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Decision making
- 2. Topics • What is ‘Decision’ & Decision Making • Types of decisions • Rational Decision Making Model • The manager’s role as decision maker
- 3. • Decision making is the essence of public administration. • It’s what public managers do (or try to avoid). • Public managers need to make good decisions because they’re judged on the outcomes of those decisions. • Managers at all levels and in all areas of organizations make decisions.
- 4. Definition • A Decision is a choice made between two or more alternatives. • Decision Making is the process of choosing the best alternative for reaching objectives. • Public Managers come across ‘decision situations’ daily.
- 5. Types of Decisions • Structured Problems & Programmed Decisions – Are routine and repetitive – Organizations develop typical ways to handle them, most of the time with ease and comfort • Unstructured Problems & Nonprogrammed Decisions – Problems are new or unusual and for which information is ambiguous or incomplete. – Are one-shot decisions that are usually less structured than programmed decisions. • Crisis/Disaster & Crisis/Disaster Management
- 6. Level of managers for making decisions Narrow Decisions scope Intermediate decisions scope Broad decisions scope Lower level managers make decisions Mid level managers make decisions Top level managers make decisions Responsibility for decision making
- 7. Rational Decision Making Process
- 8. Let’s Build a Scenario • upon citizens’ complaints, media reports and opposition’s criticism, government is under pressure to regulate drug stores and illegal clinics. • It has directed the Drug Regulatory Authority to regulate. • A District Drug Administrator reports growth of illegal clinics and unregistered drug stores. • inadequate inspection of drug stores and illegal clinics in his district. • A team of 12 Inspectors is under pressure to improving performance and increasing coverage of their weakly inspections. • They have demanded 12 new vehicles for the task.
- 9. • Fuel Efficiency (Mileage) • Price • Safety Features • After Sales Service • Life 1.Identify a problem Fuel Efficiency--------------------------- 10 Price....................................................8 Safety Features................................. 8 After Sales Services........................... 4 Life of the Vehicle............................. 3 “Drug Inspectors need new vehicles” 3.Allocate weights to the criteria Toyota Nissan Sunny Honda Motors Hyundai Mercedes Benz Mitsubishi Toyota Nissan Sunny Honda City Hyundai Mercedes Benz Mitsubishi 4.Develop alternatives Buy Honda City 2.Identify decision criteria 5.Analyze alternatives 6.Select an alternatives 7. implement the alternatives 8.Evaluate decision effectiveness Toyota Nissan Sunny Honda City Hyundai Kia Mitsubishi
- 10. The 08 steps process details • Step 1: Identifying a Problem – a problem situation demands that something needed to be done – but few problems are that obvious. – Managers not to confuse problems with symptoms of the problem. – problem identification is subjective • Step 2: Identifying Decision Criteria – Every decision maker has criteria guiding his or her decisions even if they’re not explicitly stated – It’s a cognitive process (conceptual skills)
- 11. • Step 3: Allocating Weights to the Criteria – If the relevant criteria aren’t equally important, the decision maker must weight the items – in order to give them the correct priority in the decision (analytical skills) • Step 4: Developing Alternatives – It requires the decision maker to list viable alternatives that could resolve the problem – decision maker needs to be creative (conceptual and analytical skills)
- 12. • Step 5: Analyzing Alternatives – evaluate each alternative – Assess values of alternatives – Keep organization goals in mind • Step 6: Selecting an Alternative – The sixth step in the decision-making process is choosing the best alternative – or the one that generated the highest total in Step 5
- 13. • Step 7: Implementing the Alternative – you put the decision into action by conveying it to those affected (communication and coordination skills ) – getting their commitment to it (leading and controlling). • Step 8: Evaluating Decision Effectiveness – The feedback loop
- 14. Are Public Managers Really Rational? • We assume that managers will use rational decision making; that is, • they’ll make logical and consistent choices to maximize value (benefits) for the organization/agency
- 15. ASSUMPTIONS OF RATIONALITY • A rational decision maker; – would be fully objective and logical (impersonal, emotionless). – The problem faced would be clear and unambiguous, – would have a clear and specific goal – knows all possible alternatives and consequences. – rational decision would lead to selecting the alternative that maximizes the likelihood of achieving that goal. – Finally, decisions are made in the best interests of the organization, not the personal or group interest
- 16. Making Decisions: Bounded Rationality • Herbert Simon questioned the ability of managers to make rational decisions. • managers are not able to make perfectly rational decisions • He put forth the idea that managers deal with bounded rationality. – which says that managers make decisions rationally, but are limited (bounded) by their ability to process information. • It refers to the fact that mangers are bounded in terms of time, computational power, and knowledge when making decisions
- 17. • Because they can’t possibly analyze all information on all alternatives, managers satisfice, rather than maximize the value. • That is, they accept solutions that are “good enough.” • They’re being rational within the limits (bounds) of their ability to process information
- 18. Decision-Making Conditions • Certainty – a situation where a manager can make accurate decisions because the outcome of every alternative is known • Risk – conditions in which the decision maker is able to estimate the likelihood of certain outcomes. – Under risk, managers have historical data from past personal experiences or secondary information that lets them assign probabilities to different alternatives • Uncertainty – if managers face a decision situation where they are not certain about the outcomes and can’t even make reasonable probability estimates.
- 19. Thirsty crow vs clever crow making decisions Work Hard Work Smart