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Decision-making presentation

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Joseph Cosier

on 15 March 2014

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Transcript of Decision-making presentation

Decision Making
Group vs. Individual
Top, Middle & Low level Management: all are involved in some kind of decision making.
Group Decision Making
Individual Decision Making
- long term objectives, strategies, individual goals, etc

- level of centralization, job design, organisational structure

- Employee motivation, leadership style, conflict management

- Management information systems, required level of control for any given task
Wide pool of skills and knowledge

Employees learn + gain skills

More ideas for debating + higher quality solutions

Adjustment and amendment on ideas

Spreading of responsibility

Get support and response from the group

Higher motivation (Social need)
Clash of ideas, personality conflicts

More conservative, social pressure

Waste of time (low efficiency)
The Steve Jobs case
From Harvard Business Review

"He doesn't seem to have ever gotten to the point of thinking of decision making as a team sport"

Makes every critical decision - even for small problems such as the design of the shuttle buses that ferry employees to and from San Francisco to what food will be served in the cafeteria
He was especially tough where product design decisions are concerned
(A counter point) His decisions weren't all great - He hired John Sculley as the CEO of Apple in the 1980s, who Steve Job himself had described him as a failure
Decision is made quickly

More flexible, focused

Confidential matters

Sole responsibility

Easier to conceptualise
Less ideas

Bounded rationality (limited by ability to process information)

Emotional reactions

Risk-taking propensity

Neglect others' interests

Cognitive biases, escalation of commitment

Intuition style
Situation when:
High level of ambiguity
Facts limited
Several plausible arguments
Intuition style
Rules of thumb
Used to simplify decision-making
Lead to cognitive biases – bias in judgment

Escalation of commitment
Increased commitment to decision despite increasing evidence it may have been wrong
Faulty thinking
Many European airports were closed due to the incident, which means airline industry were suffering huge loses

Walsh though the closure was unnecessary,
he had even flown in a BA plane at the weekend to check whether the ash from the Iceland volcano damaged the engines.
It didn't.

He took a brave decision to
dispatch two dozen jumbos across the Atlantic and demanded they be allowed to land in the UK
– got approved by the Civil Aviation Authority

He was seen as a hero of great volcano incident because he was the one who urged the authority to reopen the airports to minimize loses

Expertise, brave and quick reaction. Nobody would be willing to travel with the airline if something went wrong
Amount of people involved: legitimacy
Introduction of a variety of personalities and attitudes
Speed of reaching a consensus: efficiency
Number of ideas brought to the table: creativity
Diversity of experience and perspective
Four Managerial Functions:
Top level management: Organisation goals, long term business plans, strategy, etc
Middle and low level management: Production schedules, employee discipline, product quality issues
Intuition vs Evidence
-Unstructured problems
-New & unusual problems
-Ambiguous & incomplete information
-Vague goals
-Non-programmed decisions
-Unique & non-recurring
-Custom-made solution
-Long time frame for solution
-Judgment & creativity
Group decision making conditions
-Wider source of information
-More opinions and factors
-More innovative and revolutionary ideas
-Share different perspectives
-Minimize biases and errors
Why group decision making?
-Upper managerial levels
-Large scale corporation
-Consultation of various department
-Professional knowledge and experience
-Impact on company and staff
-Responsibility sharing
Group decision making conditions
Founder of Virgin Group
Most important managerial decision
Trust management teams
Always support your team

Family friendly heath club
South African gyms
Example: Richard Branson
How do you view the differences between individual and group decision making?
Out of our 2 examples (Steve Jobs & Richard Branson) which person would you most like to work under? And why?
The Steve Jobs case outlined earlier seems to contradict the conditions under which individual decision making would be advantageous. What are your opinions on this subject?
8 Step Decision Making process
General Conditions
Cognitive biases
Linear Thinking Style (group decision making process)
Use external data and facts
Making decisions through rational and logical thinking

Nonlinear Thinking Style (individual decision making process)
Use internal sources of information
Making decisions with internal insights, feelings and hunches
Certainty, Risk and Uncertainty
Organization’s culture: Democratic vs. Authoritative
-Leadership style
Internal politics
Power considerations: High v. Low
Extent of confidentiality issue
Size of company
-"Rules of thumbs" -> simplify decision-making
-Leads to cognitive biases

Common example:
- Overconfidence bias
- Confirmation bias
- Availability bias
Certainty: Precise decisions are made as outcomes of all alternatives are known.
E.g. Fixed borrowing rate

Risk: Likelihood of outcomes can be estimated.

Uncertainty: Managers are unable to assign probability estimates of decisions
E.g. Buying stocks
Linear vs. Nonlinear Thinking Style
In the spring of 2010 a volcano in Iceland erupted. This meant chaos for european airlines as the resulting ash cloud grounded nearly all flights.
BA was making an estimated loss of £20 million a day. With its share price falling and no idea how long the disruptions would last - Willie Walsh faced a difficult decision.
Wall Street Journal tech columnist Walt Mossberg: “
He did what a CEO should: Hired and inspired great people; managed for the long term, not the quarter or the short-term stock price; made big bets and took big risks.

Richard Branson:"
I admired Steve Jobs, although he was completely different from me. He used to shout at employees that made mistakes. He did not delegate much, and broke all the rules I believe in. Somehow it worked for him. Apple is one the best brands in the world.
Programmed decision (structured problems which their solutions rely on procedures, rules and policies)

A relatively small amount of people will be affected by the decision

Under conditions of certainty

When the decision maker, who has sufficient authority in the organization, has a strong belief and gut feeling about his/her own ideas – e.g. Steve Job

Decision that needs to be made quickly
2010 Icelandic Volcanic Incident
2010 Icelandic Volcanic Incident
Willie Walsh
If you were the CEO of BA what would you do in this situation?

A) Accept the losses as inevitable for the time being and formulate a marketing plan for when flights can start again

B) Issue a statement to boost investor confidence

C) Begin research into the effects of the ash cloud to then try and find ways to avoid any potential damage to engines

D) Ignore the scientific community and send up some planes to see the effects of the ash cloud first hand
He is very
strong minded and confident
- He does what he believes to be correct with or without any fan following

Peers are
not involved
in decisions- He was found to seclude himself and his colleagues found it difficult to approach him 

- as his peers were afraid to raise question about T5 at Heathrow before it was inaugurated.

He is
in his decision- He fired 2 of the oldest managers of British Airways over the terminal 5 fiasco
Step 1 : Identify the problem
Step 2: Identify decision criteria
Step 3: Allocate weights
Climate= no1 priority
Relaxed and quiet=no2
Step 4: Develop Alternatives
Criteria: Weather, Price, Amount of People, etc.
Step 5: Analyze alternatives
Thailand: Climate=8, relaxation=6...
Bali: Climate=9, Relaxation=9...
We then multiply the scores of each by the relevant weights to give us an overall total for each option
Step 6: Select an alternative
Step 7: Implement the Alternative
Step 8: Evaluate
General Motors Example
General Motors filed for
in 2009. It was
hen bailed out by the American Government.

The newly appointed CEO faced vast problems with the company's
"plodding" culture.

The decision making process in General Motors was
sluggish and overly complicated

The new CEO decided to give
more authority
to those who were best placed to make the decision.
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