Type of problem & Decision

Decision Making Condition

Decision –Maker Style
TYPE OF PROBLEM & DECISION

 1. Programmed decisions (Structured Problem)

Structured Problem :A straightforward, familiar, and easily defined problem

Programmed decisions :A routine or repetitive decision that can be handled by

established business rules or procedures.

 2. Non-programmed Decisions (Unstructured Problem)

Unstructured Problem :A problem that is new or unusual for which
information is ambiguous or incomplete.

Non-programmed Decisions :A unique and nonrecurring decision that

requires a custom-made solution.
DECISION MAKING CONDITION

 Certainty
A decision is made under conditions of certainty when a manager
knows the precise outcome associated with each possible alternative
course of action. In such situations, there is perfect knowledge about
alternatives and their consequences. Exact results are known in advance
with complete (100percent) certainty. A manager is simply faced with
identifying the consequences of available alternatives and selecting the
outcome with the highest benefit or payoff
 RISK

 In the ordinary sense, the risk is the outcome of an action taken or not taken, in a particular
situation which may result in loss or gain. It is termed as a chance or loss or exposure to
danger, arising out of internal or external factors, that can be minimised through preventive
measures.
 Under the risk condition, all available choices and their potential costs and benefits are known,
but the outcomes are sometimes in doubt. So, while the alternatives are known, the outcomes
are unknown. An example of a risk condition is the throw of a die: the alternatives (one to six)
are known, but the outcome is not known – there is a one-in-six chance of each number
coming up. The probability of certain events can be calculated by the organization using
statistical techniques. Objective probability is the likelihood of an event occurring based on
hard quantitative data, normally statistical. In contrast, subjective probability is a personal
judgement of the likelihood of an event occurring. In today’s business environment, risk taking
has become critically important for organizations.
 risk, the probability distribution of possible outcomes is well defined, which can be used to
calculate the expectancies of outcomes and compare between choices. The probability of
outcomes determines the riskiness of risk condition that high probability brings lower risk and
vice versa.
UNCERTAINTY
 The third condition is uncertainty , under which the available
alternatives, the likelihood of their occurrence and the outcomes are all
unknown. Decisions made under uncertainty are the most difficult to
take because of this lack of concrete knowledge. Such decisions tend to
be ambiguous, intangible and highly unusual. In the current business
environment more and more decisions are taken under uncertainty.
When making decisions under uncertain conditions, managers require
intuition and judgement.
Decision Making Styles
Decision-Making Styles
 Two dimensions define the approach to decision making
 Way of thinking - differs from rational to intuitive
 Tolerance for ambiguity - differs from a need for consistency and order to the ability to process many
thoughts simultaneously
 Define four decision-making styles
 Directive
 Analytic
 Conceptual
 Behavioral
Directive
“I decide”

The Directive style. This style is characterized by low tolerance for ambiguity and low cognitive complexity. The
orientation is focused on task and technical concerns. Persons characterized with this style are described as practical,
autocratic, rigid, impersonal, and have a strong desire for power and control. They have a need for speed, efficient and
satisfactory solutions because they have limited information and few alternatives. People with this style show a preference
for structure and specific information and facts, which are usually given in a verbal way. This style is marked by
aggressiveness and tight control, and a need for security and status (Connor & Becker, 2003; Bou1garides & Cohen, 2001;
Rowe & Davis, 1996; Rowe & Mason, 1987). in that such individuals focus on working toward a signal goal, are
domineering in decision-making, and prefer precisely organized methods of working.

When to use directive decision-making

This style of decision-making lends itself well to situations characterized by stability, repeating patterns, and consistent
events. Reserve directive decisions for instances where there is a clear and undisputed cause-and-effect relationship; in other
words, a right answer exists and is understood collectively.
A leader’s role in directive decision-making
A leader needs to sense the situation, categorize it as a scenario that calls for a direct decision and respond appropriately.
Make sure there are best practices in place for recurring processes. When classifying the situation, remember to ask yourself:
Is this my decision to make, and do I have all the required information to make this decision? Delegate if necessary, but
remember to communicate in clear, direct language. It’s a leader’s job to understand when extensive, interactive
communication is unnecessary and to make direct decisions based on the information they already have.
Signs you need to use a different approach
When operations are running smoothly, it’s easy for leaders to fall victim to complacency. Leaders need to be mindful of the
changing complexity of particular situations. If you start using direct decisions to make complex jobs simple, you need to change
your approach. Understand that changing circumstances call for changing decision-making styles.
Analytic decision-making
Analytic decision-makers examine much information before taking action. For example, analytic leaders rely
on direct observation, data, and facts to support their decisions. However, unlike directive decision-makers,
an analytic decision-maker will seek information and advice from others to confirm or deny their own
knowledge. These decision-makers have a high tolerance for ambiguity and are very adaptable, but they like
to control most aspects of the decision process. This style is a well-rounded approach to decision-making but
can be time-consuming.
When to use analytic decision-making
Analytic decisions are helpful in situations where there may be more than one right answer. Use this style of
decision-making to solve problems where the cause-and-effect relationship is discoverable but not
immediately apparent. Primarily, you’re using this approach to explore several options or solutions and using
fact-based management to guide appropriate action.
A leader’s role in analytic decision-making
Unlike directive decision-making, leaders need to analyze all the information available to them before
deciding on a course of action. It’s beneficial to assemble a team of industry experts to assist with analytic
decisions; however, leaders need to consider conflicting advice and ideas openly. At the same time, leaders
need to consider the viewpoints of non-experts in order to make the most of the analytic decision-making
process.
Signs you need to use a different approach
The most significant warning sign of overuse of the analytic decision style is analysis paralysis. If you find
yourself functioning in a state of over-analyzing or over-thinking without action or reaching a decision, you
need to drop this approach.
Conceptual decision-making
The Conceptual style. This style is characterized by high tolerance for ambiguity and high cognitive complexity. This
orientation is connected to people and their social concerns. Such persons are creative and tend to take risks in finding
answers. They have the ability to understand complex relationships. Intuition guides their search for information and
examinations of multiple sources and alternatives. Persons characterized with this style are people-oriented, open and from
truthful relationships with others. Such individuals do not look for control and power rather they like to share such things
with others. They are very personable, flexible, and tend to be idealistic, having a strong emphasis on values and ethics
(Connor & Becker, 2003; Boulgarides & Cohen, 2001; Rowe & Davis, 1996; Rowe & Mason, 1987). The conceptual style is
comparable to the intuiting feeling and intuiting-thinking types, in those persons rely on intuition, consider things in the long-
term, and make decisions in a decentralized manner.
When to use conceptual decision-making
Apply conceptual decision-making to problems that involve many competing ideas. This style of decision is
best suited for situations characterized by unpredictability and suited to creative and innovative approaches.
In these scenarios, you find there is no immediate solution, but patterns emerge over time. Using a conceptual
style of decision-making accounts for long-term planning and unknown variables.
A leader’s role in conceptual decision-making
For conceptual decision-making to be effective, leaders need to create an environment that encourages
experiments designed to reveal instructive patterns over time. As well, leaders need to make a point of
increasing interaction and communication. Create groups of people who can contribute innovative ideas and
help with the development and delivery of complex decisions. Patience is key, and leaders need to give
themselves time for reflection.
Signs you need to use a different approach
If the decision you need to make involves a situation that needs structure and defined outcomes, you
shouldn’t use a conceptual approach. As well, decisions that need to drive immediate results and
circumstances where there is
15 6-
Behavioral decision-making
Behavioral decision-makers try to make sure everyone works well together. Like the conceptual
style, behavioral decision-making is group-oriented; however, rather than brainstorming potential
solutions, the group is given the options available to them. From there, the group discusses the
pros and cons of each choice. This style of decision-making considers many different outlooks
and opinions in the process.
When to use behavioral decision-making
Like conceptual decision-making, the behavioral style requires proactive communication. This
style takes a more introspective approach by discussing solutions that have worked in the past
rather than trying to reveal new patterns.
A leader’s role in behavioral decision-making
Leaders need to open up lines of communication in this style of decision-making. Again, create
groups of people who can contribute their opinions and encourage democratic discussions. When
employing the behavioral decision-making style, don’t just impose a course of action. Instead,
look at what decision creates the most harmony within the organization.
Signs you need to use a different approach
If group discussion sessions never reach an agreement, you may need to consider another
approach. In contrast, if new ideas never come up or no one challenges opinions, behavioral
decision-making may not be the best option either. While this style of decision works to benefit
the group as a whole, it requires a definite and decisive leader to get things accomplished. If
necessary, look for ways and experiments to force people to think outside of what’s familiar.

16 6-
DECISION-MAKING STYLES
High
Tolerance for Ambiguity

Analytic Conceptual

Directive Behavioral

Low

Rational Intuitive
Way of Thinking