Information system unit 3

 UNIT-3 

DECISION MAKING SYSTEM AND MODELLING,models of decision making pdf,swot analysis

decision tree,pareto analysis,cost–benefit analysis

CONCEPT OF DECISION MAKING:-

Decision-making is common to all of us, in our daily lives. In fact, every action of an individual is based on

the decisions taken by him/her-concerning various matters.

Sometimes we take major decisions and are highly conscious about them. Minor or routine decisions, however,

are taken by us; without ourselves realising the fact that a decision is being taken by us.

Example:

The decision of a person to buy a bottle of soft-drink on a sizzling summer day is a decision; without the

person, being aware of the fact, that a decision is being taken by him/her. For major decisions, however, one

is very conscious, careful and alert; and takes them in a planned manner.

In the context of business management also, decision-making is a common phenomenon, characterizing the

‘organisational lives’ of all managers. All managers take decisions-major or minor – within the limits of their

authority, concerning their work field. In fact, whatever a manager does; he does so through decision-making.

It is the thread that runs through the whole fabric of management.

DEFINITION OF DECISION MAKING:-

Decision-making(decision system pdf) is the process of selecting a best alternative course of action; from among a number of

alternatives given to management or developed by it after carefully and critically examining each alternative.

“Decision-making is the selection based on some criteria from two or more possible alternatives.” -G.R. Terry

“Decision-making is a course of action chosen by a manager as the most effective means at his disposal for

achieving goals and solving problems.” – Theo Haimann

RELATIONSHIP BETWEEN DECISION AND DECISION MAKING:-

From the definitions of decision and decision-making, it follows that decision making is a process; a decision

is the outcome of this process. Accordingly, the better the decision-making process; the better would be the

decisions emerging out of it leading to an efficient commitment of precious organisational resources.

CHARACTERSTICS OF DECISION MAKING:-

1. Goal oriented

2. Pervasive

3. Intellectual exercise

4. Involves a problem of choice

5. Continuous process

6. Basis of action

7. Implies commitment of resources

8. situational

(i) Decision-Making is Goal-Oriented:

Each and every decision of management major or minor must make, at least, some contribution towards the

attainment of organisational objectives. In case otherwise, decision-making is a wasteful activity; involving

only a sheer wastage of the time, energy and efforts of managers, and precious organisational resources.

(ii) Decision-Making is Pervasive:

There are three dimensions of the pervasiveness of decision-making:

(a) All managers in the management hierarchy take decisions, within the limits of their authority, concerning

to their areas of functioning.

(b) Decision-making is done in all functional areas of management e.g. production, marketing, finance,

personnel, research and development etc.

(c) Decision-making is essential in all functions of management i.e. planning, organising, staffing, directing

and controlling.

(iii) Decision-Making is an Intellectual Exercise:

Decision-making calls for creativity and imagination on the part of managers; in that decision-making forces

managers to think in terms of developing best objectives and best alternatives for attaining those objectives.

In fact, the more intelligent a manager is; the better would be the decision-making done by him.

(iv) Decision-Making Involves a Problem of Choice:

Decision-making is fundamentally a choosing problem i.e. a problem of choosing the best alternative, from

out of a number of alternatives, in a rational and scientific manner. If in a managerial decision-making

situation, alternatives do not exist; then there is no decision-making problem involved in that situation.

(v) Decision-Making is a Continuous Process:

Decision-making process commences since the beginning of business and continues throughout the

organisational life. All managers take decisions for organisational purposes; so long as the enterprise is in

existence. In fact, decision-making is also involved in the process of winding up a business enterprise.

(vi) Decision-Making is the Basis of Action:

All actions of people operating the enterprise are based on the decisions taken by management organisational

issues. In fact, the quality of actions by people well depends on the quality of decisions taken by management.

(vii) Decision-Making Implies a Commitment of Organisational Resources:

Commitment of organisational resources time, efforts, energies, physical resources etc. is implied both during

the process of taking decisions and more particularly, at time of implementation of decisions. Right decisions,

accordingly, imply a right commitment of resources; and wrong decisions imply a wrong commitment of

precious organisational resources.

(viii) Decision-Making is Situational:

Decision-making much depends on the situation facing the management; at the time when a decision-making

problem crops up. Whenever the situation changes; decision-making also changes; e.g. decision-making by

management on similar issues is radically different during boom conditions and during conditions of recession

or depression.

TYPES OF DECISION:-

In fact, is a sort of Herculean task to list out all the decisions which managers take during the course of

organisation life; as decisions taken by managers are numberless stretching from tiny to huge number of

decisions? Yet, one could attempt the following classifications of managerial decisions – to have an idea of

the basic nature and varieties of managerial decisions.

1. Personal and Organisational

2. Casual and Routine

3. Strategic and Tactic

4. Policy and Operative

5. Programmed and Non-Programmed

6. Individual and  Group decision

7. Financial and Non-Financial

(i) Personal and Organisational Decisions:

Personal decisions are those which are taken by managers concerning their personal life matters. On the other

hand, organisational decisions are those which are taken by managers, in the context of organisation and for

furthering the objectives of the organisation.

The highlight of the above distinction between personal and organisational decisions is that sometimes,

personal decisions of managers have got organisational implications; and then such personal decisions must

be taken by managers, in the best interests of the organisation.

For example, the decision of a manager to proceed on a long leave is a personal decision of the manager. But

then, in the interest of the organisation, he must appoint some deputy to act on his behalf, till he returns.

(ii) Casual and Routine Decisions:

Casual decisions (whether more significant or less significant) are those which are taken only on some special

issues concerning organisational life e.g. a decision to install a new piece of machinery. Casual decisions of a

significant nature are taken at upper levels of management. Insignificant casual decisions may, however, be

permitted even at lower levels of management.

On the other hand, routine decisions are those which are taken in large numbers during the normal course of

organisational life, with repeated frequency. A major number of routine decisions are taken at operational

levels of management.

(iii) Strategic and Tactical Decisions:

Decisions relating to designing of strategies are strategic decisions i.e. decisions of highest significance for

the organisation. Such decisions are taken at uppermost levels of management. For implementation purposes,

strategies are translated into operational plans or tactical (planned) decisions. Such tactical decisions are taken

at middle and lower levels of management.

(iv) Policy and Operative Decisions:

A policy decision is a decision in the nature of guidance and instruction; which defines and limits the area of

decision of subordinates, in matters of decision-making. Naturally policies are decided by superiors for the

guidance of subordinates. Decisions of subordinates taken within the given limits and guidance of policies

are, in management terminology, called operative decisions.

(v) Programmed and Non-Programmed Decisions:

Programmed decisions are those which are taken within the framework of the existing plans of the

organisation; and for taking which prescribed policies, rules, procedures and methods are available with the

organisation. Such decisions do not pose much problem for managers.

On the other hand, non-programmed decisions are those for taking which there is no provision in the existing

planning framework of the organisation. Such decisions are warranted by extraordinary exceptional or

emergency situations.

For example, if workers are on strike on a particular day; such a situation will call for an un-programmed

decision as to how to deal with the work- situation on that day. Non-programmed decisions are taken by

managers confronting emergency situations, in consultation with higher levels of management.

(vi) Individual and Collective Decisions:

This classification of decisions rests on the manner of decision-making. An individual (not personal) decision

is one which is taken by a manager in his individual capacity, without being in consultation with any other

person, whatsoever. Such decisions are dictatorial or authoritarian in nature, and are taken by ‘big bosses’ of

the organisation.

On the other hand, collective decisions are those which are jointly taken by a group of managers and other

persons – through a process of mutual consultations – in meetings or committees or other joint forum. Such

decisions are democratic in nature.

(vii) Financial and Non-financial Decisions:

Financial decisions are those which involve financial implications or commitment of organisational finances.

In fact, most of the management decisions are financial in nature. On the other hand, non-financial decisions

are those which do not involve financial implications; for example, a decision-asking people to be punctual

for the organisation or a decision-asking people not to accept gifts from suppliers or others.

In a way, non-financial decisions may also be very significant for the organisation.

DECISION-MAKING CONDITIONS:-

Decision making is the act of choosing one alternative from among a set of alternatives. Most decision take

place under conditions of certainty, risk, or uncertainty. The decision maker Decision making is the act of

choosing one alternative from among a set of alternatives. Most decision take place under conditions of

certainty, risk, or uncertainty.

The decision maker faces conditions of faces conditions of Certainty, Risk, and Uncertainty.

State of certainty: A condition in which the decision maker knows with reasonable certainty what the

alternative are and what conditions are associated with each alternative.

State of risk: A condition in which the availability of each alternative and its potential payments and costs

are all associated with probability estimates.

State of uncertainty: A condition in which the decision maker does not know all the alternatives, the risks

associated with each, or the consequences each alternative is likely to have.

DECISION MAKING PROCEDURE/ PROCESS/ PHASES:-

1. Identification of the purpose of decision

2. Information gathering

3. Principles for judging the alternatives

4. Brainstorm and analyse the different choices

5. Evaluation of alternatives

6. Select the best alternative

7. Execute the decision

8. Evaluate the results

Step 1: Identification of the purpose of the decision

In this step, the problem is thoroughly analysed. There are a couple of questions one should ask when it comes

to identifying the purpose of the decision.

What exactly is the problem?

Why the problem should be solved?

Who are the affected parties of the problem?

Does the problem have a deadline or a specific time-line?

Step 2: Information gathering

A problem of an organization will have many stakeholders. In addition, there can be dozens of factors involved

and affected by the problem.

In the process of solving the problem, you will have to gather as much as information related to the factors

and stakeholders involved in the problem. For the process of information gathering, tools such as 'Check

Sheets' can be effectively used.

Step 3: Principles for judging the alternatives

In this step, the baseline criteria for judging the alternatives should be set up. When it comes to defining the

criteria, organizational goals as well as the corporate culture should be taken into consideration.

As an example, profit is one of the main concerns in every decision making process. Companies usually do

not make decisions that reduce profits, unless it is an exceptional case. Likewise, baseline principles should

be identified related to the problem in hand.

Step 4: Brainstorm and analyse the different choices

For this step, brainstorming (suggesting) to list down all the ideas is the best option. Before the idea generation

step, it is vital to understand the causes of the problem and prioritization of causes.

For this, you can make use of Cause-and-Effect diagrams and Pareto Chart tool. Cause-and-Effect diagram

helps you to identify all possible causes of the problem and Pareto chart helps you to prioritize and identify

the causes with highest effect. Then, you can move on generating all possible solutions (alternatives) for the

problem in hand.

Step 5: Evaluation of alternatives

Use your judgement principles and decision-making criteria to evaluate each alternative. In this step,

experience and effectiveness of the judgement principles come into play. You need to compare each alternative

for their positives and negatives.

Step 6: Select the best alternative

Once you go through from Step 1 to Step 5, this step is easy. In addition, the selection of the best alternative

is an informed decision since you have already followed a methodology to derive and select the best

alternative.

Step 7: Execute the decision

Convert your decision into a plan or a sequence of activities. Execute your plan by yourself or with the help

of subordinates.

Step 8: Evaluate the results

Evaluate the outcome of your decision. See whether there is anything you should learn and then correct in

future decision making. This is one of the best practices that will improve your decision-making skills.

DECISION SUPPORT SYSTEM:-

Decision support systems (DSS) are interactive software-based systems intended to help managers in decision-

making by accessing useful information generated from various related information systems involved in

organizational business processes, such as office automation system, transaction processing system, etc.

DSS uses the summary information, exceptions, patterns, and trends using the analytical models. A decision

support system helps in decision-making but does not necessarily give a decision itself. The decision makers

compile useful information from raw data, documents, personal knowledge, and/or business models to identify

and solve problems and make decisions.

A decision support system (DSS) is a computerized system that gathers and analyzes data, synthesizing it to

produce comprehensive information reports.

A decision support system differs from an ordinary operations application, whose function is just to collect

data.

Decision support systems allow for more informed decision-making, timely problem-solving, and improved

efficiency in dealing with issues or operations, planning, and even management.

For example: DSS is extensively used in business and management. Executive dashboard and other business

performance software allow faster decision making, identification of negative trends, and better allocation of

business resources. Due to DSS all the information from any organization is represented in the form of charts,

graphs i.e. in a summarized way, which helps the management to take strategic decision. For example, one of

the DSS applications is the management and development of complex anti-terrorism systems.

Attributes of a DSS:-

1. Adaptability and flexibility

2. High level of Interactivity

3. Ease of use

4. Efficiency and effectiveness

5. Complete control by decision-makers

6. Ease of development

7. Extendibility

8. Support for modeling and analysis

9. Support for data access

10. Standalone, integrated, and Web-based

CHARACTERSTICS OF DSS:-

1. Support for decision-makers in semi-structured and unstructured problems.

2. Support for managers at various managerial levels, ranging from top executive to line managers.

3. Support for individuals and groups. Less structured problems often requires the involvement of several

individuals from different departments and organization level.

4. Support for interdependent or sequential decisions.

5. Support for intelligence, design, choice, and implementation.

6. Support for variety of decision processes and styles.

7. DSS’s are adaptive over time.

BENEFITS/ADVANTAGES OF DSS:-

1. Improves efficiency and speed of decision-making activities.

2. Increases the control, competitiveness and capability of futuristic decision-making of the organization.

3. Facilitates interpersonal communication.

4. Encourages learning or training.

5. Since it is mostly used in non-programmed decisions, it reveals new approaches and sets up new

evidences for an unusual decision.

6. Helps automate managerial processes.

COMPONENTS OF DSS:-

Following are the components of the Decision Support System −

Database Management System (DBMS): To solve a problem the necessary data may come from internal or

external database. In an organization, internal data are generated by a system such as TPS and MIS. External

data come from a variety of sources such as newspapers, online data services, databases (financial, marketing,

human resources).

Model Management System: It stores and accesses models that managers use to make decisions. Such

models are used for designing and manufacturing facilities, analysing the financial strength of an organization,

forecasting demand of a product or service, etc.

Support Tools: Support tools like online help; pulls down menus, user interfaces, graphical analysis, error

correction mechanism, facilitates the user interactions with the system.

CLASSIFICATION OF DSS:

There are several ways to classify DSS. Hoi Apple and Whinstone classifies DSS as follows –

1. Text oriented DSS

2. Database oriented DSS

3. Spreadsheet oriented DSS

4. Solver oriented DSS

5. Rules oriented DSS

6. Compound DSS

1. Text Oriented DSS: It contains textually represented information that could have a bearing on

decision. It allows documents to be electronically created, revised and viewed as needed.

2. Database Oriented DSS: Database plays a major role here; it contains organized and highly structured

data.

3. Spreadsheet Oriented DSS: It contains information in spread sheets that allows create, view, modify

procedural knowledge and also instructs the system to execute self-contained instructions. The most

popular tool is Excel and Lotus 1-2-3.

4. Solver Oriented DSS: It is based on a solver, which is an algorithm or procedure written for

performing certain calculations and particular program type.

5. Rules Oriented DSS: Procedures are adopted in rules oriented DSS. Export system is the example.

6. Compound DSS: It is built by using two or more of the five structures explained above.

DIFFERENCE BETWEEN MIS AND DSS:-

MIS DSS

1. Stands For Management Information Systems Decision Support Systems

2. Definition A complementary network of

hardware and software cooperating to

collect, process, store and distribute

information to support managerial role.

An information system that supports

business or organisational decision

making activities.

3. Primary Task MIS identifies the information required. DSS identifies the tools to be used in

decision process.

4. Characteristics Focuses on operational efficiency Focuses more on making an effective

decision or in other words helping the

company to do the right thing

5. Database Corporate Databases are used. Special Database needed.

6. Data Focus is on data storage. Focus is on data manipulation.

7. Dependency Dependent on computer. Dependent on management juridiction.

8. Usage MIS is used to in control process. DSS is used in planning, staffing and

decision making.

9. Users MIS is used by middle level, low level

users and senior executives in some

cases.

DSS is used by analysts, professionals and

managers.

10. Focus Focus is on information processing. Focus is on decision making, support and

analysis.

11. Flow Of

Information

Flow of information is from both sides,

up and down

Flow of information is only upward

12. Input And

Output

Uses an input of large volume of data,

and output is summary reports

Uses an input of low volume of data and

output is decision analysis.

13. Characterised

Process

Simple model characterises MIS Interactive model characterises DSS.

14. Flexibility Of

Report

The report is usually not flexible. The report can be flexible.

MODELING PROCESS:-

The process of making and testing hypotheses about models and then revising designs or theories has its

foundation in the experimental sciences. Similarly, computational scientists use modeling to analyze complex,

real-world problems in order to predict what might happen with some course of action.

For example, Dr. Jerrold Marsden, a computational physicist at CalTech, models space mission trajectory

design (Marsden). Dr. Julianne Collins, a genetic epidemiologist (statistical genetics) at the Greenwood

Genetics Center, runs genetic analysis programs and analyzes epidemiological studies using the Statistical

Analysis Software (SAS) (Greenwood Genetics Center).

Definition:

Modeling is the application of methods to analyze complex, real-world problems in order to make predictions

about what might happen with various actions.

STEPS OF THE MODELING PROCESS:

The modeling process is cyclic and closely parallels the scientific method and the software life cycle for the

development of a major software project. The process is cyclic because at any step we might return to an

earlier stage to make revisions and continue the process from that point.

The steps of the modeling process are as follows:

1. Analyze the problem

2. Formulate a model

a. Gather data

b. Make simplify assumptions and document them

c. Determine variables and units

d. Establish relationships among variables and sub models

e. Determine equations and functions

3. Solve the model

4. Verify and interpret models solution

5. Report on the model

a. Analysis of the problem

b. Model design

c. Model solution

d. Results and conclusions

6. Maintain the model

1. Analyze the problem:

We must first study the situation sufficiently to identify the problem precisely and understand its

fundamental questions clearly. At this stage, we determine the problem’s objective and decide on the

problem’s classification, such as deterministic or stochastic. Only with a clear, precise problem

identification can we translate the problem into mathematical symbols and develop and solve the model.

2. Formulate a model:

In this stage, we design the model, forming an abstraction of the system we are modeling. Some of the

tasks of this step are as follows:

a. Gather data:

We collect relevant data to gain information about the system’s behaviour.

b. Make simplifying assumptions and document them:

In formulating a model, we should attempt to be as simple as reasonably possible. Thus, frequently we

decide to simplify some of the factors and to ignore other factors that do not seem as important. Most

problems are entirely too complex to consider every detail, and doing so would only make the model

impossible to solve or to run in a reasonable amount of time on a computer. Moreover, factors often

exist that do not appreciably affect outcomes. Besides simplifying factors, we may decide to return to

Step 1 to restrict further the problem under investigation.

c. Determine variables and units:

We must determine and name the variables. An independent variable is the variable on which others

depend. In many applications, time is an independent variable. The model will try to explain the

dependent variables. For example, in simulating the trajectory of a ball, time is an independent

variable; and the height and the horizontal distance from the initial position are dependent variables

whose values depend on the time. To simplify the model, we may decide to neglect some variables (such

as air resistance), treat certain variables as constants, or aggregate several variables into one. While

deciding on the variables, we must also establish their units, such as days as the unit for time.

d. Establish relationships among variables and sub models:

If possible, we should draw a diagram of the model, breaking it into sub models and indicating

relationships among variables. To simplify the model, we may assume that some of the relationships are

simpler than they really are. For example, we might assume that two variables are related in a linear

manner instead of in a more complex way.

e. Determine equations and functions:

While establishing relationships between variables, we determine equations and functions for these

variables. For example, we might decide that two variables are proportional to each other, or we might

establish that a known scientific formula or equation applies to the model. Many computational science

models involve differential equations, or equations involving a derivative, which we introduce in

Module 2.3 on “Rate of Change.”

3. Solve the model:

This stage implements the model. It is important not to jump to this step before thoroughly understanding

the problem and designing the model. Otherwise, we might waste much time, which can be most frustrating.

Some of the techniques and tools that the solution might employ are algebra, calculus, graphs, computer

programs, and computer packages. Our solution might produce an exact answer or might simulate the

situation. If the model is too complex to solve, we must return to Step 2 to make additional simplifying

assumptions or to Step 1 to reformulate the problem.

4. Verify and interpret the model’s solution:

Once we have a solution, we should carefully examine the results to make sure that they make sense

(verification) and that the solution solves the original problem (validation) and is usable. The process of

verification determines if the solution works correctly, while the process of validation establishes if the

system satisfies the problem’s requirements. Thus, verification concerns “solving the problem right,” and

validation concerns “solving the right problem.” Testing the solution to see if predictions agree with real

data is important for verification. We must be careful to apply our model only in the appropriate ranges for

the independent data. For example, our model might be accurate for time periods of a few days but grossly

inaccurate when applied to time periods of several years. We should analyze the model’s solution to

determine its implications. If the model solution shows weaknesses, we should return to Step 1 or 2 to

determine if it is feasible to refine the model. If so, we cycle back through the process. Hence, the cyclic

modeling process is a trade-off between simplification and refinement. For refinement, we may need to

extend the scope of the problem in Step 1. In Step 2, while refining, we often need to reconsider our

simplifying assumptions, include more variables, assume more complex relationships among the variables

and sub models, and use more sophisticated techniques.

5. Report on the model:

Reporting on a model is important for its utility. Perhaps the scientific report will be written for colleagues

at a laboratory or will be presented at a scientific conference. A report contains the following components,

which parallel the steps of the modeling process:

a. Analysis of the problem:

Usually, assuming that the audience is intelligent but not aware of the situation, we need to describe the

circumstances in which the problem arises. Then, we must clearly explain the problem and the objectives

of the study.

b. Model design:

The amount of detail with which we explain the model depends on the situation. In a comprehensive

technical report, we can incorporate much more detail than in a conference talk. For example, in the

former case, we often include the source code for our programs. In either case, we should state the

simplifying assumptions and the rationale for employing them. Usually, we will present some of the

data in tables or graphs. Such figures should contain titles, sources, and labels for columns and axes.

Clearly labeled diagrams of the relationships among variables and submodels are usually very helpful

in understanding the model.

c. Model solution:

In this section, we describe the techniques for solving the problem and the solution. We should give as

much detail as necessary for the audience to understand the material without becoming mired in

technical minutia. For a written report, appendices may contain more detail, such as source code of

programs and additional information about the solutions of equations.

d. Results and conclusions:

Our report should include results, interpretations, implications, recommendations, and conclusions of

the model’s solution. We may also include suggestions for future work.

6. Maintain the model:

As the model’s solution is used, it may be necessary or desirable to make corrections, improvements, or

enhancements. In this case, the one who is designing the model again cycles through the modeling process

to develop a revised solution.

DECISION MAKING MODELS:-

The top five models of Managerial Decision Making are:

1. Rational Model

2. Non-Rational Models

3. Satisficing Model

4. Incremental Model

5. Garbage-Can Model.

Model # 1. Rational Model:

The rational model of managerial decision-making has its roots in the economic theory of the firm. When

theories about the economic behavior of business firms were being developed, there was a general tendency

among economists to assume that whatever decisions managers made would always be in the best economic

interests of their firms. This assumption was initially accepted by many management theorists.

According to the rational model, managers engage in a decision-making process which is totally rational. They

have all the relevant information needed to take decisions. They are also aware of different possible

alternatives, outcomes and consequences, and hence make rational decisions.

This view which was in trend during the first half of the twentieth century has serious faults, as it is quite

difficult to obtain complete information and make “optimal” decisions in complex situations. In spite of its

drawbacks, the rational view provides a benchmark (target) against which actual managerial decision-making

patterns can be compared.

Model # 2. Non-Rational Models:

Unlike the rational view, several non-rational models of managerial decision-making suggest that it is difficult

for managers to make optimal decisions due to the limitations of information-gathering and processing. Within

the non-rational framework, three major models of decision-making have been identified by researchers.

These are: (a) Satisficing model,

(b) Incremental model, and

(c) Garbage-can model.

Model # 3. Satisficing Model: (Simon’s Model)

In the 1950s, an economist, Herbert Simon studied the actual behaviors of managerial decision makers. On

the basis of his studies, Simon propounded the concept of bounded rationality. This concept suggests that

the managers may not always be perfectly rational in making decisions.

Their decision-making ability may be limited by certain factors like reasoning capacity and time constraints.

The concept of bounded rationality was offered as a framework to facilitate better understanding of the actual

process of managerial decision-making.

According to the concept of bounded rationality, the following factors commonly limit the degree to

which managers are perfectly rational in making decisions:

(i) Decision-makers may have insufficient information about the nature of the issue to be decided. They

may also not possess enough information about possible alternatives, their strengths and weaknesses.

(ii) The amount of information that can be gathered is limited by time and cost factors.

(iii) Decision-makers may ignore critical information because of their observations about the relative

importance of various pieces of data.

(iv) The degree to which decision-makers can determine optimal decisions is limited by the individual’s

capacity and intelligence.

(v) The inability to remember large amounts of information is another factor that limits the ability of

managers to make rational decisions.

Simon argues that instead of searching for the perfect or ideal decision, managers frequently settle for one that

will adequately serve their purpose. He deal with the managers to accept the first satisfactory decision they

uncover, rather than searching till they find the best possible decision.

Simon calls this ‘satisficing’. The satisficing model holds that managers seek alternatives only until they

identify one that looks satisfactory. The satisficing approach can be considered to be an appropriate decision-

making approach when the cost of searching for a better alternative or delaying a decision exceeds the potential

gain that is likely by following the satisficing approach.

Model # 4. Incremental Model:

Another approach to decision-making is the incremental model. The incremental model states that managers

put in the least possible effort – only enough to reduce the problem to a tolerable level. The manager here is

concerned more with finding a short-term solution to the problem than making a decision that will facilitate

the attainment of goals in the long-term. The incremental model does not require managers to process a great

deal of information in order to take a decision.

Model # 5. Garbage-Can Model:

The garbage-can approach to decision-making holds that managers behave randomly while making non-

programmed decisions. That is, decision outcomes are chance occurrences and depend on such factors as the

participants involved in the decision-making process, the problems about which they happen to be concerned

at the moment, the opportunities they happen to identify and their favorite solutions or the solutions they use

the most to solve most problems.

The garbage-can strategy is effective in the following situations:

(i) When the managers have no specific goal preferences,

(ii) When the means of achieving goals are unclear, and

(iii) When there are frequent changes in the participants involved in decision-making. This approach can

have serious consequences.

(iv) The garbage- can approach is often used in the absence of strategic management.

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