
• Decisional
Managers
One of the key traits that distinguish managers from operatives is the ability to make independent decisions.- self determining. Decide traits.
Managers
Part II
Decision-making
The word decision is defined as:
“A choice between two or more alternatives”. Maraming pagpipilian
Thus decision-making can be defined as:
“the selection of a course of action from among alternatives ”. Select action from alternatives
What is decision-making?
Identifying a problem
Identifying decision criteria
Allocating weights to criteria
Developing alternatives
Analyzing alternatives
Selecting an alternative
Implementing the alternative
Evaluation (of decision effectiveness)
Decision-making Process
Problem is a discrepancy (difference) between an existing and a desired state.
Example:
“The manager has resigned, and we need another manager”
Here the phrase “manager has resigned” reflects the current state while “need another manager” represents a desired state.
Problem Definition
The word criteria, is defined as “a standard by which something can be judged”.
A decision criteria therefore, is the basis of a decision, which outlines the relevant and important factors for a decision. And implicitly, it also defines what is not important.
Identifying Decision Criteria
In the above-cited scenario, the decision criteria may include the following factors:
Relevant qualifications
Leadership skills
Communication skills
Planning and analytical skills
Professional experience
Decision Criteria: Example
The next step in the decision making process is prioritization.
Prioritization is achieved by assigning quantitative weights to each criteria element.
The weightage defines the relative significance of each element.
Allocating Weights to Criteria
Criterion Weight
Relevant qualifications 3
Leadership skills 5
Communication skills 3
Analytical skills 4
Professional experience 1
Allocating Weights: Example
Involves defining the possible alternatives (or choices) that would resolve the problem.
In our case, the alternatives would be a list of candidates or job applicants.
Developing Alternatives
Alternatives are rated and analyzed on the basis of the criteria
The rating can be based on a specified scale, say 1 – 5 etc.
Rating may be subjective in nature and thus,may depend on the judgment of the individual(s)
Analyzing Alternatives
C A N D I D A T E S R A T I N G A N D A S S E S S M E N T
Candidate Qualif- ication
Leader- ship
Commun- ication
Analysis Exper- ience
Kamran Ashraf 3 3 3 1 1
Rahila Mushtaq 2 1 4 2 2
Tasaduq Hussain 4 2 3 2 3
Zubair Ahmed 2 5 2 4 1
Maliha J aved 4 5 4 3 2
Criteria Rating: Example
E V A L U A T I O N O F C A N D I D A T E S
Candidate Qualif-ication
Leader- ship
Commun- ication
Analysis Exper- ience
Total
Kamran Ashraf 9 15 9 4 1 38
Rahila Mushtaq 6 5 12 8 2 33
Tasaduq Hussain 12 10 9 8 3 42
Zubair Ahmed 6 25 6 16 1 54
Maliha J aved 12 25 12 12 2 63
Analyzing & Assessment: Example
Involves choosing the best alternative, based on the above rating and analysis
Generally implies selecting the alternative with the highest score.
Selecting an alternative
Putting the decision into action
Involves clear communication of the decision to all concerned and obtaining their commitment
Implementing the Alternative
Evaluation forms an integral part of any process
Involves evaluation of the outcome based on the desired goal and criteria
Involves assessing the effectiveness and efficiency of the outcome (or the entire process)
In case of any undesired results, each step of the process is carefully reviewed to trace the root causes
Evaluation
Model
“A simplified representation or description of a system or complex entity”
Examples
A model of a building
A globe (Earth model)
Decision-making Models
So Rational and Bounded Rational Models are cognitive models that describe how managers make rational decisions
Rational/Bounded Rational
2. Set goals
The Rational Model
External and internal Environ. forces
1. Define and diagnose the
problem
3. Search for alternative solutions
4. Compare and evaluate
solution
5. Choose among
alternative solutions
6. Implement the solution
selected
7. Follow up and control
2. Analyze the problem
Not all decisions made on rational basis
Most problems, goals and preferences are not clear or well defined
Not practical to know all possible alternatives
Time and cost constraints exist in all practical problems
Result not maximized in most cases
Rational Model: Criticism
Limited set of criteria
Self-interest influences ratings
Limited no. of alternatives
Alternatives are assessed one at a time till a satisficing (or good enough) alternative is found
Politics influences acceptance and commitment of decision
Bounded Rational: Assumptions
An unconscious process of making decisions on the basis of experience and judgment
Intuition
Involves gut feeling
May also have rational basis
The “feeling” arises from past experience and knowledge
Involves quicker response
Does not involve systematic analysis
Intuition
Effective managers make various kinds of decisions. In general, these decisions are either
Programmed decisions
Non-programmed decisions
Decision Types
A decision that is repetitive and routine
A definite method for its solution can be established
Does not have to be treated a new each time it occurs
Procedures are often already laid out
Examples: pricing standard customer orders, determining billing dates, recording office supplies etc.
Programmed Decisions
A decision that is novel (new or unique) or Ill structured
No established methods exist, because it has never occurred before or because
It is too complex
Non-programmed Decisions
Non-programmed Decisions
Organizational Levels
Nature ofProblems
Nature ofDecision-making
Are “tough” decisions that involve risk and uncertainty and
call for entrepreneurial abilities
Such decisions draw heavily on the analytical abilities of the manager
Examples: Moving into a new market, investing in a new unproven technology, changing strategic direction
Non-programmed Decisions
Decision-making, though a rational process does include some subjective elements
Thus in real organizational settings, the quality of decision does depend on the ability, style and approach of the manager
Decision Styles
Directive
Represents low tolerance for ambiguity and uncertainty
Reflects rational thinking of the manager
Such decision styles are more suitable for routine procedural tasks
Decision Styles: Directive
Analytic
Analytical style is also a rational style of thinking
Involves a very high tolerance for ambiguity and uncertainty
Such managers generally seek detailed information before making a decision
Decision Styles: Analytic
Behavioural
Represents a creative way of thinking
Involves a low tolerance for ambiguity or uncertainty
Managers with a behavioural style introduce “new” ways of doing things
Decision Styles: Behavioural
Conceptual
Conceptual style also reflects a creative and intuitive way of thinking
Conceptual style managers have a very broad vision and generally look at numerous alternatives for decision-making
Focused on the long run and often result in creative outcomes or alternatives
Decision Styles: Conceptual
The factors requiring group decisions include:
Involving sensitive issues
High cost alternatives
Involving very high risk factor
Strategic impact
Group Decision-making
Acceptance of group members
Coordination is easier
Communication is easier
Existence of large alternatives
More information can be processed
Diversity of experience and perspectives
Group Decisions: Advantages
Take longer time
Group can be indecisive
Groups can compromise
Groups can be dominated
Groups can “play games”
Victim to Groupthink
Group Decisions: Disadvantages
Short time
Unimportant to group
Manager can take decision
Dominate the decision
Destructive conflict
Members hesitant
Situational Factors for Individual Decision-making
Confidential data
Incapability of members
Manager’s dominance
Indirect effect on group members
Situational Factors for Individual Decision-making
Need for innovation and creativity
Data collection
Importance of acceptance
Importance of solution
Complex problem
Democratic process
Situational Factors for Group Decision-making
Risk taking solution needed
Better understanding
Whole responsibility
Feedback required
Situational Factors for Group Decision-making
Brainstorming
Nominal group techniques
Electronic meeting
Improving Group Decision-making