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Chapter 2

The document outlines the eight steps in the decision-making process: 1) identify the problem, 2) identify decision criteria, 3) allocate weights to criteria, 4) develop alternatives, 5) analyze alternatives, 6) select an alternative, 7) implement the alternative, and 8) evaluate the decision effectiveness. It also describes different types of decisions including structured vs. unstructured and programmed vs. nonprogrammed decisions. Finally, it discusses heuristics, biases that can affect decision-making, and common decision-making errors.

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Yousef Wardat
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121 views25 pages

Chapter 2

The document outlines the eight steps in the decision-making process: 1) identify the problem, 2) identify decision criteria, 3) allocate weights to criteria, 4) develop alternatives, 5) analyze alternatives, 6) select an alternative, 7) implement the alternative, and 8) evaluate the decision effectiveness. It also describes different types of decisions including structured vs. unstructured and programmed vs. nonprogrammed decisions. Finally, it discusses heuristics, biases that can affect decision-making, and common decision-making errors.

Uploaded by

Yousef Wardat
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Making Decisions

Chapter 2
F I F T E E N T H E D I T I O N , G L O B A L E D I T I O N
Learning Objectives
Explain the five approaches managers
Describe the eight steps in the can use when making decisions.
01 decision-making process 02

Classify decisions and decision-making Describe how biases affect decision


03 styles.
04 making

Identify cutting-edge approaches for


05 improving decision making.
Be A Better
Decision
Maker
A key to success in management and in your
career is knowing how to be an effective
decision maker.
What is a Decision?

• Decision: a choice among two


or more alternatives
Exhibit 2.1 Decision-
Making Process

Exhibit 2.1 shows the eight steps in the decision-making process. This process is as relevant to personal decisions as it is to corporate
decisions.
Decision-Making Process Step 1:
Identify a Problem
• Problem: an obstacle that makes it difficult to achieve a desired goal or
purpose.

• Every decision starts with a problem, a discrepancy between an existing and a


desired condition.
• Example: Amanda is a sales manager whose reps need new laptops.
Decision-Making Process Step 2:
Identify the Decision Criteria
• Decision criteria are factors that are
important to resolving the problem.
• Example: Amanda decides that memory
and storage capabilities, display quality,
battery life, warranty, and carrying weight
are the relevant criteria in her decision
Decision-Making Process Step 3:
Allocate Weights to the Criteria
• If the relevant criteria aren’t equally
important, the decision maker must weight
the items in order to give them the correct
priority in the decision.

• Example: The weighted criteria for


Amanda’s computer purchase are shown in
Exhibit 2.2.
Exhibit 2.2 Important Decision
Criteria
Decision-Making Process Step 4:
Develop Alternatives
• List viable alternatives that could solve the
problem.

• Example: Amanda identifies eight laptops


as possible choices (shown in Exhibit 2.3).
Exhibit 2.3 Possible Alternatives
Decision-Making Process Step 5: Analyze
Alternatives
Step 6: Select an Alternative

• STEP 5: Once you identify the alternatives you need to


analyze them using the criteria established in Step 2.
• STEP 6: Choose the alternative that generates the highest
total in Step 5.
Exhibit 2.4 Evaluation of
Alternatives
Decision-Making Process Step 7:
Implement the Alternative

• Put the chosen alternative into action.


• Convey the decision to those affected and get their
commitment to it.
Decision-Making Process Step 8: Evaluate
Decision Effectiveness

• Evaluate the result or outcome of the decision to see if


the problem was resolved.
• If it wasn’t resolved, what went wrong?
Types of Decisions: Structured
Problems and Programmed Decisions

• Structured problems: straightforward, familiar,


and easily defined problems

• Programmed decisions: repetitive decisions that


can be handled by a routine approach
Types of Programmed Decisions

• Procedure: a series of sequential steps used to respond to


a well-structured problem

• Rule: an explicit statement that tells managers what can


or cannot be done

• Policy: a guideline for making decisions


Types of Decisions: Unstructured Problems and
Nonprogrammed Decisions
• Unstructured problems: problems that are new or
unusual and for which information is ambiguous or
incomplete

• Nonprogrammed decisions: unique and nonrecurring


and involve custom-made solutions
Heuristics

• Heuristics or “rules of thumb” can help make


sense of complex, uncertain, or ambiguous
information.

• However, they can also lead to errors and biases


in processing and evaluating information.
Exhibit 2.9 Common Decision-Making
Biases
Decision-Making Biases and Errors (1 of 4)

• Overconfidence Bias: holding unrealistically positive


views of oneself and one’s performance
• Immediate Gratification Bias: choosing alternatives
that offer immediate rewards and avoid immediate
costs
• Anchoring Effect: fixating on initial information and
ignoring subsequent information
Decision-Making Biases and Errors (2 of 4)

• Selective Perception Bias: selecting, organizing, and


interpreting events based on the decision maker’s
biased perceptions
• Confirmation Bias: seeking out information that
reaffirms past choices while discounting
contradictory information
• Framing Bias: selecting and highlighting certain
aspects of a situation while ignoring other aspects
Decision-Making Biases and Errors (3 of 4)

• Availability Bias: losing decision-making objectivity


by focusing on the most recent events
• Representation Bias: drawing analogies and seeing
identical situations when none exist
• Randomness Bias: creating unfounded meaning out
of random events
Decision-Making Biases and Errors (4 of 4)

• Sunk Costs Errors: forgetting that current actions cannot


influence past events and relate only to future consequences
• Self-serving Bias: taking quick credit for successes and
blaming outside factors for failures
• Hindsight Bias: mistakenly believing that an event could have
been predicted once the actual outcome is known (after-the-
fact)
Thank You

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