6. Decision Making for Engg Manag

8/6/2019 6. Decision Making for Engg Manag

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Types of Decisions andTypes of Decisions and

ProblemsProblems

Decision-a choice made from available alternatives.

Decision Making-the process of identifying problems

and opportunities and then resolving them.

Programmed Decision -a decision made in response

to a situation that has occurred often enough to

enable decision rules to be developed and applied

in the future. (SOP)

Non programmed Decision - a decision made in

response to a situation that is unique, is poorly

defined and largely unstructured, and has important

consequences for the organization.



Types of Decisions andTypes of Decisions and

Problems (cont.)Problems (cont.)

Certainty -all the information the decision maker

needs is fully available

¡ Risk -a decision has clear cut goals and good

information is available, but the future outcomesassociated with each alternative are subject to change.

Uncertainty -managers know which goal they wish to

achieve, but information about alternatives and future

events in incomplete. Ambiguity -the goals to be achieved or the problem to

be solved is unclear, alternatives are difficult to define,

and information about outcomes is unavailable.



Sources of Organizational andSources of Organizational and

Entrepreneurial DecisionEntrepreneurial Decision


Entrepreneurial DecisionEntrepreneurial Decision

Managers are faced with decisions when a

problem occurs or when an opportunity arises.




Entrepreneurial DecisionsEntrepreneurial Decisions


Entrepreneurial DecisionsEntrepreneurial Decisions

Problem

A situation in which some aspect of

organizational performance is less thandesirable.

Opportunity

A situation that has the potential to provide

additional beneficial outcomes.



Classification of DecisionClassification of Decision

SituationsSituations



Programmed decisions

Decisions made in response to routine situations

that have occurred in the past.

Non programmed decisions

Decisions made in response to situations that areunique, unstructured, or poorly defined.







R esponses to Decision Situations

Programmed decisions Non programmed decisions

Alternatives are

familiar to decision

makers

R esponses are

routine

Alternatives are not

familiar to decision

makers

R esponses require

creativity



DecisionDecision--Making StepsMaking Steps 6 Steps

1. Recognition of Decision Requirement

2. Diagnosis and Analysis of Causes

3. Development of Alternatives4. Selection of Desired Alternative

5. Implementation of Chosen Alternative

6. Evaluation and Feedback

± These steps are used regardless of whichmodel of decision used or whether thedecision is programmed or non programmed.



1. Recognition of Decision Requirement1. Recognition of Decision Requirement

± A decision requirement arises when there is

either an opportunity or a problem.

Opportunity-a situation in which managers seepotential organizational accomplishments that

exceed current goals.

Problem-a situation in which organizational

accomplishments have failed to meet establishedgoals.

± Sources of information: financial reports,

performance reports, customer satisfaction

reports, etc.



2. Diagnosis and Analysis of Causes2. Diagnosis and Analysis of Causes

± Once a problem or opportunity has come to a

manager¶s attention, the understanding of the

situation should be refined. Diagnosis: the step in the decision making

process in which managers analyze underlying

causal factors associated with the decision

situation. (see what is going on!) Ask questions; gather information; how urgent is

the problem, is it isolated, will it affect other areas

of the organization?



3. Development of Alternatives3. Development of Alternatives

± Once the problem or opportunity has been

recognized and analyzed, decision makers

begin to consider taking action. Don¶t limit the alternative solutions



4. Selection of Desired4. Selection of Desired

AlternativesAlternatives ± Once feasible alternatives have been

developed, one must be selected.

± Choose the most promising of several

alternative courses of action. ± The best alternative is one in which the solution

best fits the overall goals and values of the

organization and achieved the desired results

using the fewest resources.

± Risk Propensity will affect your choices

The willingness to undertake risk with the opportunity

of gaining an increased payoff.



5. Implementation of Chosen Alternative5. Implementation of Chosen Alternative

± The implementation stage involves the use of

managerial, administrative, and persuasive

abilities to ensure that the chosen alternativeis carried out.

± Can your decision be carried out?

± Implementation: the step in a decision

making process that involves usingmanagerial, administrative, and persuasive

abilities to translate the chosen alternative

into action.



6. Evaluation and Feedback6. Evaluation and Feedback

± Decision makers gather information that tells

them how well the decision was implemented

and whether it was effective in achieving itsgoals.

± Did you make the right decision?

± Do you need to make additional decisions?

± Additional tweaking may be necessary



Personal Decision Making FrameworkPersonal Decision Making Framework ± Each manager has their own style for making decisions

Problems are perceived differently and managers decide toact upon problems and opportunities differently.

± Directive-simple, clear cut solutions to problems; makedecisions quickly with just a few alternatives.

± Analytical-like to consider complex solutions based upon asmuch data as they can gather. Base decisions on objective,rational data from management control systems & other sources.

± Conceptual-consider large amounts of information combinedwith discussions with other people. Use both people andsystems.

± Behavioral-deep concern for others as individuals. Maymake decisions to help others achieve their goals.



Increasing Participation in Decision MakingIncreasing Participation in Decision Making ± Learn, Don¶t Punish

± Decisions are made under conditions of uncertainty

and time pressure which may cause some errors.

± How will you react?

± Each failure provides new information and learning.

± Late Departures:

American Airlines (who has done it?) vs. Southwest Airlines (team

delay)

± Know When to Bail ± ³fail early, fail often, and pull the plug early.´

± Escalating Commitment-invest time and resources in a

failing decision.

± Your solution from time to time may in fact be wrong!



Increasing Participation in Decision Making (cont.)Increasing Participation in Decision Making (cont.)

± Practice the Five Whys

± Learn to ask why, not just once, but 5 times.

± Each subsequent answer will generate alternatives for solving the

problem and probes deeper into the problem

± Build Collective Intuition

± Combined knowledge, experience, and understanding of the group. ± Meet as a group and work together on a solution allowing

everybody's ideas to interplay bringing additional alternatives and

solutions.

± Engage in Constructive Conflict

± A diverse group with varied levels of experience.

± Devils Advocate-challenge the assumptions and assertions to

prevent premature consensus or µgroup think¶.

± Point-Counterpoint: divide the group and argue two sides of the

issue.



Using Information Technology for decisionUsing Information Technology for decision

making.making.

Managers use information systems that rely

on a massive data warehouse to make

decisions about what to stock, how to priceand promote it, and when to reorder or

discontinue items.

Enhances ability to analyze buying patters,

spot problems or opportunities and conveythe information to lower levels.



Economies of scale

Economies of scale, in microeconomics, are the cost advantages that abusiness obtains due to expansion. They are factors that cause aproducer¶s average cost per unit to fall as scale is increased. Economiesof scale is a long run concept and refers to reductions in unit cost as thesize of a facility, or scale, increases. Diseconomies of scale are the

opposite. Economies of scale may be utilized by any size firm expandingits scale of operation. The common ones are purchasing (bulk buying of materials through long-term contracts), managerial (increasing thespecialization of managers), financial (obtaining lower-interest chargeswhen borrowing from banks and having access to a greater range of financial instruments), and marketing (spreading the cost of advertising

over a greater range of output in media markets). Each of these factorsreduces the long run average costs (LRAC) of production by shifting theshort-run average total cost (SRATC) curve down and to the right.



-

-



Recession is a business cycle contraction, a general

slowdown in economic activity over a period of time.During recessions, many macroeconomic indicators vary

in a similar way. Production as measured by Gross

Domestic Product (GDP), employment, investment

spending, capacity utilization, household incomes,

business profits and inflation all fall during recessions;

while bankruptcies and the unemployment rate rise.

Recessions are generally believed to be caused by a

widespread drop in spending. Governments usually

respond to recessions by adopting expansionary

macroeconomic policies, such as increasing money

supply, increasing government spending and decreasing

taxation.



Information TechnologyInformation Technology

± The hardware, software, telecommunications,

database management, and other

technologies used to store, process, and

distribute information.

± Data-raw, un-summarized, and unanalyzed

facts and figures.

± Information-data that have been convertedinto a meaningful and useful context for the

receiver.



Characteristics of useful informationCharacteristics of useful information

Time: information should be available and

provided when needed, up to date, and related to

the appropriate time period.

Content: useful information is error free, suited tothe user¶s needs, complete, concise, relevant (get

rid of the unnecessary data), and an accurate

measure of performance.

Form: information should be provided in a formthat is easy for the user to understand and that

meets the user¶s needs for the level of detail.



Types of Information SystemsTypes of Information Systems

Operations Information Systems

Management Information Systems



Operations Information SystemsOperations Information Systems

A computer based information system that

supports a company¶s day-to-day operations.

2 Types of Systems

Transaction Processing System Records and processes data resulting from routine

business transactions such as sales, purchases, and

payroll.

Office Automation Systems Combine modern hardware and software to handle the

tasks of publishing, distributing information, and

process accounting procedures electronically.



The Internet and EThe Internet and E--BusinessBusiness

Internet World Wide Web

E-business: any business that takes place by digital

processes over computer network rather than physical place.

E-commerce: business exchanges that occur electronically. Intranet: an internal communications system that uses the

technology and standards of the internet but is accessible

only to people within the organization.

Electronic Data Interchange (EDI): a network that links thecomputer systems of buyers and sellers to allow the

transmission of structured data primarily for ordering,

distribution, and payable and receivables.

Extranet: an external communications system that uses the

internet and is shared by two or more organizations.



How to get Business into EHow to get Business into E--

BusinessBusiness

E-business strategies

In-house internet division

your own company site

Spin-off

Barnes & Noble vs. barnesandnoble.com

Whirlpool vs. brandwise.com

Strategic partnership

Toys R Us and Amazon.com



Enhanced CollaborationEnhanced Collaboration Intranets and networks keep customers,

suppliers, and other organizations in better

communication.

What is available online for the customers?

Hong Kong¶s Li & Fung, A&F, Guess, Ann Taylor

They own no factories or machines

Electronically connected to 7,500 supply and manufacturing

partners in 37 countries

Are there risks for customers?



Organizational LearningOrganizational Learning Information gets to Managers faster

Information gets to Employees faster

Decisions are made with more and better information

Access to databases about industry,

financial, and demographic trends in their

environments will help managers stay on top

of important trends.



IT TrendsIT Trends Instant Messaging

Wireless Internet

Peer-to-Peer File Sharing

Google Desktop Search

6. Decision Making for Engg Manag

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