Discuss the various types of decision – making.

Discuss the various types of decision – making. Describe the managerial decisions being made in an organization you are familiar with, what are the outcomes of those decisions. Explains with examples.


Different Types of Decision Making

The following are the most common types of decision making styles that a manager in a business or even a common man might have to follow.
Irreversible: These decisions are permanent. Once taken, they can't be undone. The effects of these decisions can be felt for a long time to come. Such decisions are taken when there is no other option.
Reversible: Reversible decisions are not final and binding. In fact, they can be changed entirely at any point of time. It allows one to acknowledge mistakes and fresh decisions can be taken depending upon the new circumstances.
Delayed: Such decisions are put on hold until the decision maker thinks that the right time has come. The wait might make one miss the right opportunity that can cause some loss, Specially in the case of businesses. However, such decisions give one enough time to collect all information required and to organize all the factors in the correct way.
Quick Decisions: These decisions enable one to make maximum of the opportunity available at hand. However, only a good decision maker can take decisions that are instantaneous as well as correct. In order to be able to take the right decision within a short span of time, one should also take the long-term results into consideration.
Experimental: One of the different types of decision making is the experimental type in which the final decision cannot be taken until the preliminary results appear and are positive. This approach is used when one is sure of the final destination but is not convinced of the course to be taken.
Trial and Error: This approach involves trying out a certain course of action. If the result is positive it is followed further, if not, then a fresh course is adopted. Such a trail and error method is continued until the decision maker finally arrives at a course of action that convinces him of success. This allows a manager to change and adjust his plans until the final commitment is made.
Conditional: Conditional decisions allow an individual to keep all his options open. He sticks to one decision so long as the circumstances remain the same. Once the competitor makes a new move, conditional decisions allow a person to take up a different course of action.

Types of Decision Making for Leaders

A leader gives direction to people to follow. He is responsible for ensuring that his decision provides the right direction to the organization. Be it in a business or in other organizations, decision making is an important component of leadership skills. The different types of decision making that a leader typically encounters are:
Authoritative: In authoritative type of decision making the leader is the sole decision maker which subordinates follow. The leader has all the information and expertise required to make a quick decision. It is important that the leader is a good decision maker as it is he who has to own up to the consequences of his decision. Though effective, in case the leader is an experienced individual, it can harm the organization if the leader insists on an authoritative type of decision making even when there is expertise available within the team.
Facilitative: In facilitative type of decision making, both the leader and his subordinates work together to arrive at a decision. The subordinates should have the expertise as well as access to the information required to make decisions. Such an approach could be useful when the risk of wrong decision is very low. It is also a great way of involving and encouraging subordinates in the working of the organization.
Consultative: As the name suggests, consultative decisions are made in consultation with the subordinates. However, the fact remains that unlike in the facilitative decision making style, in consultative decision making it is the leader who holds the decision making power. A wise leader tends to consult his subordinates when he thinks that they have valuable expertise on the situation at hand.
Delegative: As per the term, the leader passes on the responsibility of making decisions to one or more of his subordinates. This type of decision making is usually adopted by the leader when he is confident of the capabilities of his subordinates.

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Express various models of decision making process.

Express various models of decision making process. Describe a model which is most
suitable to your organization or any organization you are familiar with and why? Describe the organization you are referring to.

2 Answer. Decision making is the process of selection of a course of action from among alternatives. As a manager one would need to take decisions under different situations. The kind of decision used for routine and repetitive work and the other is new, unexpected and nonrepetitive one. The earlier one is termed as programmed decision and other nonprogrammed decision. Decisions are not always necessarily be either of the two, it can be a combination of both. Most of the strategic decisions however, are nonprogrammed decisions and involve a certain amount of risk.

Before a nonprogrammed decision is made the manager should calculate the amount of risk involved in the decision known as Risk Analysis, look at the major alternatives available-Decision Trees. The decision made by the manager would also be dependent on his attitude towards risk taking and this is called preference theory or utility theory.

MODELS OF DECISION MAKING
1. The rational Model: According to the School of Information Sciences and Technology at Penn State University, the Rational Model of decision-making, “requires comprehensive problem definition, an exhaustive search for alternatives, and thorough data collection and analysis. According to this model, information exchange and communication are unbiased, and accurate decision alternatives are intentionally chosen to bring maximum benefits to the individual, organization or group. Essentially, the Rational Model requires people to have a clear understanding of the actual problem. Unless the issue is clearly established, the Rational Model can be ineffective. This model also incorporates extensive research, so that all options or alternatives can be brought before the decision-maker(s). The Rational Model is a step-by-step decision-making model. Basically, the Rational Model can be broken down into four basic steps, which can be further diluted to create the additional three to five steps.



2. The Carnegie Model: This model recognizes the effects of “satisficing”, bounded rationality, and organizational coalitions.
a) Satisficing: Instead of searching for all possible solutions to a problem, managers resort to satisficing – that is they decide on certain criteria that they will use to evaluate possible acceptable solutions. The criteria automatically limit the set of possible alternatives. The managers then select one alternative from the range of alternatives they have generated. Thus satisficing involves a much less costly information search and puts far less burden on managers than does the rational model.
b) Bounded rationality: The carnegie model assumes that managers are limited by bounded rationality – a limited capacity to process information. The fact that they have limited information processing capacity does not mean that will take the first acceptable solution they are offered. Managers can improve their decision making by sharpening their analytical skills. Managers can use technology like computers to improve their decisions making skills.
c) Organizational Coalitions: The carnegie model views an organization as a coalition of different interests, in which decision making takes place by compromise, bargaining, and negotiation between managers from different functions and areas of the organization. Any solution chosen meets approval of the dominant coalition, the collection of managers or stakeholders who have the power to select a solution and commit resources to implement it. Over time, as interests change, the makeup of the dominant coalition changes and so does decision making. This carnegie model recognizes that decision making is not a neutral process with objective decision rules as they pursue their goals and interests.

To sum up the carnegie model recognizes that decision making takes place in an uncertain environment where information is often incomplete and ambiguous. It also recognizes that decisions are made by people who are limited by bounded rationality, who satisfice, and who form coalitions to pursue their own interests.

3. The Incrementalist Model: According to this model, managers select alternative courses of action that are only slightly, or incrementally, different from those used in the past, thus lessening their chances of making a mistake. The incrementalist model implies that managers rarely make major decisions that are radically different from decisions they have made before. Instead they avoid or correct mistakes through a succession of incremental changes, which eventually may lead to a completely new course of action. According to the incrementalist model, managers, limited by lack of information and lack of foresight, move cautiously one step at a time to limit their chances of being wrong.

INCREMENTALISM - the Example of British Government
Lindblom & others looked at US system of Government- but much work on Britain.
i. The fragmented British political structure. There is no formal concentration of power i.e. we do not have a President. Departmental pluralism- -Public Spending policy is incremental
ii. Lack of radical agenda leads to incrementalism.
iii. The growth in power & influence of pressure groups- trade unions in post war Britain, single issue groups such as Greenpeace/ Friends of the Earth, Anti War Campaigns etc.
Jordan & Richardson- Groups mediate radical or rationally planned decisions. E.g. Health, education, agriculture, urban renewal, sport.
iv. Policy Communities and networks- every sector of decision making features a range of actors, e.g., Urban renewal in East Manchester.

According to me the best decision making models are the Unstructured and the Garbage Can Model. Both these models are described below.

4. The Unstructured Model: This model describes how decision making takes place in environments of high uncertainty. This model recognizes the incremental nature of decision making and how decision making takes place in a series of small steps that collectively add up to a major decision over time. Incremental decisions are made within an overall decision-framework consisting of three stages- identification, development, and selection. In the identification stage, managers develop routines to recognize problems and to understand what is happening to the organization. In the development stage, they search for and design alternatives to solve the problems they have defined. Solutions may be new plans or modifications of old plans as in the muddling-through approach. Finally in the selection stage, managers use an incremental selection process- judgement and intuition, bargaining, and to a lesser extent formal analysis (typical of the rational model) to reach the final decision.

In the unstructured model, whenever organizations encounter roadblocks, they rethink their alternatives and go back to the drawing board. Thus decision making is not a linear, sequential process but a process that may evolve unpredictably in an unstructured way. For example, decision making may be constantly interrupted because uncertainty in the environment alters managers’ interpretations of a problem and thus casts doubt on the alternatives they have generated or the solutions they have chosen. The managers must then generate new solutions and find new strategies that help the organization adapt to and modify its environment. The organization tries to make the best decisions it can, but uncertainty forces it to adopt an unstructured way of making decisions. Thus the unstructured model tries to explain how organizations make non-programmed decisions, and the incrementalist model tries to explain how organizations improve their programmed decisions over time.

5. The Garbage Can Model: The view of decision making as an unstructured process is taken to its extreme in the garbage can model. This model turns the decision making process around and argues that organizations are as likely to start making decisions from the solutions side as from the problem side. In others words, decision makers may propose solutions to problems that do not exist; they create a problem that they can solve with solutions that are already available.

Garbage can decisions making arises in the following way: An organization has a set of solutions, or skills, with which it can solve certain problems- for example, how to generate new customers, how to lower production costs, or how to innovate products. Possessing these skills in making custom-designed furniture. The head of the marketing department persuades the company president that the organization should exploit these skills by expanding internationally. Thus a new problem- how to manage how to manage international expansion- is created because of the existence of a solution- the ability to make superior custom-designed furniture.

While an organization is encountering new problems of its own making, it is also trying to find solutions to problems it has identified in its environment or in its internal operations. To further complicate the decision making process, different coalitions of managers may champion different alternatives and compete for resources to implement their own chosen solutions, and the preferences of different individuals and coalitions all mix together and contend with one another for organizational attention and action. In this situation, an organizational becomes an organized anarchy in which the selection of alternatives depends on which coalition’s or manager’s definition of the situation holds sway at the moment. Chance , luck, and timing are important determinants of what the organization decides to do, because the problem that is currently the major source of uncertainty facing the organization has the best chance of being dealt with. Outcomes for the organization become more uncertain than usual, and decision making becomes fluid, unpredictable, and even contradictory.

The following diagram shows the garbage can model.




Conclusion
The reality of decision making in organizations is clearly a far cry from the process described by the rational model. Instead of benefiting from the wisdom of all knowing managers generating all possible solutions and agreeing on the best one so that decisions can be programmed over time, real organizations are forced to make unprogrammed decisions in an unstructured, garbage-can-like way in order to deal with the uncertainity of the environment that suurounds them.

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Describe different types and models of decision-making process.

Describe different types and models of decision-making process. Discuss how decision-making is followed in your organisation or an organisation you are familiar with. Suggest how it could be improved. Briefly describe the organisation you are referring to.

Types and models of decision-making process
There are several models of decision-making which are as follows :-
1.The economic rationality model
This model comes from the classical economist models, in which the decision maker is perfectly and completely rational in every way. In this, following conditions are assumed.
a. The decision will be completely rational in means ends sense.
b. There is a complete and consistent system of preferences that allows a choice among alternatives.
c. There is a complete awareness of all the possible alternatives.
d. Probability calculations are neither frightening nor mysterious.
e. There are no limits to the complexity of computations that can be performed to determine the best alternatives.
2.The social model :-
At the opposite extreme from the economic rationality model is the social model drawn from psychology. Sigmund Freud viewed humans as bundles of feelings, emotions and instincts, with their behaviour guided by their unconscious desires. These processes have even an impact in the international arena as they provide some basic rules of protocol.
3.Simon’s bounded rationality model :-
To present a more realistic alternative to the economic rationality model, Herbert Simon proposed an alternative model. He felt that management decision-making behaviour could be described as follows
a. In choosing between alternatives, manager attempt to satisfy or looks for the one which is satisfactory or “good enough”. Examples of satisfying criteria would be adequate profit or share or the market and fair price.
b. They recognise that the world they perceive is drastically simplified model of the real world. They are content with the simplification because they believe the real world is mostly empty anyway.
c. Because they satisfy rather than maximise, they can make their choices without first determining all possible behaviour alternatives and without ascertaining that these are all the alternatives.
d. The managers treat the world as empty, they are able to make decision with simple rule of thumb. These techniques do not make impossible demands upon their capacity for thought.
4.Judgemental heuristics and biases model:-
The judgemental heuristics and biases model is drawn mostly from kahnernan and Tuersky, cognitive decision theorists, who suggested that decision makers rely on heuristics. Such judgmental heuristics reduce the information demands on the decision maker and realistically help in the following ways .
a. Summarise past experiences and provide an easy method to evaluate the present.
b. Substitute simple rules of thumb or ‘standard operating procedures’ for complex information collection and calculation.
c. Save considerable mental activity and cognitive processing.
5. Participative decision-making techniques :-
All four above techniques are behaviourally oriented techniques. Used as decision-making technique, participation involves individuals or groups in the process. It can be formal or informed and it entails intellectual and emotional as well as physical involvement. The actual amount in making decisions ranges from one extreme of no participation, wherein the manager makes the decision and asks for no help or ideas from anyone, to the other extreme of full participation, where everyone connected with, or affected by, the decision is completely involved. In practice, the more open and constructured the task, the more participation there will tend to be.
In today’s organisations, there is an awakened interest in participation. Interest in participation among American mangers, unions and workers has been spurred by the competitive assault on U.S companies by companies with more participatory industrial relation systems, by the challenges of new production techniques and by the disappointing productivity performance of American companies. Participative techniques have been talked about ever since the early human relation movement, and now some organisations and individual managers are actually trying them.
Introduction to the organisation
Nike organisation grew out of an idea Philip Knight expressed in graduate school paper. In 1964, he and Bill Bowerman started an athletic shoe company call Blue Ribbon sports to evoke the image of the winner. In 1972, Blue Ribbon sports become Nike, named after mythological goddess of victory.
Decision-making model (Rational)
Nike previously used rationality model of decision-making model. One new venture was Nike Town concept. It was a sports museum, part store and part amusement park and was intended as a celebration of Nike’s energy and youth vitality. According to David Monfred this is an opportunity to have direct control over how your company is presented to the world. The idea here was not discounted. When the Chicago Nike town opened, it attracted 5000 customers a week who spent about $50 each.
To keep up with the changing market place, Nike managers have already started diversifying. In 1992, Nike opened retailed outlets in which apparel shoes and Nike paraphernalia are sold. Nike managers attribute a $100 million increase in gross profits in 1992, to it retail division, which operates 30 Nike owned outlets for factory seconds and the two Nike town stores. The stores promote the growth of the Nike Apparel business, which is experiencing must faster growth than the athletic shoe business.
Improvement
I prefer the use of modern decision-making method such as game theory rather than using old and traditional rational model. Game theory is the study of people making interdependent choices. A game is a situation involving at least two people in which each person makes choices based, in part, on what he or she expects the others to do. Game theory highlights the explicit role of human relationships and interactions in decisions. For example, in 1993, Nike managers focussed on range of women’s product. The decision to focus on women was not a quick decision. Many seemed to feat that growing the women’s business would undermine the company’s image and decrease it appeal to men.
Though long hours of brainstorming, the team arrived at series of ads featuring women a powerful, capable person.
The women’s marketing and advertising team, their supervisors and their competitors within Nike’s organisation ate all decision-making in the context of each other’s making decision. By game theory, the decision to proceed with dialogue is the joint result of their individual decisions. At the same time, this resulting decision is being played out in a world where forces of turbulence are at work.

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