CHAPTER 6

DECISION MAKING AND

PROBLEM SOLVING

Strategic Management
 Decision Making & Problem Solving
 Successful problem solving depends on good decisions. Much of the
supervisor’s job is making decisions.
 Decision : is a solution chosen from among alternatives .
 Decision-making process : is the process of selecting an alternative
course of action that will solve a problem.
 Problem: is deviation/gap from expectation
 Problem solving: the process of “overcoming obstacles to achieve a
goal.”
 Problem solving involves making a series of decisions:
 deciding that something is wrong,
 deciding what the problem is, and
 deciding how to solve it.
 Cont’d

 There are two basic types of problems:

 simple, or acute and

 long-standing, or chronic, problems

 Simple problems occur suddenly, and the cause of the problem may be
obvious and hence intuitive decision may solve the problem
 An example is when the electricity goes off because a fuse is blown.

 The chronic problem is usually more complex, and it is difficult to

determine the causes and solutions and hence rational model is needed
 This type of problem can benefit from the conscious use of a problem-solving
or decision-making model.
 The importance of understanding and using a model is that the decision will
be the result of facts and analysis rather than of opinions and feelings.
 Cont’d

Problem solving
 Problem solving contains elements of

 Undesirable existing situation

 A goal to achieve
 Obstacles that keep group from achieving goal

 Thus problem solving involves decision making to overcome obstacles

and achieving goals
 ORGANIZATIONAL MODELS OF DECISION MAKING

 RATIONAL : Maximize organization’s benefits and common goals by selecting

the best solution to achieve the desired outcomes.
 Disadvantage : take longer time to select the best

 BUREAUCRATIC: Follow standard operating procedures (SOP) & routine

 Disadvantage: limited alternative solutions ,depends on history

 POLITICAL: Key groups compete and bargain ,win-win situations, majority and
negotiations.
 Disadvantage: limited alternative solutions

 “GARBAGE CAN”: Organizations not rational; solutions accidental

Decision Strategies

 Four main decision making strategies:

 Rational
 Intuitive
 Recognition primed
 The Ultimate Decision Making strategy
 Rational decision making models

 Rational decision making models involve a cognitive

process where each step follows in a logical order from
the one before.
 By cognitive, mean it is based on thinking through and
weighing up the alternatives to come up with the best
potential result
 Cont’d

 Pros and cons :a rational decision making model presupposes

that there is one best outcome.
 Because of this it is sometimes called an optimizing decision making
model.
 The search for perfection is frequently a factor in actually delaying
making a decision.
 Intuitive decision Strategy

 In many cases, decisions are made without giving any thought to the process of
deciding.
 Supervisors will automatically decide something
 because he feels it is right or
 because a decision has been made on a similar issue in the past.

 Institutive decision indicate that there may be no rationale or logic

behind the choices made.

 Some people consider these decisions to be lucky guesses.

The logic is, “A good plan, executed now, is better than a perfect plan next week”.
 Supervisors often have neither the time nor the desire to follow all these steps to
make a good decision.
 They may have trouble thinking of all the alternatives or
 gathering all the facts they need.
 Recognition prime decision

 Gary Klein's recognition prime decision model is a

combination of intuitive and rational decision strategy.

 Intuition is used to generate a workable course of action and

then you consider it logically to confirm it as appropriate.
 The Ultimate Decision Making model

The Ultimate Decision Making model put forward on this site goes
beyond Klein's model in that it teaches you your own personal
decision making signals that are built into your own biology.

 Minimax: the idea is to minimize the maximum possible loss.

Basically you determine what the worst outcome of each alternative
is and go for 'the best of a bad lot'. The attention is obviously on
minimizing the worst that can happen.

 This decision making strategy is designed to choose the alternative

with the least chance of disaster.
 Cont’d

 Maximax: the idea here is to maximise the maximum outcome,

i.e., choose your alternative with the best potential outcome.

 Also called decisions under uncertainty because several outcomes

may occur, but the probabilities of the outcomes are not known.

 People who enjoy risk use these decision making strategies.

 Loss avoidance principle: choosing the alternative with the lowest

possibility of loss.
Decision making & problem solving steps-Rational Model

 Define the problem

 Gather information
 Develop alternatives
 Evaluate(weigh) alternatives
 Select the best alternative
 Implement the solution
 Monitor progress and follow up
 1. Define the problem

 Being able to accurately identify the nature of a problem is a crucial

undertaking
 Incorrect problem identification can lead to the wrong decision

 If the wrong cause and solution for that cause is selected, the
problem will still be there.

Two of the most common errors are:

 Identifying the wrong problem and identifying the wrong causes of a problem.
 The tendency for leaders to make mental errors increases as their levels of stress
increase.
Cont’d

To express the issue in a clear, one-sentence problem statement:

• Identifying the gap
 Something is wrong and needs to be corrected
 Something is threatening and needs to be prevented
 Something is missing and needs to be provided
• Smoke out the issues to the team or organization
 Use questions to probe for understanding of real issues which require further
investigation
 Questions to ask:
1. Why is a solution necessary? Consequences if nothing is done?
2. What is (or is not) the problem? Keep asking to surface the real issues
3. What is/should be happening? Determine the appropriate gap
• Use appropriate tools and techniques
 Check-sheets, reports, observations
 Brainstorming
 Force Field Analysis
 Cause and Effect Diagram or Fish Bone Diagram
 2. Generate/Gather information

 Gather all available information that pertains to or can influence the

identified problem from sources such as higher, lateral, and subordinate
levels of command as well as from applicable outside agencies.

Brainstorming is common method to generating ideas

 In the problem-solving decision-making process, managers should have involved
subordinates to research the problem, gather information, and develop and analyze
the various courses of action.
 Subordinates are more likely to support a plan or decision if they took part in its
development.
 This technique will pay off in terms of increased interest, higher morale, and
better efficiency by team members.
 Cont’d

Brainstorming is an idea-generating process in which:

.Group members state their ideas no matter how far-reaching they may seem
.No one may criticize or even comment on an idea until the end of the process
. All ideas are recorded on a flip chart or black (white) board.
.Evaluation or follow-up on ideas takes place after all ideas are suggested

 Fifty to a hundred ideas may be generated in a single brainstorming

session.
 The value of generating ideas in a free and open forum is to have group
members build off each other’s ideas.
 Some ideas are likely to be only slightly different from others or a
combination of previously mentioned ideas.
NB: Brainstorming is the process of coming up with as many ideas as possible.
 Cont’d

Brainstorming may be:

 structured, that is, each person takes a turn suggesting an idea
 an unstructured session calls for individuals calling out whatever comes to
mind.
NB: In the use of either method, no value judgments should be made about
the suggestions.
 A brainstorming session can be held for: generating ideas about
problems to be solved, causes for identified problems, and alternative
solutions for the problem.
 Individuals with knowledge about the issue should be included, although
an “outsider” may also be useful.
 This person will help clarify and question why suggestions are or are not
made.
 Cont’d

 The supervisor is wise to involve employees in some but not all decisions.
 When a decision must be made quickly, like in an emergency, the
supervisor should probably make it alone.

 When the supervisor needs to build support for a solution, such as in

cutting costs or improving productivity, the group process is useful.

 When the consequences of a poor decision are great, the benefits of

the group’s collective wisdom are worth the time and expense of
gathering the input

 Whenever supervisors ask for employee input, they should be sure they intend to
use the information.
 Cont’d

 Since a primary benefit of group decision making is the variety of

opinions and expertise, a supervisor leading a decision-making
meeting should be sure that everyone is participating.

 The supervisor should concentrate on listening and encouraging the

input of others.
 If someone is not participating, the supervisor may have to ask for his or her
opinion or thoughts on the matter at hand.
4. Evaluate alternatives

 Decision maker should develop as many advantages and

disadvantages for each course of action as possible.
 Then, they must objectively and logically analyze the advantages
and disadvantages of each one against the advantages and
disadvantages of the others.
To effectively evaluate alternatives:
 Establish priorities and
 Set criteria in an effort to establish a goal
 Enables a wider perspective of possible solutions which tend to
be more mutually acceptable by team. This in turn leads to
higher commitment by the group
-Examine pros and cons of possible solutions
-Evaluate opinions and assumptions of others
-Test solutions to see if they meet established criteria
 Cont’d

 Criteria: the characteristics or requirements that each alternative

must possess to a greater or lesser extent.
 Usually the alternatives are rated on how well they possess each
criterion.

 These decision criteria identify what will guide the decision-making

process. They are the important facts relevant to the problem as
defined .
 There is no single best criterion for decision making where a perfect knowledge is
present.
 It is important that decision criteria be established early in the problem solving
process .
Alternatives evaluation/ testing procedures

 Takes into account 3 fact finding and judgment procedures

1. Establish team priorities
1. List Absolute Requirements (Time to complete & cost)
2. List Desirable Objectives
2. Evaluate alternatives eg.
1. Replace with new unit
2. Return cash to customer
3. Repair and return later
3. Set your criteria
1. What do you want to achieve by any solution you
make?
2. What do you want to preserve by any solution you
make?
3. What do you want to avoid by any solution you
make?
5. Select the best and Implement the solution

 Based on the evaluation criteria, select the best alternative

and then implement it.
 To implement, develop a plan of action
1. Specify steps to be completed
2. Determine resources needed to implement plan
3. Group member responsibilities to be agreed upon
4. Determine timeline of events
5. Provide for emergencies and/or contingencies
6. Determine expected and actual impact
7. Plan for assessment of your proposed plan
 Action Planning Tool
25

Steps to be Needed Whose Begin date Expected Actual Possible

completed Resources responsibility? and Impact Impact emergencies
Chronologic completion
al order date

Plan to assess Action Plan results : (list tools used eg Pareto charts, trend charts etc)
Step 6. Analyze the Outcome

 Follow through is critical

1. Analysis follow through
1. Validate the entire process
2. Dissemination and analysis of improvement results
2. Determination of new problems that surfaced
3. Revisit the process as necessary
4. Problem Recurrence Prevention intervention
5. Institutionalization
 Step 7. Improve the Process

 Continue the improvement

 verifies your commitment to continuous improvement by:
 Evaluating what you do on a daily basis
 Rethinking and changing the way you do things
 Eliminating non-value added activities
 Accepting responsibility and ownership for problems for which
you are part of the solution

NB: Problem Solving is an ongoing process

Methods of Decision Making

 Decision by inside expert

 Decision by outside expert
 Averaging rankings
 Random choice
 Majority rule
 Consensus
 Minority rule
 Decision Making Techniques

 The techniques in this chapter help you to make the

best decisions possible with the information you
have available.
 With these tools you will be able to map out the
likely consequences of decisions, work out the
importance of individual factors, and choose the
best course of action to take.
 Cont’d

 Pareto Analysis Selecting the most important changes to

make. Often better known as “The 80/20 Rule,” Pareto helps
you locate where you can derive the greatest benefit by
expending the least relative effort (or cost or resources or
what have you).

 Paired Comparison Analysis evaluating the relative

importance of different options

 Decision Trees choosing between options by projecting likely

outcomes
 Decision matrix: Evaluates and prioritizes a list of options,
using pre-determined weighted criteria
 Cont’d

 Grid Analysis Selecting between good options. Evaluate a

larger set of options based on numerous criteria, then weight
the importance of each criterion to derive the best choice.

 Force Field Analysis Analyzing the pressures for and against

change
 Six Thinking Hats Looking at a decision from all points of view

 Cost/Benefit Analysis Seeing whether a change is worth

making
 Multivoting: Narrows a large list of possibilities to a smaller
list of the top priorities or to a final selection; allows an item
that is favored by all, but not the top choice of any, to rise to
the top.
32

The Human Side of Problem Solving

 Team Member Interaction Styles
The Power of Group Diversity
33
Contributors Collaborators
People who concentrate on People who see the big picture,
individual, task-oriented the ultimate goal of the team
effort
• Set standards/rules
• Synthesize ideas
• Assess risks • Generate ideas
• Summarize process status • Test ideas
• Provide expertise • Negotiate solutions

Communicators Challengers
People who ensure everyone’s People who question the
views are expressed and leaders and members to
keeps everyone talking keep the team on track
• Encourage participation • Provide ideas
• Provide compromise • Criticize answers
• Reflect feelings • Defend ideas
• Support others
 Obstacles to Decision Making

 Failure to establish clear goal

 Failure to understand positive & negative consequences of alternatives
 Failure to think critically
 Failure to include others in discussion
 Lack of planning
 Lack of resources
 Wrong people present/ Lack of problem-solving skill
 Time pressure
 Poor communication
 Negative attitudes
 Creativity

Problem solving need creativity in decision making

 Creativity is the ability to bring about something imaginative or new.

 In decision making, creativity means being able to generate

alternatives that are innovative or different from what has been
used in the past.
 Thinking outside the box
 Cont’d

 There is a common notion that some people are creative and the
rest of us are stuck with following routine and ordinary courses of
action

 A fundamental way to become more creative is to be open to

your own ideas.
 think of as many alternatives as you can
 jot them down
 don’t evaluate them until after you have finished the list
 Five Step Technique for Generating Creative Idea

1. Gather the raw materials by learning about the problem and by

developing your general knowledge.
 Constantly expand your experience

2. Work over those materials in your mind

 As you think of partial ideas, jot them down so you can refer to them
later.
 If you’re stuck on a problem, try leaving it for a while
Cont’d

3. Incubate
 Let your subconscious do the work.
 Stimulate your imagination.

4. Identify an idea
 Ideas often pop into your head unexpectedly.

5. Shape and develop the idea to make it practical

 Seek out constructive criticism.
 Creative Thinking Techniques

 Brainstorming: is an idea generating technique

 Think freely, Freewheeling, wild thoughts are fine.

 Checklists: is a standard collection of items (things, verbs, questions,

approaches, attributes) used to remind the creative thinker of
possible ways to approach a problem or shape a solution.
 Encouraging creativity in decision making

 The most important step a supervisor can take to establish a work

climate that encourages creative thinking is to show that he or she
values creativity.
 When employees offer suggestions, the supervisor should listen
attentively and look for the positive aspects of the suggestions.
 Then the supervisor should attempt to implement the suggestions and
give the employee credit for the idea.
 Failure should be acknowledged as a sign that people are trying.
 Help employees see what can be learned from failures as well as
from successes.
 Cont’d

Create environment that foster creativity

 Creating an environment that fosters creativity is not simply listening
to alternative solutions when problems occur.
 The environment is developed daily and by all levels of the
organization.
 The supervisor can nurture a creative environment by the way he/she
treats people and their ideas on an ongoing basis.
 Respect for all employees and appreciation of daily contributions

All these will create an environment where employees feel valued and
are willing to think about the problems of the workplace.
 Barrier to creativity

 Often supervisors and employees have difficulty being creative

because they are afraid their ideas will fail.
 One must focus on learning from failures

 Another barrier to creativity is being overly busy.

 Creativity requires time to think.

 The last barriers is Isolation (introvert personality). Isolation

interferes with creativity.
 Creativity requires gregarious personality
43

Input Process Action Results

Information Gather Creativity Concern
Thinking

Experience Sort Decision Making Resolved

Judgment Organize Speed of execution
Knowledge Analyze
Confirm

Questioning & Listening

Skills

Making decision and taking action are critical to learning and understanding
the problem resolution
Common issues in Decision making

 The followings are common issues to be aware of

during decision making
 Cont’d

Bounded rationality
 When it seems impossible or unreasonable to find the best
alternative in the universe, decision makers settle for an alternative
they consider enough .
 The process is known as bounded rationality, that is, the decision maker
places limits, or bounds, on the rational model of decision making.
 The decision maker considers alternatives only until he or she finds one that
meets his or her minimum criteria acceptability.

 Choosing an alternative that meets minimum standards of

acceptability.
 Cont’d

Recency Syndrome
 The tendency to most easily remember events that have occurred
recently.
 To test this concept, try to remember what happened yesterday.
 Now try to remember eight or ten days ago with the same kind of
detail.

Stereotyping
 Rigid opinions about categories of people.
Cont’d

Groupthink
 The failure to think independently and realistically as a group
because of the desire to enjoy consensus and closeness
 Cont’d

Symptoms of Groupthink
 Defending the group’s position against any objections
 Stereotyped views of opponents
 Pressure against group members who disagree
 Self-censorship, that is, not allowing oneself to disagree.
 An illusion that everyone agrees (because no one states an opposing view)
 Self-appointed “mind guards”--people who urge other group members to go
along with the group.
 A view that the group is clearly moral--”the good guys”
 An illusion of being invulnerable
 Advantages of Group Decision Making

 Group members can contribute more ideas for alternatives than an

individual working alone.

 The group will have a broader perspective since the experience of the
group is broader than an individual’s experience.

 People involved in the decision will better understand an alternative

selected and also be more likely to support the decision.

 Involvement by employees in decision making provides an opportunity

for improving morale and employee self-esteem.
 Recognition of the contributions of groups is a powerful motivator.
 Cont’d

Disadvantages of Group Decision Making

 Group decision making is slower than individual decision making.

 There is an opportunity cost to the organization when employees

spend time in meetings rather than producing or selling.

 If one person dominates the decision-making process, the value of

multiple inputs is lost.
 Cont’d

Compromises
 Given the human and organizational limitations, supervisors
tend to make compromises most of the time.

 If the supervisor is aware of the kinds of compromises people

make, he or she is more likely to be aware when using them.

 Some kinds of compromises are useful in some situations,

others are to be avoided as much as possible.
Cont’d

Reasons for compromises

 Sitnplicity:
 Usually what we do is think over our experiences and
consider some of the ways similar problems have been
handled in the past.
 Thedownside of this approach is that it tends to bypass new
and innovative solutions that may deliver better results.
 Cont’d

Subjective rationality
 This considers alternatives that are the result of intuition and
instincts, rather than impartial data.
 Even when the process for arriving at the decision otherwise
rational, the numbers used in the process may be subjective.
 As a result, they may be less than completely accurate.

Rationalization
 People tend to favor solutions that they believe they can justify to
others.
 Cont’d

Personal perspective
 People may assume that everyone sees things the way they do.
 They think if something is clear to them it is also clear to everyone
else.
 Decision makers must find out what other people are thinking and
take those views into account.
 Cont’d

Stereotyping
 Rigid opinions about categories of people distort the truth that
people offer a rich variety of individual strengths and viewpoints.
 The cure for stereotyping is not to assume that everyone is alike.
 The supervisor should be aware of what his or her stereotypes about
people and situations are.
 In making a decision, the supervisor should consider whether those
stereotypes truly describe the situation at hand.
 Cont’d

Consider the Consequences

 When the consequences of a decision are great, the supervisor should

spend more time on the decision.
 He or she should try to follow the rational model of decision making,
collecting information and including as many alternatives as possible.

 When the consequences are slight, the supervisor should limit the
time and money spent in identifying and evaluating alternatives.
 Cont’d

Respond quickly in a crisis

 In a crisis, the supervisor should quickly select the course of action that
seems best
 This is an application of satisficing.

 Rather than waiting to evaluate other alternatives, the supervisor should

begin implementing the solution and interpreting feedback to see whether
the solution is working.

 Supervisors should be careful in identifying crisis situations to use

crisis decision-making methods.
 Cont’d

Inform the manager

 The supervisor’s boss doesn’t want to hear about every minor decision,
but the boss does need to know what is happening in the
department.
 The supervisor should inform the boss about major decisions.
 These would include decisions affecting
 the department,
 meeting objectives,
 responses to crises, and
 any decision that might be controversial.
 Cont’d

 When the boss needs to know about a decision, it’s usually smart to
discuss the problem before reaching and announcing the decision.
 The boss may have some input to the decision-making process that may
modify the supervisor’s decision.
 In a crisis, the supervisor may not have time to consult with his or her
boss and has to settle for discussing the decision as soon as possible
afterward.
 Cont’d

Be decisive yet flexible

 Sometimes it is difficult to say which alternative solution is best.
 Perhaps none of the choices looks good enough.
 In this case, it may be difficult to move beyond studying the alternatives to
selection and implementation.

 However, avoiding a decision is just another way to decide to do nothing.

 Being decisive means reaching a decision within a reasonable amount of
time.
 The supervisor should pick the best alternative or at least an acceptable
one, and then focus on implementing it.
 Cont’d

 A decisive supervisor clears his or her desk of routine matters

when a problem arises
 The supervisor

 refers the question or problem to the proper people,

 delegates appropriately, and
 keeps work moving

 He/she takes complete responsibility for getting the facts needed.

 Cont’d

 A decisive supervisor keeps his or her employees informed of what

they are expected to do and how they are progressing relative to
their objectives
 Being decisive should not mean that a supervisor is blind to signs of
a mistake
 If the feedback indicates the solution is not working, the supervisor
must be flexible and try another approach
 Cont’d

Avoid decision-making traps

 Avoid making a major issue out of each decision.

 Good planning can avert many crises, and life-and-death

issues are not the usual stuff of the supervisor’s job.

 Puteach issue into perspective so that alternatives can be

evaluated and an appropriate amount of time can be
devoted to finding the solution.
 Cont’d

 Avoid inappropriate responses to failure.

 Acknowledge mistakes, but do not dwell and agonize over them.
 Itis more important to learn whatever lesson the mistake can
teach, and then move on.
Cont’d

 Remember to draw on easily available information.

 Have some of the alternatives been tried before?
 If so, what was the outcome?

 Also consult with other members of the organization or with

outside experts.

 Beware of promising too much.

 Don’t make promises you can’t keep to your employees or your
boss.