Decision

Making• Types of Decisions

• Factors affecting Decision making

Presented by: Ekta Belwal

HHM/2013-011M.Sc. (FN)

Decision Making “Decision Making is a conscious & Human Process

involving both individual & social phenomenon based upon factual & value premises which concludes with a choice of one behavioural activity among one or more alternatives with the intention of moving towards some desired state of affairs.”

- Shull, Delberg & Cumming “Decision- making is a process of identifying &

choosing alternative courses of action in a manner appropriate to the demand of the situation. The act of choosing implies that alternative courses of action must be weighted & weeded out.”

- Kreitner

Six ‘s of Decision Making Construct a clear picture of precisely

what must be decided. Compile a list of requirements that must

be met. Collect information on alternatives that

meet the requirements. Compare alternatives that meet the

requirements. Consider the "what might go wrong"

factor with each alternative. Commit to a decision and follow

through with it.

Types of

Decisions

1.Organisational & Personal Decisions

2.Tactical(Routine) &

Strategic(Basic) Decisions

3.Programmed & Non-Programmed

Decisions4.Policy & Operative

Decisions

5.Individual & Group Decisions

1.Organisational and Personal Decisions

Organisational decisions are those which managers undertake under certain conditions relating to organisation. Sometimes taken independently and sometimes delegated to other colleagues.

Personal decisions are to be taken by the managers on their own. Others need not to be consulted.

2. Tactical(Routine) & Strategic(Basic) Decisions

Tactical (Routine) Decisions Concerned with routine & repetitive problems neither require collection of new data nor conferring with the

people. Thus can be taken without much deliberation. Has short term implications May be complicated but are always one dimensional. More experience & judgement is needed.

Strategic(Basic) Decisions made on the problems which are important. Require thorough fact finding analysis of the possible alternatives. Finding the correct problem in such decisions assume more

importance. Has long term implications Established rules & procedures are needed not the special efforts.

3. Programmed & Non-Programmed Decisions

Professor Herbert Simon has given this classification. He has utilised computer terminology in classifying decisions.

Programmed decision may also be called as Routine Decision and Non programmed as Strategic Decisions

4. Policy & Operative Decisions

Policy decisions determine the the basic policies of the organisations & are taken at top level management. The policies are decided at the top become the basis for operative decisions can go beyond the policy framework of the organisation. These are important in nature & have long term impact.

Operative decisions on other hand, are less important & related with day-today operations of the business. Middle and lower management take these decisions since these involve actual execution and supervision.

Whether to allow bonus to employees or not is a policy decision. Once it is decided to pay bonus then making calculation of payments to be made to different employees is an operative decision.

5. Individual & Group Decisions

It is based on the number of persons involved in decision-making. Generally individual decision are less important

& programmed one. Group decisions are taken by a group of persons.

These are generally important decisions & relate to policy matters. The decisions are taken after a thorough discussion among persons who are assigned this work. The problem of delay in taking group decisions may create difficulties but otherwise these are well discussed decisions.

FACTORS AFFECTING DECISION MAKING(IN AN ORGANISATION)

Whenever we are involved in making decisions a number of factors can affect the process we follow and ultimately the decision we make.

They can be organised into three major groups: Perception Issues Organisational Issues Environmental Issues

PERCEPTION ISSUES:Perception can be described as the way in which

individuals interpret their environment. Perception can be influenced by the following: The perceiver

The types of personal characteristics that can affect an individual's perception include:

Background and experience Personal values Personal expectations Personal interests

The situation: Time, location and other situational factors can influence our perception of an object. E.g., For example, a Team Leader may notice team members who work late on the same evenings as the Team Leader. However, team members who work late on other evenings may not be noticed by the Team Leader.

The object: The object, which refers to any person, item or event can

have an impact on the way it is perceived. For example, when a manager receives a number of reports to

read he may be more inclined to read the one with the most colourful cover as this one stands out.

The relation an object has to other objects can also affect the perception of the perceiver.

For example, an individual team member may be judged on the actions of the whole team even when it is more appropriate for them to be judged on their own merits.

ISSUES WITHIN THE ORGANISATION:

A number of organisational issues can impact on the decision making process. These issues include:

Policies and proceduresOrganisational hierarchyOrganisational politics

POLICIES AND PROCEDURES Many organisations have formalised policies

and procedures which have been developed to resolve common problems and to guide managers when making decisions.

e.g., many organisations have documented disciplinary procedures which guide managers through a process of resolving issues with staff members.

ORGANISATIONAL HIERARCHY Organisational hierarchy refers to the

management structure of the organisation. Most organisations have different levels of management which carry with them different degrees of authority. The degree of authority directly impacts on the nature of the decisions an individual can make.

E.g., a Customer Contact Centre Team Leader cannot make decisions about the overall goals of the organisation. However, the Team Leader can make decisions about how their team contributes to the achievement of the organisation's goals.

ORGANISATIONAL POLITICS

Organisational politics refers to behaviour displayed by individuals and groups which is designed to influence others. Individuals and teams will often use politics to: Advance their careers Advance their interests and ideas Increase their rewards

Organisations are made up of individuals with different beliefs, values and interests. These differences are often the driving forces behind organisational politics.

For example, two teams believe they require an extra team member. Unfortunately the organisation can only afford one new employee. The two teams may well use politics in an attempt to influence their manager to allocate the new employee to their team.

ISSUES WITHIN THE ENVIRONMENT:Environmental issues are the external factors that affect the organisation. The types of external factors that can have an effect on decision making include: The market in which the organisation

operatesThe economyGovernment legislationCustomers' reaction to the

organisation's products and services

Factors affectin

g Decision making

Personal

Factors

Cultural factors

Social Factor

Information

Psychological factors

Personal factors Personal Demographics: age, gender,

stages in life cycle, education, occupation, economic position, etc.

Personal psychographics: includes lifestyle, attitudes, self-concept, concern about status, value systems, beliefs etc.

Cultural factors Culture: combined resulted of factors like

religion, traditions, taboos, language, education, upbringing, established pattern of social behaviour, values (core & secondary)etc.

Sub culture: caste Social class: it is determined by the education

level, wealth, occupation, profession & designation, location of residence, values, and behaviour of its members.

Social FactorsInfluence of reference group:

Intimate groups: e.g. family, friends, peer groups, close colleagues & close-knit organisations. Face-to-face & frequent interactions are

characteristic feature of the group. Secondary groups(including Opinion

leaders): based on occupation, profession place of residence, etc., of the members. O.L has the high credibility & influence.

Information information, should be

authentic, reliable, adequate and must be available at time. So enough time must be there to analyse the problem.

It reduces the uncertainty. Too much information or

information over-load creates confusion & delay in decision making.

Psychological factors Motivation: it all begins with needs. Perception: According to consistency theory one

mostly listen to things that support one’s existing belief system) Selective attention Selective distortion Selective retention

Learning Process: people do change their beliefs, faiths, likes & dislike which happens through learning

Memory Process: include past experiences even the hearsay experiences.

Heuristic In psychology, heuristics are simple, efficient rules,

learned or hard-coded by evolutionary processes, that have been proposed to explain how people make decisions, come to judgments, and solve problems typically when facing complex problems or incomplete information. These rules work well under most circumstances, but in certain cases lead to systematic errors or cognitive biases.

Examples of this method include using a rule of thumb, an educated guess, an intuitive judgment, stereotyping, or common sense.

• Anchoring and adjustment – Describes the common human tendency to rely too heavily on the first piece of information offered (the "anchor") when making decisions.

• Availability heuristic – A mental shortcut that occurs when people make judgments about the probability of events by the ease with which examples come to mind. For example, in a 1973 Tversky & Kahneman experiment, the majority of participants reported that there were more words in the English language that start with the letter K than for which K was the third letter. There are actually twice as many words in the English Language that have K as the third letter than start with K, but words that start with K are much easier to recall and bring to mind.

• Escalation of commitment – Describes the phenomenon where people justify increased investment in a decision, based on the cumulative prior investment, despite new evidence suggesting that the cost, starting today, of continuing the decision outweighs the expected benefit.

• Familiarity heuristic – A mental shortcut applied to various situations in which individuals assume that the circumstances underlying the past behaviour still hold true for the present situation and that the past behaviour thus can be correctly applied to the new situation.

Inherent Personal Traps Trying too hard to play it safe.

Letting fears and biases tilt your thinking and analysis.

Getting lost in the minutia can cause trouble.

Craving for unanimous approval. Trying to make decisions which are

outside your realm of authority.

Inherent System Traps

Willing to begin with too little, inaccurate, or wrong information.

Overlook viable alternatives or waste time considering alternatives which have no realistic prospects.

Not following the six C's. Failure to clearly define the

results you expect to achieve. Worst of all, failure to reach a

decision.

Thank You.

“Doing what's right isn't hard -- Knowing what's right is.”

Lyndon B. Johnson.