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Intro Chapter 3

The document outlines the 8 step decision making process which includes identifying the problem, criteria and weights, developing alternatives, analyzing alternatives, selecting an alternative, implementing the choice, and evaluating the decision. It provides examples of applying the process to choosing a new laptop computer. Key aspects of an effective decision making process are that it focuses on what is important, uses logical and consistent reasoning, and balances analytical and intuitive thinking.

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23 views17 pages

Intro Chapter 3

The document outlines the 8 step decision making process which includes identifying the problem, criteria and weights, developing alternatives, analyzing alternatives, selecting an alternative, implementing the choice, and evaluating the decision. It provides examples of applying the process to choosing a new laptop computer. Key aspects of an effective decision making process are that it focuses on what is important, uses logical and consistent reasoning, and balances analytical and intuitive thinking.

Uploaded by

bisryawaye
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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Chapter

THREE

DECISION
MAKING
Decision Making
• Decision
 Decision making is the study of identifying and choosing
alternatives based on the values and preferences of the decision
maker.
 Making a choice from two or more alternatives.
• The Decision-Making Process
1. Identifying a problem and decision criteria and allocating
weights to the criteria.
2. Developing, analyzing, and selecting an alternative that can
resolve the problem.
3. Implementing the selected alternative.
4. Evaluating the decision’s effectiveness.
Exercise
• Define steps when you decide to buy a new
computer.
• Finally, which brand would you buy? Why?
Exhibit 3.1
The Decision-Making Process
Step 1: Identifying the Problem
• Problem
 The decision-making process begins when a manager
identifies the real problem.
 A discrepancy between an existing and desired state of
affairs.
 The accurate definition of the problem affects all the steps
that follow; if the problem is inaccurately defined, every
step in the decision-making process will be based on an
incorrect starting point.
 One way that a manager can help to determine the true
problem in a situation is by identifying the problem
separately from its symptoms.
The most obviously troubling situations found in an
organization can usually be identified as symptoms of
underlying problems.

Symptoms Underlying Problem


Low profits (declining Poor market research
sales)

High costs Poor design process; poorly trained


employees
Low morale Lack of communication between
management & subordinates
High employee turnover Rate of pay too low; job design not
suitable
High rate of Employees believe that they are not
absenteeism valued
• Characteristics of Problems
 A problem becomes a problem when a manager
becomes aware of it.
 There is pressure to solve the problem.
 The manager must have the authority, information, or
resources needed to solve the problem.
Step 2: Identifying Decision Criteria
(What is relevant in a decision?)
• Decision criteria are factors that are important
(relevant) to resolving the problem.
 Costs that will be incurred (investments required)
 Risks likely to be encountered (chance of failure)
 Outcomes that are desired (growth of the firm)

Step 3: Allocating Weights to the Criteria


(What is priority in the decision?)
• Decision criteria are not of equal importance:
 Assigning a weight to each item places the items in
the correct priority order of their importance in the
decision making process.
Exhibit 3.2 Criteria and Weights for Computer Replacement Decision

Criterion Weight
Memory and Storage 10
Battery life 8
Carrying Weight 6
Warranty 4
Display Quality 3
Step 4: Developing Alternatives
• Identifying viable alternatives
 Alternatives are listed (without evaluation) that can
resolve the problem.

Step 5: Analyzing Alternatives


• Appraising each alternative’s strengths and
weaknesses
 An alternative’s appraisal is based on its ability to
resolve the issues identified in steps 2 and 3.
Exhibit 3.3 Assessed Values of Laptop Computers
Using Decision Criteria
Step 6: Selecting an Alternative
• Choosing the best alternative
 The alternative with the highest total weight is
chosen.

Step 7: Implementing the Alternative


• Putting the chosen alternative into action.
 Conveying the decision to and gaining commitment
from those who will carry out the decision.
Exhibit 3.4 Evaluation of Laptop Alternatives
Against Weighted Criteria
Step 8: Evaluating the Decision’s
Effectiveness
• The soundness of the decision is judged by its
outcomes.
 How effectively was the problem resolved by
outcomes resulting from the chosen alternatives?
 If the problem was not resolved, what went wrong?
Exhibit 3.5 Decisions in the Management Functions
Exhibit 3.14 Overview of Managerial Decision Making
Characteristics of an Effective Decision-
Making Process
• It focuses on what is important.
• It is logical and consistent.
• It acknowledges both subjective and objective thinking
and blends analytical with intuitive thinking.
• It requires only as much information and analysis as is
necessary to resolve a particular dilemma.
• It encourages and guides the gathering of relevant
information and informed opinion.
• It is straightforward, reliable, easy to use, and flexible.

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