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Decision Making in
Organisations - BBA 420
Lecture 11
 Topic Objectives
After studying this topic, students should be able to define ,
illustrate and discuss the following concepts:-
Decision Making
Types of Decision Making
Categories of Decision Making
Models for Decision Making
Factors that Evaluate the Level of Creativity in Decision
Making
Individual and Group Decision Making
Decision Making Process
Decision Making Styles
Importance of decision making in Organisations
Type of Decisions we Take

PersonalDecisions
Career Decisions
Family Decisions
Definitions
What is a Decision

 the act of making up your mind

about something
 the act or process of deciding to
do something
Definitions (2)
What is Decision Making

Decision-making is the act of

choosing between two or more
courses of action. In the wider
process of problem-solving,
decision-making involves
choosing between possible
solutions to a problem
Types of Decisions

Programmed Decisions
Non Programmed
Decisions
 Programmed Decisions
 Decisions related to structured
situations, where the problem is more or
less routine and repetitive in nature are
known as programmed decisions

 Forexample, before you come to class,

you make simple and habitual decisions
such as what to wear, what to eat, and
which route to take as you go to and
from home and school. Granting leave to
an employee.
Non Programmed
Decisions
 These decisions are taken in
unstructured situations which
reflect novel, ill-defined and
complex problems.

 Theproblems are non-recurring or

exceptional in nature. Since they
have not occurred before, they
require extensive brainstorming.
Categories of Decision
Making

Routine and Strategic

decisions
Tactical and Operational
decisions
Organisational and
personal decisions:
Routine and Strategic
decisions
 Routine decisions are  Strategic decisions are
related to the general important which affect
functioning of the objectives,
organisation. organisational goals
and other important policy
matters.
 They do not require much
evaluation and analysis
 These decisions usually
involve huge investments
and can be taken quickly.
or funds. These are non-
repetitive in nature and
 Ample powers are are taken after careful
delegated to lower analysis and evaluation of
ranks to take these many alternatives. These
decisions within the broad decisions are taken at the
policy structure of the higher level of
organisation. management.
Tactical(Policy) & Operational
Decisions
Operating decisions relate
Decisions pertaining to to day-to-day functioning or
various policy matters of operations of business. Middle
the organisation are policy and lower level managers take
these decisions.
decisions.
An example may be taken to
These are taken by the top
distinguish these decisions.
management and have long
Decisions concerning payment
term impact on the
of bonus to employees are a
functioning of the concern.
policy decision.
For example, decisions On the other hand if bonus is
regarding location of plant, to be given to the employees,
volume of production and calculation of bonus in respect
channels of distribution of each employee is an
(Tactical) policies, etc. are
operating decision.
policy decisions
Organisational & Personal
decisions
 When an individual If decision is taken by the
takes decision as an executive in the personal
capacity (thereby affecting
executive in the his personal life), it is
official capacity, it is known as personal decision.
known as .
organisational For example, if an
decision. executive leaves the
organisation, it may affect
the organisation. The
authority of taking
organizational decisions
may be delegated, whereas
personal decisions cannot
be delegated.
Models for Decision
Making
1) The rational decision-making
model
2) The bounded rationality model
of decision making
3) The intuitive decision-making
model
Models of Decision Making
(Continued)
rational when making a decision, you may want to make sure
that you establish your decision criteria before you
decision- search for alternatives. This would prevent you from
making liking one option too much and setting your criteria
model accordingly. ( Car Online)

bounded According to this model, individuals knowingly limit

their options to a manageable set and choose the first
rationality acceptable alternative without conducting an
model exhaustive search for alternatives.. (Job Offer)

intuitive This has emerged as an alternative to other decision

making processes. This model refers to arriving at
decision-
decisions without conscious reasoning. A total of 89% of
making managers surveyed admitted to using intuition to make
model decisions at least sometimes and 59% said they used
intuition often.
Factors that Evaluate the Level of
Creativity in Decision-Making
Process
Fluency refers to the number of ideas a person is able to generate.

Flexibility refers to how different the ideas are from one another. If you
are able to generate several distinct solutions to a problem, your
decision-making process is high on flexibility.

Originality refers to how unique a person’s ideas are. You

might say that Reed Hastings, founder and CEO of Netflix Inc.
is a pretty creative person. His decision-making process shows
at least two elements of creativity. Soon after starting work at
a software company, he invented a successful debugging tool,
which led to his founding of the computer troubleshooting
company Pure Software LLC in 1991. After a merger and the
subsequent sale of the resulting company in 1997, Hastings
founded Netflix, which revolutionized the DVD rental business
with online rentals delivered through the mail with no late fees.
In 2007, Hastings was elected to Microsoft’s board of directors.
His ideas are high in originality and flexibility.
Individual and Group
Decision Making
Individual decision-making is where an
individual makes a decision without
involvement of a group.
Group Decision Making is the collective
activity wherein several persons interact
simultaneously to find out the solution to a
given statement of a problem. In other
words, group decision making is a
participatory process wherein multiple
individuals work together to analyze the
problem and find out the optimum solution
out of the available set of alternatives
Pros and Cons of Individual
and Group Decision Making
 An individual generally makes  A group has the potential to
prompt decisions, while a group is collect more complete
dominated by various people, making
information, compared to an
decision-making very time consuming.
individual, while making
Moreover, assembling group members
consumes lots of time. decisions.
 An individual uses his own
intuition and views. A group
 Individuals do not escape
responsibilities. They are has many members, so its many
accountable for their acts and views and many approaches
performance. In a group, it is not easy result in better decision-making.
to hold any one person accountable  A group discovers the hidden
for a wrong decision. talent and core competency of
employees of an organization.
 Individual decision-making saves  An individual will not take into
time, money and energy as consideration every member's
individuals usually make prompt and
interest, while a group will take
logical decisions, says Juneja, while
group decision-making involves lot of
into account interest of all
time, money and energy. members of an organization.
Decision Making Process
A decision cannot be taken in
isolation. It is influenced by past
experience, present conditions
and future expectations. Once a
decisions is taken, then it becomes
difficult to reverse it.

It is pertinent to discuss the

problem involved and then take a
decision after considering various
possibilities.
Steps in Decision Making
A good-decision-maker has to follow certain
steps in decision making. They are :

1. Identify the problem and define it.

2. Develop objectives.
3. Seek the facts and identify the problem.
4. Develop a model.
5. Evaluate the alternatives.
6. Select the best alternative
7. Implement the decision or plan a course of
action.
Decision Making Styles
Every leader prefers a different
way to contemplate a decision.
Each style is a different method
of weighing alternatives and
examining solutions.
Directive,
Analytical,
Conceptual and
Behavioral.
Directive
This form of decision John Dirt is the most senior
making relies on a vice-president at Hearts
rational and Development firm. He
prefers to make decisions
autocratic style that
using a directive style. John
results in the employee
believes that a shopping
using his own mall is the best type of
knowledge, development for the land.
experience and He is going to present this
judgment to choose decision to the CEO, based
the best alternative. on the fact that he believes
This type of leader is this is the best solution. He
very rational, but thinks has built malls in the past,
mostly about the short- and will not consider any
term. other options
Analytical and Conceptual
Analytical decision-makers Conceptual
examine much information
before taking action. This This style is
style relies on direct
observation, data, and facts concerned with
to support their decisions. long-term results,
Analytical Decision mkers Its brainstorming of
seeks information and advice
from others to confirm or alternatives,
deny their own knowledge. creative
These decision-makers have
a high tolerance for approaches to
ambiguity and are very problem solving
adaptable, but they like to
control most aspects of the and taking higher
decision process. risks.
Behavioral
These style reflect a number of
psychological dimensions that
decision makers employ in perceiving
and processing the information.

Two important dimensions among

them are: value orientation and
tolerance for ambiguity. Behavioral
approach is also known as descriptive
approach and administrative model
Importance of decision
making in Organisations ?
 Decisionmaking is important to
achieve the organizational
goals/objectives within given time
and budget

 Decisionmaking is a managerial
function related to planning,
organizing, directing and controlling
functions of a manager.