Decision Theory Approach in

Management:
Introduction:
Simple decisions usually need a simple decision-making process.
But difficult decisions typically involve issues like these:

Uncertainty - Many facts may not be known.

Complexity - You have to consider many interrelated factors.

High-risk consequences - The impact of the decision may be
significant.

Alternatives - Each has its own set of uncertainties and
consequences.

Interpersonal issues - It can be difficult to predict how other
people will react.

With these difficulties in mind, the best way to make a complex
decision is to use an effective process.
A Systematic Approach to Decision Making:
A logical and systematic decision-making process helps
you address the critical elements that result in a good
decision. By taking an organized approach, you're less
likely to miss important factors, and you can build on
the approach to make your decisions better and better.

There are six steps to making an effective decision:
Create a constructive environment.
Generate good alternatives.
Explore these alternatives.
Choose the best alternative.
Check your decision.
Communicate your decision, and take action.
Create a constructive Environment:
Establish the Objective - Define what you want to
achieve.

Agree on the process - Know how the decision will
be made, including whether it will be an individual
or team based decision.

Involve the right people Stakeholder Analyses is
important in making an effective decision, even if
you are making an individual decision.

Allow Opinions to be heard Encourage participants
to contribute to the discussions,debates and
analysis without any fear of rejection from the
group.
Make sure you are asking the right question
Ask yourself whether this is really the true
issue.

Use creativity tools from the start The basis of
creativity is thinking from a different
perspective.
Generate Good Alternatives:
This step is still critical to making an effective decision.
The more good options you consider, the more
comprehensive your final decision will be.

When you generate alternatives, you force yourself to
dig deeper, and look at the problem from different
angles.

If you don't have reasonable alternatives, then there's
really not much of a decision to make!.

The following are some key tools to make good
alternatives.

Brainstorming :
It is probably the most popular method of generating ideas.

Reverse Brainstorming :
Another approach which works similarly. However , it starts
by asking people to brainstorm how to achieve the opposite
outcome from the one wanted, and then reversing these
actions.

The Charette Procedure :
It is a systematic process for gathering and developing ideas
from many stakeholders.

Use the Crowford Slip Writing Technique :
To generate ideas from a large number of people.
The Reframing Matrix Technique :
It uses 4 Ps (product, planning, potential and
people) as the basis for gathering different
perspectives.


Appreciative Inquiry Technique :
Forces you to look at the problem based on what
is going right than what is going wrong.

Organizing Ideas Technique:
This is very helpful when there are
many ideas.
Sometimes separate ideas can be
combined into one comprehensive
aternative.
Use Affinity Diagrams to organise ideas
into common themes and groupings.
Explore the Alternatives:
Risk In decision making there is usually some
degree of certainty which inevitably leads to risk.

Risk Analysis- helps you to look at risks
objectively. It uses a structured approach for
assessing threats,and for evaluating the probability
of events occuring.

Implications Another way to look at options is to
consider the potential consequences of each.

Validation Determine if resources are adequate,if
the solution matches your objectives,whether the
decision is likely to work for a long term.
Choose the Best Alternative:
After you have evaluated the alternatives, the
next step is to choose between them. The
following tools help in making the right
choice.
Grid Analysis Is a key tool for this type of
evaluation.
Use Paired Compared Analysis To determine
the relative importance of various Factors.
Decision Trees Which is useful in choosing
between options.
Check Your Decision:
The first part of this is an intuitive step, which involves
quietly and methodically testing the assumptions and the
decisions you've made against your own experience, and
thoroughly reviewing and exploring any doubts you might
have.

A second part involves using a technique like Blindspot
Analysis (member only) to review whether common
decision-making problems like over-confidence, escalating
commitment, or groupthink (member only) may have
undermined the decision-making process.

A third part involves using a technique like the Ladder of
Inference (member only) to check through the logical
structure of the decision with a view to ensuring that a well-
founded and consistent decision emerges at the end of the
decision-making process.
Communicate your Decision and Move to
Action:
Once you've made your decision, it's
important to explain it to those
affected by it, and involved in
implementing it. Talk about why you
chose the alternative. The more
information you provide about risks
and projected benefits, the more likely
people are to support the decision.

Thank You