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Tim Hortons Decision Making Powerpoint Presentation

Organizational Decision Making

CHAPTER -1

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FLOW OF PRESENTATION

What is decision making

Characteristics of decision

Approaches of decision-making process

Steps in Rational decision-making

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DECISION MAKING

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Decision making is a process of making choice from a number of alternatives to achieve a desired results ( Eisenfuhr 2011).

Using a step-by-step decision-making process can help you make more deliberate, thoughtful decisions by organizing relevant information and defining alternatives.

Managerial functions like planning, organizing, staffing, directing, coordinating and controlling are carried through decisions.

NO OF DECISIONS IN A DAY

Various internet sources estimate that an adult makes about 35,000 remotely conscious decisions each day [in contrast a child makes about 3,000] (Sahakian & Labuzetta, 2013)

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COMPLICATIONS (BARRIER ) IN DECISION MAKING

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Consider 1980. There was no such thing as a personal computer. The Internet and broadband connections to it were more than a decade away.

Roughly half of the 4.4 billion people on Earth were either so poor that they were cut off from the rest of humanity.

AT&T was the only telephone operator in the United States

Today’s decision makers face environments in which things that were isolated from one another just 30 years ago are bumping up against each other

COMPLICATIONS IN DECISION MAKING

To choose just one example, it is impossible for organizations to control what information escaped their four walls.

HARVARD BUSINESS REVIEW

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Decision making today is becoming more complicated:(Barriers)

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Technology / Information /Computers: increasing  More alternatives to choose

Structural Complexity & Competition: increasing  larger cost of error

International markets / Consumerism: increasing  more uncertainty about future

Changes / Fluctuations: increasing need for quick decision

CASE STUDY

In the mid-1980s Coca-Cola was the biggest-selling soft drink worldwide, yet the company decided to change the formula and introduce a ‘new’ Coca-Cola to the market. The result was disastrous: consumers disliked the new formula and preferred the old one. As a result, after three months the company had to reintroduce the old formula, using the brand name Coca-Cola Classic.

What events led to the company taking such a poor decision?

The decision was the product of a negative decision frame. Coca-Cola’s share of the market had been steadily declining and the company’s options were to make no changes. In essence, the choice was between certain loss or risk, and the company chose the latter. As it turned out, though, the decision the company made resulted in more short-term losses than anticipated.

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PROFILE OF A DECISION

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The Problem: an absence or void that remains until an appropriate response is found.

The Decision: a choice made from among alternative solutions or options when faced with solving a problem, fulfilling an unmet need, or finding the best way to achieve a goal or an aspiration.

CHARACTERISTICS OF DECISIONS Programmed Vs. Non-Programmed Decisions

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Programmed decisions tend to be well structured, routine and repetitive, occurring on a regular basis. They are usually made at lower levels in the organization, have short-term consequences and are based on readily available information.

Examples of programmed decisions include ordering raw materials or office supplies and calculating holiday pay, sick pay

CHARACTERISTICS OF DECISIONS,CONT………. Programmed Vs. Non-Programmed Decisions

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ALLEGRO Non-Programmed Decisions

Allegro, the Irish distribution company, took a major nonprogrammed decision in deciding to launch the American snack Pringles on the Irish market. This product is very different from traditional snack foods in that it is marketed in a distinctive tube packaging, which protects the product from breaking, and has a long shelf life of 18 months. The decision paid off, and Pringles captured a significant share of the market.

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ALLEGRO

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ALLEGRO

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CHARACTERISTICS OF DECISIONS,CONT………. Routine decisions Vs. Strategic decisions

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Routine decisions are related to the general functioning of the organization. They do not require much evaluation and analysis and can be taken quickly. Ample powers are delegated to lower ranks to take these decisions within the broad policy structure of the organization.

Strategic decisions are important which affect objectives, organizational goals and other important policy matters. These decisions usually involve huge investments or funds. These are non-repetitive in nature and are taken after careful analysis and evaluation of many alternatives. These decisions are taken at the higher level of management.

GOALS AND OBJECTIVES

Goals are statements you make about the future for your business., and an objectives are the exact steps your company must take to reach its goals.

For example, if an organization has a goal to “grow revenues”. An objective to achieve the goal may be “introduce 2 new products by 2020”

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CHARACTERISTICS OF DECISIONS,CONT………. Policy decisions Vs. Operating decisions

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Decisions pertaining to various policy matters of the organization are policy decisions. These are taken by the top management and have long term impact on the functioning of the concern. For example, decisions regarding location of plant, volume of production and channels of distribution (Tactical) policies, etc. are policy decisions. managers take these decisions.

For example: Decisions concerning payment of bonus to employees are a policy decision. On the other hand if bonus is to be given to the employees, calculation of bonus in respect of each employee is an operating decision.

CHARACTERISTICS OF DECISIONS,CONT………. Organizational decisions Vs. Personal decisions

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When an individual takes decision as an executive in the official capacity, it is known as organizational decision. If decision is taken by the executive in the personal capacity (thereby affecting his personal life), it is known as personal decision.

Sometimes these decisions may affect functioning of the organisation also. For example, if an executive leaves the organisation, it may affect the organisation. The authority of taking organizational decisions may be delegated, whereas personal decisions cannot be delegated.

CHARACTERISTICS OF DECISIONS,CONT………. Major decisions Vs. Minor decisions

Another classification of decisions is major and minor. Decision pertaining to purchase of new factory premises is a major decision. Major decisions are taken by top management.

Purchase of office stationery is a minor decision which can be taken by office superintendent.

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Approaches to Decision Making Decision-Making Models

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Rational model

Organizational model

Political model

Process model

The concept of rationality

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Founded on quantitative disciplines

Maximized outcome

Computational decision-making strategy

Closed decision-making process

Fixed objectives

Objectives are clear

All alternatives are known

ORGANIZATIONAL MODEL

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Attainable objectives

Short-term horizon

Qualitative orientation

Judgmental decision-making strategy

Open decision-making process [The manager does not know all the decision alternatives]

Such explanations typically involve looking at the distribution of responsibilities among organizational sub-units, the activities of committees and ad hoc coordinating groups, meeting schedules, rules etc.

POLITICAL MODEL

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The political model concentrates on the impact of organizational politics on decision making. Power and politics play an important role in the decision-making process.

On the other hand, power struggles may lead to a lack of focus on key issues and produce narrowly defined decisions largely following the self-interest of particular groups.

PROCESS MODEL

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Dynamic objectives

Objectives-oriented outcomes

Long-term horizon

Accommodates innovation

Objectives-oriented decision-making strategy

Open decision-making process

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RATIONAL DECISION-MAKING MODEL STEPS STEP 1: IDENTIFY AND DEFINE THE PROBLEM

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Keep in mind during identifying the problem to identify the cause of the problem, not the symptoms.

Define the gap between the current state and the desired state.

Define all available options and don’t think about quick solutions.

STEP I, CONTN…..

Example: If your family is growing and you have a small house which doesn’t meet your needs. Let’s assume that your decision is buying a bigger house to overcome that issue.

Note that: Buying a new house is a solution (not identifying the problem), and by this way you don’t think about the cause of the problem (space), the gap between the current and desired state and all alternative options.

The cause of the problem:

And the cause of the problem is the (Space).

The gap between the current and desired state:

In our example, you should mention the available space and the needed space.

All alternative options

Think about all alternatives:

If there is unneeded stuff in your house can be removed to free up space.

Having a space to build a new room in the house.

Buying a new house.

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STEP 2: IDENTIFY THE DECISION CRITERIA

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The second step in the rational decision-making model is outlining all the criteria ahead of time because those criteria will be a good guide to plan.

Example: Let’s get back to our problem, space is our issue and we need to identify some criteria to measure all alternatives and determining if there is solution is better than others, in this example our criteria are (time and cost).

STEP 2, CONTN….

Time: We should think about:

When will we need that space?

When will solving the problem be critical?

And how long will each option take?

Cost: these criteria are important to know if there is some options cost more than others; so you should know:

How much will each option cost?

How much money do we have?

Note that: If our problem is buying a new house instead of solving a space issue, we would establish criteria a little differently; and we would likely focus on things like distances to activities, crime per capita, quality of schools, and some other factors.

Now we’ve identified the problem and the decision’s criteria, it’s the time to weigh those criteria

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STEP3: WEIGHT ESTABLISHED CRITERIA:

We need to weigh those criteria because each criterion is unlikely to have the same level of importance; there are few ways you can use to accomplish this step:

Using an absolute comparison:

You can use this method which you commonly find costumers’ ratings; this comparison is helpful because it allows you to compare items side by side. So if you’re shopping for a product, you can look through customers’ reports and ratings and compare different types of the product in a specific category.

Those reports and ratings are accomplished by incorporating a ranking system where the user enters a value reflecting the importance of the criteria on a scale.

Example: Let’s say that there is a scale starting from “1” and going to “5”. “1” indicates that the criteria has no importance to us and a score of “5” indicates that the item is very important. So we would go through each criteria and use this method to weigh their significance to us.

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STEP 4: GENERATE LIST OF ALTERNATIVES

Once we have identified a thorough list of criteria and weighed the importance of those criteria, now we can generate a list of alternatives.

During this step, our goal is generating many alternatives as possible. The more alternatives that we generate, the greater the likelihood is that we’ll produce an effective solution to our problem.

Going back to our problem, we can generate a few alternatives, including buying new house, building another room, placing possessions in storage.

Keep in mind, in this stage we define all possible options, no matter they are good or bad solutions because we’ll think about that in the next stage.

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STEP 5: EVALUATE THE ALTERNATIVES

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At this stage, we want to evaluate the alternatives that we’ve identified using the criteria that we’ve identified in step 2. This step may be lengthy depending on the number of criteria and the number of alternatives.

Let’s go back to our Example: We’ll use a simple rank-order method to rank the alternatives in the criteria that we’ve identified. We’re also establishing weights to each criteria based on our findings from step 3. as shown in the following table:

LONG TERM SOLUTION (0.6) TIME (0.3) COST (0.1)
BUYING A NEW HOME 1 4 4
USING STORE 4 1 1
MODIFYING OLD BUILDING 5 5 5
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STEP 6: DETERMINING THE OPTIMAL DECISION

The sixth step in our rational decision-making model is determining the optimal decision. In order to know the optimal decision, we’re going to multiply ranking for each alternative by that criteria’s respective weight.

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MAXIMUM VALUE: BUYING A HOUSE ISAN OPTIMAL SOLUTION

LONG TERM SOLUTION (0.6) TIME (0.3) COST (0.1)
BUYING A NEW HOME 1*0.6 4*0.3 4*0.1
USING STORE 4*0.6 1*0.3 1*0.1
MODIFYING OLD BUILDING (OPTIMAL SOLUTION) 5*0.6 5*0.3 5*0.3
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The Scope of Decision Making

https://www.youtube.com/watch?v=cLqjK3ddSy0

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WHY NOT ALL BIG DECISIONS ARE HARD? THE ERROR OF COMPARISON

As philosopher Ruth Chang explains in a recent TEDTalk, we do ourselves a disservice when trying to compare to incomparable options.

For example, if you're comparing two potential job prospects, it's easy to compare one salary against another. It's much harder to compare less measurable factors, like one job's slightly closer commute and one job's more casual work environment. Those factors cannot be reduced to a number and cannot be objectively compared against one another. As such, there is no clear decision.

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KEY STRATEGIES FOR MAKING DECISIONS EASIER

Stop trying to reduce everything to a number

Reduce the factors you consider for the decision

Think about who you want to be

Listen to others, but don't depend on them

Go with your gut

According to a new study, thinking too hard about a problem leads to poor choices - difficult decisions are best handled by our unconscious minds. While most people are happy to buy a new set of towels without much thought, they are unlikely to buy a new car or house without some serious thought

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HERE ARE SOME HELPFUL, ACTIONABLE TIPS YOU CAN TRY THE NEXT TIME YOU NEED TO CALM DOWN

Breathe.

Admit that you're anxious or angry.

Challenge your thoughts.

Release the anxiety or anger.

Visualize yourself calm.

Think it through.

Listen to music.

Change your focus.

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MUST WATCH

https://www.youtube.com/watch?v=3AwMmEYLWt0