The Foundations of Decision Making - Coggle Diagram
The Foundations of Decision Making
The Eight Steps of Decision Making
1. Identification of a Problem
What defines a problem?
The decision making process starts with the identification of a problem (step 1). A problem is a discrepancy between the existing and desired state of affairs. [ For example, your phone was working fine, but now it does not work at all. ]
Problem identification often is subjective and not as easy as it appears.
Failure to correctly identify problems can be a problem itself.
The manager who mistakenly solves the wrong problem perfectly is just as likely to perform poorly as the manager who fails to identify the right problem and does nothing.
How do managers become aware of discrepancies (or problems)?
They have to make a comparison between the current state of affairs and some standard.
[ Standards can be past performance, previously set goals, performance of some other unit in the organization, performance of some unit in another organization, etc. ]
2. Identification of Decision Criteria
Decision criteria are the factors which will be important to making a decision.
Step 1: identified problem – lack of a smart phone and need to buy one.
[ Since smart phones come in all shapes, size, abilities, and other features; the step 2 in this case would be to decide which characteristics your future smart phone should have. ]
Step 2 : decision criteria
[ photograph ability, good internet access, long battery life, VPN, big screen, cute color. ]
3. Allocation of Weights to Criteria
Not all criteria are equally important. In addition, not all criteria may be equally available.
A simple approach is to give the most important criterion a weight of 10 and then assign weights to the rest against that standard.
[ Price (10) Size (9) Photograph ability (8) Internet capabilities (7) Cute color (6) ]
4. Development of Alternatives
Make a list of the alternatives that would succeed in resolving the problem.
[ In our smart phone example, let’s say the following list was generated: Samsung S5, Samsung S4, HTC 1, Oppo, Apple iPhone 5 ]
No attempt is made in this step to appraise these alternatives, only to list them.
5. Analysis of Alternatives
Each alternative is evaluated by appraising it against the criteria. The strengths and weaknesses of each alternative become evident as they are compared with the criteria and weights established in steps 2 and 3.
Step 5 is relatively easy when each of the criteria can be objectively measured. However, in some cases, criteria might be more subjective and thus a little harder to measure.
[ In our smart phone example, cute color is subjective. What is cute to one may not be cute to another. ]
6. Selection of an Alternative
Since all of the pertinent factors in the decision have been identified, weighted appropriately, viable alternatives identified, making a choice or decision should be easy.
7. Implementation of the Alternative
Decision implementation includes conveying the decision to those affected and getting their commitment to it.
In some organizations, groups or committees can help a manager achieve commitment. The people who must carry out a decision are more likely to enthusiastically endorse the outcome if they participate in the decision making process.
Although the choice process is completed in step 6, the decision still might fail if it is not implemented properly. Unfortunately, not all “step 7” situations are like buying a smart phone.
8. Evaluation of the Decision Effectiveness
Managers appraise the results of the decision to see whether it has corrected the problem.
Rules of thumb/heuristics
In order to further simplify and/or save time in the decision making process. In other words, cut out some steps in the process.
Rules of thumb/heuristics can be useful, because they help make sense of complex, uncertain, and ambiguous information.
However, rules of thumb/heuristics are not always reliable, because they may lead to errors and biases in processing and evaluating information.