CHAPTERTHREE

THEDECI
SIONMAKI
NG

3.
1Meani
ngofdeci
sionmaki
ng
Whati
sdeci
sionmaki
ng?
Deci
sionmaki
ngi
sdef
inedasar
ati
onalchoi
ceamongal
ter
nat
ives.“
Ift
her
eisnoopt
ion,t
her
eisno
choi
ce&nodeci
si
on.
”Indeci
sionmaki
ng,manageri
smaki
ngj
udgment
s–r
eachi
ngconcl
usi
on-f
rom
al
i
stofknownact
ivi
ti
es.Deci
sionmaki
ngi
suni
ver
sal
.Iti
sthemai
npar
tofal
lmanager
sjob.A
managementmakesdeci
sionsconst
ant
lywhi
l
eper
for
mingmanagementf
unct
ions.Deci
sionmaki
ngi
s
notasepar
ate,
isol
atedf
unct
ionofmanagement
,butt
hecommoncor
etoot
herf
unct
ions.
Manager
satal
llev
elsar
eengagedi
ndeci
sionmaki
ngandmakebi
g&smal
ldeci
sionsdai
l
y.They
makedeci
sionswhi
l
e
 Pl
anni
ngabudget
 Or
gani
zi
ngawor
kschedul
e
 I
nter
viewi
ngapr
ospect
iveempl
oyee
 Wat
chi
ngawor
keront
heassembl
yli
ne
 Maki
ngadj
ust
mentt
opr
oject
s,et
c.
3.
2Rat
ionaldeci
sionmaki
ngpr
ocess
Deci
sionmaki
ngi
sapr
ocesswhi
chani
mpor
tantpar
tofamanager
’sj
ob.I
tisnecessar
ytof
ind
any
thi
ngt
hatcani
mpr
ovet
hequal
i
tyofdeci
sionmaki
ng.Theef
fect
ivemeasur
eist
ofol
l
owconsci
ous,
r
ati
onaldeci
sionmaki
ngpr
ocess.Thedeci
sionmaki
ngpr
ocessar
elogi
cal& si
mpl
eandal
lar
e
essent
ial
tot
hepr
ocess.
Deci
sionmaki
ngpr
ocesshassev
en(
7)st
eps.
St
ep1.Def
inet
hepr
obl
em
Def
ini
ngt
hepr
obl
em i
sthecr
it
icalst
ep.Ther
eisapar
ti
cul
arpr
obl
em y
ouhav
etosol
ve.Theaccur
ate
def
ini
ti
onofapr
obl
em af
fect
sal
lst
epst
hatf
oll
ow.I
fthepr
obl
em i
sinaccur
atel
ydef
ined,
ever
yst
epi
n
t
hedeci
sionmaki
ngpr
ocesswi
l
lbebasedont
hati
ncor
rectpoi
nt.
Thegoodmet
hodf
ormanagert
odef
inet
hepr
obl
em i
stof
ocusont
hepr
obl
em butnotont
he
sy
mpt
oms.Thi
sisaccompl
i
shedbyaski
ngt
her
ightquest
ion& dev
elopi
ngasoundquest
ioni
ng
pr
ocess.
Ast
oPet
erDr
ucker
,“Themostcommonsour
ceofmi
stakei
nmanagementdeci
sioni
stheemphasi
s

1|Page
onf
indi her
ngt ightanswer
srat
hert
hant
her
ightquest
ions.
”
Fi
ndi
ngasol
uti
ont
othepr
obl
em wi
l
lbegr
eat
lyai
dedbyi
tspr
operi
dent
if
icat
ion.Theconsequenceof
notpr
oper
lydef
ini
ngt
hepr
obl
emsi
swast
edt
ime&ener
gy.
St
ep2.I
dent
if
ythel
imi
ti
ngorcr
it
icalf
act
ors
Oncet
hepr
obl
em i
sdef
ined,
themanagerneedst
odev
elopt
hel
i
mit
ingorcr
it
ical
fact
orsoft
he
pr
obl
em.
Li
mit
ing f
act
ors ar
ethe const
rai
ntst
hose r
ule outcer
tai
n al
ter
nat
ive sol
uti
ons.The common
l
i
mit
ati
onsar
eti
me,r
esour
ces,per
sonnel
,money
,faci
l
iti
es,andequi
pment
.Theynar
row downt
he
r
angeofpossi
bleal
ter
nat
ives.
St
ep3.Devel
oppot
ent
ialal
ter
nat
ives
Att
hispoi
nt,i
tisnecessar
ytol
ookf
or,dev
elop&l
i
stasmanypossi
bleal
ter
nat
ivesol
uti
onst
othe
pr
obl
em asy
oucan.Theseal
ter
nat
ivesshoul
del
i
minat
e,cor
rect
,orneut
ral
i
zet
hepr
obl
em.Doi
ng
not
hingaboutapr
obl
em somet
imesi
sthepr
operal
ter
nat
iveatl
eastunt
ilt
hesi
tuat
ionhasbeen
t
hor
oughl
yanal
yzed.Occasi
onal
l
y,j
ustt
hepassi
ngoft
imepr
ovi
desacur
e.Censor
shi
p/r
est
ri
cti
on
l
i
mit
sthenumberofal
ter
nat
ivesdev
eloped.Al
ter
nat
ivesshoul
dbesepar
atesol
uti
onst
othepr
obl
ems.
I
ndev
elopi
ngal
ter
nat
ives,t
hegoalhast
obecr
eat
iveandwi
de-
rangi
ngaspossi
ble.Sour
cesf
or
al
ter
nat
ivesi
ncl
ude:
o Exper
ience
o Per
sons(
whoseopi
nions&j
udgment
sar
erespect
ed)
o Thepr
act
iceofsuccessf
ulmanager
o Gr
oupopi
nionst
hrought
heuseoft
askf
orces&commi
tt
ee
o Theuseofout
sidesour
ces,
incl
udi
ngmanager
sinot
heror
gani
zat
ions.
St
ep4.Anal
yzet
heal
ter
nat
ives
Thi
sst
epi
stodeci
det
her
elat
ivemer
it
sanddemer
it
sofeachoft
heal
ter
nat
ives.I
ftheal
ter
nat
ives
conf
li
ctwi
thcr
it
ical(
li
mit
ing)f
act
ors,t
heymustbeaut
omat
ical
l
ydi
scar
ded.Dependi
ngont
het
ypeof
pr
obl
em,
thepot
ent
ialsol
uti
onsdev
eloped.Themanagermi
ghtneedt
omakeamor
ethr
oughanal
ysi
s
byappl
yi
ngspeci
fi
cdeci
sionmaki
ngai
ds.
St
ep5.Sel
ectt
hebestal
ter
nat
ive
Her
eal
ltheal
ter
nat
ivesar
eli
stedal
ongwi
tht
hei
rcor
respondi
ngadv
ant
agesanddi
sadv
ant
ages.
To sel
ectt
he al
ter
nat
ives,y
ou mustf
ind a sol
uti
on t
hatappear
sto of
fert
he f
ewestser
ious
di
sadv ages&t
ant hemostadvant
ages.Takecar
enott
osol
veonepr
obl
em &cr
eat
eanot
herwi
thy
our

2|Page
choi
ce.
St
ep6.I
mpl
ementt
hesol
uti
on
Manager
sar
epai
dtomakedeci
sionsandt
ogetr
esul
tsf
rom t
hesedeci
sions.Adeci
sionhast
obeput
i
ntoef
fect
.Ev
ery
onei
nvol
vedwi
thi
tmustknowwhats/
hemustdo;
howt
odoi
t;why&when.
Agoodal
ter
nat
ivet
hathal
f–hear
tedl
yappl
i
edbyuncommi
tt
edper
sonwi
l
lof
tencr
eat
epr
obl
ems.Li
ke
pl
ans,
deci
sionsneedef
fect
ivei
mpl
ement
ati
ont
oyi
eldt
hedesi
redr
esul
ts.Peopl
emustbesol
don
t
hei
rrol
es&mustknowexact
lywhatt
heymustdo&why
.Pr
ogr
ams,
procedur
es,
rul
esorpol
i
ciesmust
bet
hought
ful
l
yputi
ntoef
fect
.
St
ep7.Est
abl
ishacont
rol&eval
uat
ionsyst
em.
Thi
sist
hef
inal
stageofdeci
sion–maki
ngpr
ocess.Ongoi
ngact
ionsneedt
obemoni
tor
ed.I
tshoul
d
pr
ovi
def
eedbackon
 howwel
lthedeci
sionwasi
mpl
ement
ed
 whatr
esul
tsar
eposi
ti
ve&negat
ive,
and
 whatadj
ust
ment
sar
enecessar
ytogett
her
esul
tst
hatwer
ewant
ed&whent
hesol
uti
onwas
chosen.
I
famanagerusest
hisdeci
sionmaki
ngpr
ocess,t
hepr
obabi
l
ityf
orsuccessi
ndeci
sionwoul
dbe
i
mpr
oved,becausei
tpr
ovi
desast
ep–by
–st
epr
oadmapf
ort
hemanagert
omov
elogi
cal
l
ythr
ough
deci
si
onmaki
ng.
3.
3Ty
pesofdeci
sions
Manageri
nor
gani
zat
ionsmaybesepar
atedbyt
hei
rbackgr
ound;
li
fest
yle&di
stance,
theyal
lsooneror
l
atermustshar
ecommonexper
ienceofdeci
sionmaki
ng.Theyal
lfacesi
tuat
ionsi
nvol
vi
ngsev
eral
al
ter
nat
ives&anev
aluat
ionoft
heout
come.
Ty
pesofdeci
si
onsar
e
1.Pr
ogr
ammeddeci
sions
Pr
ogr
ammeddeci
si
onsar
edeci
sionmanager
smakei
nresponset
orepet
it
ive&r
out
ingpr
obl
ems.I
fa
par
ti
cul
arsi
tuat
ionoccur
sof
ten,
manager
swi
l
ldev
elopar
out
inepr
ocedur
eforhandl
i
ngi
t.
Mostmanagementf
aces a gr
eatnumberofpr
ogr
ammed deci
sions i
nthei
rdai
l
y oper
ati
ons.
Pr
ogr
ammed deci
si
onsshoul
d bemadewi
thoutexpendi
ng unnecessar
yti
me& ef
for
t.I
nmost
or
gani
zat
ions,pr
ogr
ammeddeci
sionsar
ehandl
edt
hroughpol
i
cies;i
nsomemanagementsci
ent
ist
s
hav
edev
elopedmat
hemat
ical
model
s.
2.Non–pr
ogr
ammeddeci
sions

3|Page
Non– pr
ogr
ammeddeci
sionsar
edeci
sionsmadef
ornov
elandunst
ruct
uredpr
obl
ems.Whena
pr
obl
em hasn’
tar
iseni
nexact
lyt
hesamemannerbef
ore,ori
scompl
exorext
remel
yimpor
tant
,it
r
equi
resanonpr
ogr
ammeddeci
sion.Nonpr
ogr
ammeddeci
sionsar
emor
ecompl
i
cat
ed.Theyr
equi
re
t
heexpendi
tur
eofl
otsofmoney
,wor
thofr
esour
cesev
eryy
ear
.Ver
yli
tt
lei
sknownaboutt
hist
ypeof
deci
si
onmaki
ng.Theyar
eusual
l
yhandl
edbygener
alpr
obl
em sol
vi
ngpr
ocesses,
judgment
s,i
ntui
ti
ons,
andcr
eat
ivi
ty.
Theset
wot
ypes/cl
assi
fi
cat
ionsofdeci
sionsar
ebr
oad.I
tisi
mpor
tantt
odi
ff
erent
iat
ebet
weent
hem
cl
ear
ly.
Typesofdeci
sions&l
evelofmanagement
Thenat
ureoft
hepr
obl
em howf
requent
lyi
toccur
s,andt
hedegr
eeofcer
tai
ntysur
roundi
ngi
tshoul
d
di
ctat
eatwhatl
evel
ofmanagementt
hedeci
sionshoul
dbet
aken/made.
Pr
obl hatar
emst isei
nfr
equent
ly&havi
ngagr
eatdealofuncer
tai
ntysur
roundi
ngt
hem ar
eof
ten
st
rat
egi
cinnat
ureandshoul
dbet
heconcer
noft
opmanagement
.Pr
obl hatar
emst isef
requent
ly&
hav
efai
rl
ycer
tai
nout
comesshoul
dbet
heconcer
nofl
owerl
evelmanagement
.Mi
ddl
emanager
sin
mostor
gani
zat
ionsconcent
rat
eonpr
ogr
ammeddeci
sions.

Top Non
pr
ogr
amme
d
Unst
ruct
ure
d

St
ruct
ured
Lower Pr
ogr
ammed

Or
gani
zat
ional
Hier
archy Nat
ureofpr
obl
ems Nat
ureofdeci
sion
maki
ng
Fi
g:Ther
elat
ionshi
pbet
weenl
evel
sofmanager
s&ki
ndsofdeci
sion

3.
4Deci
sionmaki
ngenv
ironment
/condi
ti
ons
Ast
her
ear
edi
ff
erentki
ndsofdeci
sions,
ther
ear
eal
sodi
ff
erentcondi
ti
onsi
nwhi
chdeci
sionsmustbe
made.Themanagermustbeawar
eoft
heenv
ironmenti
nwhi
chs/
hemakesdeci
sions.Deci
sion
maki
ngl
i
keot
hermanagementf
unct
ionsdoesn’
ttakepl
acei
nvacuum.Ther
ear
efact
orsi
nthe

4|Page
env
ironmentt
hataf
fectt
hepr
ocess&t
hedeci
sionmaker
.Insomesi
tuat
ionsonemanagercanhav
e
per
fectknowl
edge/under
standi
ngofwhatt
odo&whatt
heconsequenceoft
heact
ionwi
l
lbe;
wher
e
asi
not shasnosuchknowl
her edgeorhavef
ewcl
ues.
Deci
sionsar
emadeundert
hecondi
ti
onsofcer
tai
nty
,ri
sk&uncer
tai
nty
.Thesedi
ff
erentdeci
sion
maki
ngenv
ironment
s/ci
rcumst
ancesr
equi
redi
ff
erentr
esponsesf
rom amanager
.

Deci
sionmakingcondi
ti
ons/
envi
ronment
s

Cer
tai
nty Ri
sk Uncer
tai
nty

Lev
elofambi
gui
ty&chanceofmaki
ngbad

Lower moder
ate hi
gher
Fi
g:Thedeci
si
onmaki
ngcondi
ti
on

1.Deci
sionmaki
ngundercondi
ti
onsofcer
tai
nty
Thi
ssi
tuat
ionmeanst sknownasper
hemanagerhaswhati fectknowl
edge,
i.
e.t
hemanagerhadhad
t
hisdeci
sionbef
ore;
theal
ter
nat
ivesar
eknown;
andt
heconsequencesofeachal
ter
nat
ivear
eful
l
y
under
stood.I
tcanmeanamanagercanr
elyonst
andi
ngpl
ans;
thedeci
sionswi
l
lbemader
out
inel
y.
2.Deci
sionmaki
ngundercondi
ti
onsofr
isk
Thi
ssi
tuat
ionpr
ovi
desamor
edi
ff
icul
tdeci
sionmaki
ngenv
ironmentt
hant
hecer
tai
ntysi
tuat
ion.I
nthi
s
si
tuat
ion,
themanagerknowswhatt
hepr
obl
em i
s;whatt
heal
ter
nat
ivear
e;butdoesn’
tknowhoweach
al
ter
nat
ivewi
l
lwor
koutev
ent
houghs/
heknowst
heodds(
probabi
l
iti
es)ofpossi
bleout
comes.The
manageri
sfacedwi
thdi
l
emmaofchoosi
ngt
hebestal
ter
nat
iveav
ail
abl
e.
3.deci
sionmaki
ngundercondi
ti
onsofuncer
tai
nty
Thi
sist
hemostdi
ff
icul
tsi
tuat
ionf
ormanager
s.I
tisl
i
kebei
ngapi
oneer
/br
eaki
ngnewgr
ound.I
nthi
s
si
tuat
ion,t
he manageri
s notabl
eto det
ermi
ne t
he exactodds (
probabi
l
iti
es)oft
he pot
ent
ial
al
ter
nat
ivesav
ail
abl
e.S/
hemaybedeal
i
ngwi
tht
oomanyv
ari
abl
es,orper
hapst
her
ear
etoomany
unknownf
act
s.Themanagementi
sunabl
etoaccur
atel
ypr
edi
ctt
hepr
obabl
eresul
tsofchoosi
ng
any
oneoft
heal
ter
nat
ives.Rel
i
anceonexper
ience,j
udgment&ot
herpeopl
e’
sexper
iencecanassi
st
t
hemanageri
nassessi
ngt
hev
alueoft
heal
ter
nat
ives.

5|Page
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