DECISION

MAKING
Presented by :
Shivya Sumbly
Tisya Behal
Lucky Bisht
Vihaan Pant
Jagriti Sharma
OUTLINE TOPICS TO
COVER

Concept of Decision-Making
Characteristics of Decision-Making
Decision-Making Environment(Certainty ,Risk ,Uncertainty)
Importance of Decision-Making
Types of Managerial Decisions
Process of Rational Decision-Making
Individual and Group Decision-Making
Techniques of Decision-Making
 WHAT IS
DECISION?
A DECISION IS A COURSE OF ACTION WHICH IS
CONSCIOUSLY CHOSEN FROM AMONG A SET OF
ALTERNATIVES TO ACHIEVE A DESIRED RESULT. IT
REPRESENTS A JUDGEMENT AND A COMMITMENT TO
ACTION.
According to

Haynes and Massie

"Decision making is a process of
selection from a set of alternative
courses of action which is thought to
fulfil the objective of the decision
problem more satisfactorily than
others."
4 INTERRELATED
PHASES OF DECISION-MAKING

EXPLORATIVE(Searching for decision occasion)

SPECULATIVE(Identifying factor affecting the
decision problem)
EVALUATIVE(Analyzing & weighing alternative
courses of action)
SELECTIVE(Choice of the best course of action)
CLOSE RELATIONSHIP BETWEEN PLANNING and Decision-Making:
Both involve reasoning and judgment.
Both are goal-oriented and aim to achieve desired outcomes.

Ongoing and Continuous Processes:

Both planning and decision-making require continuous adjustments.
Old plans are modified and new plans are created to meet changing demands.
Similarly, decisions may be revised or new ones taken based on changing circumstances.

Involves Choice Among Alternatives:

Both processes require choosing between different alternative actions.

.Depend on Information:
Planners and decision-makers need information about both the internal and external
environments of the organization.
 Mindfulness
DECISION-MAKING AS A PART OF PLANNING:
Decision-making is a specific type of planning.
A decision is a plan involving a commitment of resources.
Decisions are based on forecasts and assumptions about the future.

PLANNING AND PROBLEM SOLVING:

Problem solving and decision-making are directly linked to planning.
Planning involves the most significant and far-reaching decisions
managers make.

PLANNING PROCESS AND DECISION-MAKING:

Managers decide the goals, the resources to use, and the actions
needed to achieve those goals.
The quality of decisions determines the effectiveness of the plan.
Characteristic
of
decision-
making...
 GOAL-ORIENTED:
Decisions are made with specific aims in mind, such as
solving a problem, achieving a target, or improving a

CHARATERISTICS situation. Clarity of goals helps to guide the decision-making

process.

CHOICE:
Involves selecting from multiple alternatives, highlighting the
necessity of evaluating options.

COMPLEXITY:
Decision-making often involves navigating intricate scenarios
with multiple variables. This complexity can arise from
interdependencies among factors, making it challenging to
predict outcomes accurately.

UNCERTAINTY:
Decisions frequently occur in unpredictable environments,
where not all variables are known, and outcomes are
uncertain. This requires assessing risks and potential
consequences.
PERVASIVE:
Affects various levels within organizations and
everyday life, as decisions are integral to all activities
and operations.

DYNAMIC:
Influenced by changing circumstances and
environments, necessitating flexibility and
adaptability in decisions.

INTELLECTUAL PROCESS:
Requires critical thinking, analysis, and judgment to
assess information and predict outcomes..
 DECISION MAKING ENVIRONMENT
DECISION-MAKING ENVIRONMENTS REFER TO THE
CONDITIONS OR CIRCUMSTANCES IN WHICH DECISIONS
ARE MADE. DIFFERENT ENVIRONMENTS AFFECT HOW
DECISION-MAKERS ASSESS INFORMATION, CONSIDER
ALTERNATIVES, AND PREDICT OUTCOMES

Presentations are communication tools.

FEATURES OF DECISION
MAKING ENVIRONMENT

CERTAINTY RISK UNCERTAINTY

CERTAINTY RISK UNCERTAINTY
A decision-making A risk environment occurs In an environment of
environment of certainty when the decision-maker uncertainty, decision-
exists when all the knows the probable makers lack sufficient
relevant information is outcomes of different information to assign
available, and the options but does not probabilities to the
outcome of each know the actual outcome outcomes. They don't know
decision alternative is beforehand. the likelihood of events, nor
known with 100% There is an element of the outcomes.
accuracy. uncertainty, but some Decision-makers must rely
Complete knowledge of information is available. on intuition, judgment, or
all possible outcomes. Decision-makers rely on external expertise.
Clear cause-and-effect probabilistic models to There may be multiple
relationships. estimate potential unknown variables
No ambiguity in decision- outcomes. influencing the outcomes.
COMPARING CERTAINTY,
RISK AND UNCERTAINTY

CERTAINTY
-Complete information, no room for error.
RISK
-Known probabilities, calculated risks
UNCERTAINTY
-No knowledge or very limited
information, higher unpredictability
 IMPORTANCE OF
DECISION-MAKING
 1. EFFECTIVE RESOURCE ALLOCATION
GOOD DECISION-MAKING ENSURES OPTIMAL USE OF RESOURCES, PREVENTING
WASTAGE AND PROMOTING EFFICIENT ALLOCATION OF FUNDS, MANPOWER, AND
MATERIALS. BY PRIORITIZING CRITICAL TASKS AND GOALS, DECISION MAKERS
CAN ALLOCATE RESOURCES ACCORDINGLY AND ENSURE THAT THE MOST
IMPORTANT ASPECTS RECEIVE THE NECESSARY ATTENTION. IT HELPS MITIGATE
RISKS BY FOCUSING ON AREAS THAT HAVE THE HIGHEST IMPACT ON PROFIT

2. COST CONTROL & REDUCTION

DECISION-MAKING HELPS IN IDENTIFYING AREAS OF UNNECESSARY COSTS AND
IMPLEMENTING STRATEGIES TO CONTROL OR REDUCE THESE EXPENSES, THUS
IMPROVING PROFITABILITY
 3. BUDGETING & FORECASTING
ACCURATE DECISIONS BASED ON ACCOUNTING DATA ALLOW FOR EFFECTIVE
BUDGETING AND FORECASTING, ENABLING A BUSINESS TO PREPARE FOR FUTURE
EXPENSES AND REVENUE GENERATION

4. COMPLIANCE WITH RULES AND

REGULATIONS
SOUND DECISIONS ENSURE ADHERENCE TO ACCOUNTING STANDARDS AND
LEGAL REGULATIONS. THIS REDUCES THE RISK OF LEGAL PENALTIES AND HELPS
TO MAINTAIN THE ORGANISATION’S REPUTATION
EXAMPLE
A TECH COMPANY HAS $100K FOR THE UPCOMING QUARTER, WHICH HAVE TO BE
ALLOCATED BETWEEN THE SOFTWARE DEVELOPMENT AND MARKETING DEPARTMENTS. THE
FORMER REQUIRES $60K FOR OPTIMIZING THE CODE OF THEIR CORE PRODUCT, WHICH
WOULD REDUCE THE LONG TERM OPERATIONAL COSTS OF THE COMPANY. THE LATTER
REQUIRES $70K TO SPEND ON MARKETING CAMPAIGNS FOR THE LAUNCH OF THEIR NEW
PRODUCT. AFTER ASSESSING THE NEEDS OF BOTH THE DEPARTMENTS THE RESOURCES ARE
PRIORITIZED. AS THE CODE OPTIMIZATION HAS A DIRECT EFFECT ON THE COMPANY’S
OPERATIONAL EFFICIENCY, WHEREAS THE MARKETING CAMPAIGN PROMISES A
SIGNIFICANT, BUT LESS IMMEDIATE RETURN, THE DECISION IS MADE TO ALLOCATE $50K
EACH, TO BOTH THE DEPARTMENTS.

OUTCOME: THIS BALANCED DECISION ENSURES THAT THE COMPANY MAINTAINS LONG
TERM OPERATIONAL EFFICIENCY, WHILE STILL SUPPORTING SALES GROWTH,
POSITIONING THEM WELL FOR THE UPCOMING QUARTERS.
 TYPES OF
MANAGERIAL
DECISIONS
1. STRATEGICDECISIONS 2. TACTICAL DECISIONS
These are long-term decisions Tactical decisions (a.k.a.
focused on the overall direction of operational decisions) are medium-
the organization. They are typically term and focus on implementing
related to growth, mergers, the strategies set at the higher
diversification, and market entry level. These decisions deal with
strategies. Strategic decisions resource allocation and day-to-day
require extensive data analysis and operations, translating strategies
impact the future of the into actionable steps.
organization Example: Determining the
Example: Deciding to enter a new production schedule for the next
international market. quarter
3. FINANCIAL DECISIONS 4. INVESTMENT DECISIONS
These decisions pertain to managing Investment decisions, also known as
the financial resources of the capital budgeting decisions, involve
company. They include financing determining where and how to
decisions (raising funds), investing allocate resources to generate
decisions (allocation of funds in future returns. These are long-term
assets), and dividend decisions decisions involving significant
(distribution of profits to
financial outlay.
shareholders).
Example: Deciding to invest in new
Example: Deciding to either issue
technology or machinery to increase
shares or take a loan to finance a
production capacity.
new project.
5. COST CONTROL DECISIONS 6. PRICING DECISIONS
These decisions focus on Pricing decisions involve setting
minimizing costs while maintaining the price of goods or services
efficiency and productivity. They to balance profitability with
involve determining areas where market competitiveness. These
costs can be reduced without decisions depend on cost
negatively impacting operations. analysis, market demand, and
Example: Identifying and competitor pricing.
eliminating unnecessary Example: Deciding the price
administrative expenses for a new product launch.
 PROCESS OF
RATIONAL DECISION
MAKING
 THE RATIONAL DECISION-MAKING PROCESS IS A
SYSTEMATIC, LOGICAL, AND DATA-DRIVEN METHOD FOR
MAKING DECISIONS.

Rational decision making means taking decisions on the basis

of facts and logical reasoning. On the other hand a decision
is considered irrational when it's based purely on hunch and
intuition without using the relevant facts and figures.
 IDENTIFY THE PROBLEM
THE DECISION MAKING PROCESS BEGINS WITH THE RECOGNITION OF A
PROBLEM THAT REQUIRES A DECISION. THE PROBLEM MAY ARISE DUE TO GAP
BETWEEN PRESENT AND DESIRED STATE OF AFFAIRS. THE THREAT AND
OPPORTUNITIES CREATED BY ENVIRONMENTAL CHANGES MAY ALSO CREATE
DECISION PROBLEMS. AT THIS STAGE, THE PROBLEM SHOULD BE WELL DEFINED.
"A problem well defined is a problem half solved."

DIAGNOSE THE PROBLEM

DIAGNOSTING THE REAL PROBLEMS IMPLIES ANALYZING IT IN TERMS OF
MAGNITUDE, URGENCY, IT'S CAUSES, CONSEQUENCES AND RELATIONS WITH
OTHER PROBLEMS.DETERMINE RELEVANT INFORMATION RELATED TO YOUR GOAL
OR CHALLENGE. Completing this step typically involves research,
reflection, and a firm understanding of how to write
and determine decision criteria.
 EVALUATE ALTERNATIVES
Once the alternatives are discovered, the next stage is to weigh or
screen each feasible alternative. Evaluation is the process of measuring
the positive and negative consequences of each alternative. Sound
judgement is required to do so. Both quantitative and qualitative
evaluation is needed to ensure that all tangible and intangible factors are
taken into account.
Peter Drucker has suggested the following criteria to weigh the
alternative course of action:-
a) Risk :- degree of risk involved with each alternative.
b) Economy of effort:- cost , time and effort involved.
c) Timing:- whether the problem is urgent
d) limitation of resources:- human , financial and physical resources
available with the organisation.
 SELECT THE BEST ALTERNATIVE
AFTER EVALUATION, THE OPTIMUM ALTERNATIVE IS SELECTED.
Optimum alternative is the alternative that will maximize the results under given
conditions. Choice of the best alternative is the most critical point in decision
making.Past experience, research and analysis are useful in the aforementioned
field.

IMPLEMENTATION AND FOLLOW UP

FIRSTLY THE DECISION SHOULD BE COMMUNICATED TO THOSE RESPONSIBLE
FOR ITS IMPLEMENTATIONS .
Secondly, acceptance of the decision should be obtained.
Thirdly, procedures and time sequence should be established for better
implementation. Necessary resources should be allocated or training should be
provided to the assigned individuals.
H E R B E R T S I M O N has identified
three phases in the decision making process:
Intelligence activity - includes
indentification and diagnosis of the problem,
definition of objectives and collection of
information.
Decision activity - concerned with
generation and evaluation of alternative
courses of action.
Choice activity - implies selection of the
best course of action.
EXAMPLE
•Raj is a manager at Wavewood Inc. After his performance review with company executives, he receives a memo to increase
monthly profits and generate more revenue. The challenge for Raj is finding the best way to increase monthly profits.Raj
examines the relevant information that can help him increase profits. He doesn't believe in terminating or laying off a
teammate to reduce expenses but feels finding cost-effective vendors and improving sales are more effective strategies.
Raj's decision criteria to consider are the impact of his decision on customers, teammates, and product quality. Raj feels the
key factor is how his financial strategy would impact the team. He also thinks other factors, such as customer impact and
product quality, are equally important. Raj creates a list of alternative solutions. Ranking them according to their ability to
meet the decision criteria, he has the following strategies for solving the financial challenge:
Select a new distributor that charges less money.
Reduce overtime hours, which would reduce overhead costs.
Increase customer promotions to attract new customers and make more sales.
Rent a section of the company's building to increase revenue.
Request more funding from company executives for expansion operations.
Invest in more stocks and bonds to improve the company's market position

Raj recommends finding a new distributor for the company to reduce costs, leading to more profits. He also chooses
this option because it's the most favourable when considering his established decision criteria. He creates a
document detailing the process for implementing the rational decision-making model to present to Wavewood Inc.
 INDIVIDUAL AND GROUP
DECISION MAKING
Individual decision making is the process where the individual
makes the decision. Both routine and strategic decisions can
be made by individuals. Individual decision-making may be
essential during crises or emergencies.
 CHARACTERISTICS

Fast and efficient The decision-maker Less influenced by

when decisions need takes full responsibility group dynamics or
to be made quickly. for the consequences social pressures
 ADVANTAGES: DISADVANTAGES:
Speed: Faster decision- Limited perspective: Lacks diverse
input from others.
making since no need for
Overconfidence: Risk of biases or
discussion. errors, as only one person's knowledge
Clear accountability: is used.
The decision-maker is Stress: Full responsibility can
increase pressure and stress.
solely accountable.
Examples:
Autonomy: The person - A CEO deciding on a company's
can make decisions based strategic direction without consulting
others.
on personal values and
- A surgeon making a quick decision
expertise. in the operating room.
GROUP DECISION MAKING
Group decision-making is when decisions are
made collectively by a group of people who collaborate,
share ideas, and contribute to the final decision.
 CHARACTERISTICS

Involves multiple Often results in more Requires discussion,

people with diverse creative and well- negotiation, and often
knowledge, skills, and rounded decisions consensus or voting
perspectives..
 ADVANTAGES: DISADVANTAGES:
Diverse perspectives: Time-consuming: Requires more time
Multiple viewpoints lead to for discussion and reaching
consensus.
more informed decisions.
Risk of conflict: Differing opinions
Shared responsibility: may lead to disagreements and
The responsibility for the conflict.
decision is shared across Groupthink: Pressure to conform may
stifle creativity and lead to poor
the group.
decisions.
Increased buy-in: People Examples:
are more likely to support a - A project team deciding on a new
decision they helped make. product design.
- A board of directors voting on
corporate strategy.
TECHNIQUES OF DECISION
MAKING
Several techniques have been developed to help the
decision maker .
These techniques can be classified as :
Techniques of individual decision making
Techniques of group decision making
Techniques of individual decision making
1. Marginal Analysis:
• A quantitative approach used to determine the point where
additional cost (marginal cost) equals additional revenue (marginal
revenue).
• Helps decide the break-even point—where there’s neither profit nor
loss.
• Useful for assessing the efficiency of inputs, analyzing costs, and
identifying the point of maximum efficiency.
2. Linear Programming:
• A qualitative technique for optimizing the use of limited resources.
• Used to minimize costs or maximize profits by modeling constraints and
objective functions.
• Widely applied in resource allocation, transportation planning, and
production management.
• Relies on linear relationships between variables and uses mathematical
equations.
3. Simulation:
• A qualitative technique for reproducing real-world phenomena to predict
outcomes.
• Particularly helpful when mathematical solutions aren’t available or
adequate.
• Often requires computer software due to its complexity.
4. Decision Tree:
• A quantitative method that visually maps out decisions and their
possible outcomes.
• Helps to evaluate the risk and payoff of different alternatives.
• Useful in breaking down decisions step by step, calculating the
possible payoffs at each stage.
TECHNIQUES OF GROUP DECISION MAKING:
1 BRAINSTORMING:
It is a combination of group problem-solving and
discussions. It works on the belief that the more the
number of ideas, greater the possibility of arriving at a
solution to the problem that is acceptable to all.

2 ELECTRONIC MEETING:
The decision-making process takes place virtually
with the help of technology.
For example, we can have a Skype call with the
client.
3 DELPHI METHOD
In this method of decision-making, the facilitator allows team members
to individually brainstorm and submit their ideas “anonymously”. Other
team members do not know the owner of the ideas. The facilitator then
collects all the inputs and circulates them among
others for modifying or improving them. This
process continues until a final decision is made.

4 MULTI-VOTING
It starts with a round of voting where an individual casts his vote for the
shortlisted options. Each individual can cast one vote at a time. The
options with
the maximum number of votes are carried to the next
round. This process is repeated until a clear winning
option is obtained.
5.NOMINAL GROUP TECHNIQUE
In a nominal group technique, the team divide isitself into
smaller groups and generates ideas. Possible options are
noted down in writing and the team members further discuss
these to
narrow down the possible choices they would like to accept.
Team members then discuss and vote on the best possible
choice. The choice that
receives the maximum votes is accepted as the
group decision.
CASE
STUDY
STARBUCKS’ DECISION TO
CLOSE UNDERPERFORMING
STORES
 BACKGROUND
IN 2008, STARBUCKS FACED A TOUGH DECISION.
AFTER YEARS OF RAPID expansion, the company
found itself operating more than 16,000 stores
worldwide. However, due to the financial crisis,
declining customer visits, and increasing operational
costs, Starbucks was struggling with profitability. The
company’s revenues were falling, and they needed to
make a critical decision to improve financial
performance.
 THE DECISION
THE LEADERSHIP TEAM, HEADED BY CEO HOWARD SCHULTZ, DECIDED
TO close 600 underperforming stores in the U.S. This decision was tough
because:
1. Job losses: Over 12,000 Starbucks employees were impacted.
2. Customer experience: The company feared losing loyal
customers in areas where stores were shut down.
3. Brand reputation: This was a significant shift for a brand known for
growth and success, and there was a risk of damaging its image
 DECISION-MAKING PROCESS
1. DATA ANALYSIS: STARBUCKS EVALUATED DATA ON STORE PROFITABILITY,
customer footfall, and sales trends. They identified stores that were consistently
underperforming and those in oversaturated markets.

2. Strategic Vision: Schultz aimed to focus on the core customer

experience. By closing unprofitable stores, Starbucks could
concentrate on improving the experience at better-performing
locations and invest more in innovation and quality.

3. Employee Impact: Starbucks offered support to displaced

employees, such as severance packages and opportunities to transfer to other
stores
 OUTCOME
THE DECISION HELPED STARBUCKS WEATHER THE ECONOMIC DOWNTURN.
The company streamlined operations, reduced costs, and
eventually bounced back stronger. By focusing on fewer,
better-performing stores, Starbucks was able to regain
profitability and protect its long-term brand value.

CONCLUSION
THIS CASE ILLUSTRATES HOW TOUGH BUT NECESSARY
decisions, when made carefully, can lead to positive
outcomes despite short-term challenges.
MCQS
Which factor affecting decision-making is most associated
with the personal values, experiences, and beliefs of the
decision-maker?

A Organizational Policies

B Group Dynamics

C Individual Biases

D Market Conditions

E Legal Constraints
____ is NOT one of the eight steps in the decision making
process.

A Analyzing alternative solutions

B Identifying the problem

C Delegating the decision making

D Implementing the decision

 The overall process of decision making in, for example, staff
selection includes which of these stages?

A Only deciding which candidate to appoint

B Only identifying the need for a new member of staff

C Only agreeing the job specification

D All of these
Which of the following deals with resource allocation and
day-to-day operations?

A Investment Decisions

B Tactile Decisions

C Pricing Decisions

D Strategic Decisions
Which of the following techniques focuses on creating
multiple options before selecting the best solution?

A Rational decision-making

B Groupthink

C Brainstorming

D Heuristic decision-making
Which step comes after discovering alternative courses of
action?

A Identify the problem

B taking corrective measures

C evaluating the alternatives

D diagnosing the problem

What is the primary purpose of using a decision tree in
individual decision-making?

A To rely on intuition for making decisions

B To simplify complex decisions by breaking them into smaller, manageable

parts

C To evaluate emotional factors in decision-making

D To randomly select a decision based on past experiences

IN WHICH DECISION MAKING ENVIRONMENT DOES
THE DECISION MAKER KNOW THE OUTCOME OF EACH
ALTERNATIVE ?

A CERTAINTY

B UNCERTAINTY

C RISK

D INTUITION
SOURCES OF
INFORMATION
1 C.B. GUPTA; Management
Principles and Application
2 www.wikipedia.org
3 www.researchgate.net
THANK
YOU