Decision Making

What is Decision Making?

Decision making is the study of identifying and choosing alternatives based on the values and preferences of the decision maker. Making a decision implies that there are alternatives choices to be considered, and in such a case we want not only to identify as many of these alternatives as possible but to choose the one that best fits with our goals, desires, values, lifestyle and so on.

Kinds of Decision:

Decisions whether: This is the yes/no, either/or, decision that must be made before we proceed with the selection of an alternative. It is important to be aware of having made a decision whether, since too often we assume that decision making begins with the identification of alternatives, assuming that the decision to choose one has already been made.

Decision which: These decisions involve a choice of one or more alternatives from among a set of possibilities, the choice being based on how well each alternative measures up to a set of predefined criteria.

Contingent decisions: These are decisions that have been made but put on hold until some condition is met. Most people carry around a set of already made, contingent decisions, just waiting for the right conditions or opportunity to arise. Time, energy, price, availability, opportunity, encouragement all these factors can figure into the necessary conditions that need to be met before we can act on our decision.

Concepts and Definition:

1. Information: If a person has proper information than he can take a proper decision but Too much information can actually reduce the quality of a decision.
2. Alternatives: There are the possibilities one has to choose from. Alternatives can be identified or even developed. Merely searching for preexisting alternatives will result in less effective decision making.
3. Criteria: There are the characteristics or requirements that each alternative must posses to a greater or lesser extent. Usually the alternatives are rated on how well they possess each measure.
4. Goals: What is it you want to accomplish? A component of goal identification should be included in every instance of decision analysis.
5. Value: Value refers to how desirable a particular outcome is, the value of the alternative, whether in dollars, satisfaction, or other benefit.
6. Preferences: These reflect the viewpoint and moral hierarchy of the decision maker. They take personal preferences for the decision making.
7. Decision Quality: This is a rating of whether a decision is good or bad. A good decision is a logical one based on the available information and reflecting the preferences of the decision maker. The important concept to grab here is that the quality of a decision is not related to its outcome: a good decision can have either a good or a bad outcome. Similarly, a bad decision can still have a good outcome.
8. Acceptance: Those who must implement the decision or who will be affected by it must accept it both mentally and emotionally.

Approaches to Decision Making:

There are two major approaches to decision making in an organization, the authoritarian method in which an executive makes a decision for the group and the group method in which the group decides what to do.

Authoritarian: The manager makes the decision based on the knowledge he can gather. He then must explain the decision to the group and their acceptance of it.

Group: The group shares ideas and analyses, and agrees upon a decision to implement. Studies show that the group often has values, feelings, and reactions quite different from those the manager supposes they have. No one knows the group and its testes and preferences as well as the group itself. Group decision making is better. More than this, it has been shown many times that people prefer to implement the ideas they themselves think of. They will work harder and more energetically to implement their own idea than they would to implement an idea imposed on them by others.

There are two types of group decision making sessions. First is free discussion in which the problem is simply put on the table for the group to talk about.

The other kind of group decision making is developmental discussion Structured discussion. Here the problem is broken down into steps, smaller parts with specific goals. Development discussion (1) insures systematic coverage of a topic and (2) ensures that all members of the group are talking about the same aspect of the problem at the same time.

Some Decision Making strategies:

As you know, there are often many solutions to a given problem, and the decision maker's task is a choose one of them. There are several strategies used for choosing. Among them are the following:

Optimizing: This is the strategy of choosing the best possible solution to the problem, discovering as many alternatives as possible and choosing the very best. How thoroughly optimizing can be done is dependent on

1. importance of the problem
2. time available for solving it
3. cost involved with alternative solutions
4. availability of resources, knowledge
5. personal psychology, values

Satisfying: In this strategy, the first satisfactory alternative is chosen rather than the best alternative. If you are very hungry, you might choose to step at the first decent looking restaurant in the next town rather than attempting to choose the best restaurant from among all.

Maximax: This stands for "maximize the minimums." This strategy focuses on ejaculating and then choosing the alternatives based on their maximum possible payoff. It is a good strategy for use when risk taking is most acceptable, when the go-for-broke philosophy is reigning freely.

Maximin: This stands for "maximize the minimums." In this strategy, that of the pessimist, the worst possible outcome of each decision is considered and the decision with the highest minimum is chosen.

Decision Making Procedure: as you move ahead in process more easily to take decisions.

Identify the decision to be made together with the goals it should achieve.
Determine the scope and limitations of decision. When thinking about the decision, be sure to include a clarification of goals.

Get the facts: Get as many as possible about a decision within the limits of time imposed on you and your ability to process them, but remember that virtually every decision must be made in partial ignorance. Lack of complete information must not be allowed to paralyze your decision. A decision based on partial knowledge is usually better than not making the decision when a decision is really needed.

How to take decision with help of different alternatives:

Development alternatives: Make a list of the possible choices you have, including the choice of doing nothing. But something the decision to do nothing is useful or at least better than the alternatives, so it should always be knowingly included in the decision making process. Also be sure to think about not just identifying available alternatives but creating alternatives that don't yet exist.

Rate each alternative: This is the evaluation of value of each alternative. Consider the negative of each alternative (cost, penalty, problems created, time needed, etc,) and the positive of each (money saved, time saved, added creativity or happiness to company or employees, etc.) Remember here that alternative that you might like best or that would in the best of all possible worlds be an obvious choice will, however, not be functional in the real world because of too much cost, time, or lack of acceptance by others.

Rate the risk of each alternative: In problem solving, you hunt around for a solution that best solves a particular problem, and by such a hunt you are pretty sure that the solution will work. In decision making, however, there is always some degree of uncertainly in any choice. Risks can be rated as percentages, ratios, rankings, grades or in any other form that allows them to be compared.

Make the decision: if you are making an individual decision, apply your preferences (which may take into account the preferences of others). Choose the path to follow, whether it includes one of the alternatives, more than one of them (a multiple decision) or the decision to choose none.

And of course, don't forget to implement the decision and then evaluate the implementation, just as you would in a solving experience.

Risking:

Making decisions involves a degree of risk, it would be helpful to examine risk and risk analysis in this chapter in order to gain an understanding of what is involved. Risk and uncertainly create nervousness, yet they necessary components of an active life.

General Comments on Risk Taking:

1. Only the risk takers are truly free. All decisions of consequence involve risk.
   Without taking risks, you cannot grow or improve or even live.
2. There is really no such thing as permanent security: in anything on earth. Not taking risks is really not more secure than taking them, for your present state can always be changed without action on your part. If you don't take the risk of dying by driving to the store, your house could collapse on you and kill you anyway.
3. You are supposed to be afraid when you risk. Admit your fears - of loss, of reaction, of failure.
4. Risking normally involved a degree of separation anxiety - the anxiety you feel whenever you are removed from something that makes you feel secure. Many children feel this when they first leave their parents for school. Some college students feel this when they go off to college. Travelers sometimes feel it when they get homesick. The way to overcome separation anxiety is to build a bridge between the familiar and secure and the new. Find out what the new place-school or county-is like and how its elements compare to familiar and secure things at home. Take familiar things with you-books, teddy bear, popcorn popper, whatever.
   The same is true of all risks. Make the opportunity as familiar as possible and learn as much about it as you before you release the security of the old. Find out about the new job, its location, the lifestyle of those who live there, and so on.