Decision Making 30072024 014715pm

Decision-Making:
The Essence of the

Manager’s Job
Decision Making
A decision is a choice made
from two or more alternatives.
The decision-making process
is defined as a set of different
eight steps.
The Decision-Making Process
Step 1: Identifying the Problem
• Problem
 A situation where there is a gap between a desired
state and an existing state.
• To make decisions about problems, managers
must:
 be aware of the gap
 be motivated to reduce the gap
 have the knowledge, skills, abilities, and resources to
fix the problem
Step 2: Identifying Decision Criteria
• 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

 Assigning a weight to each item places the items in
the correct priority order of their importance in the
decision making process.
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.
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.
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?
Decisions in the Management
Functions
Making Decisions
• Rationality
• Managerial decision making is assumed to be
Rational.
 Managers make consistent, value-maximizing choices
with specified constraints.
 Assumptions are that decision makers:
 A decision maker who was perfectly rational would be fully
objective, and logical.
 Have carefully defined the problem and identified all viable
alternatives.
 Have a clear and specific goal
 Will select the alternative that maximizes outcomes in the
organization’s interests rather than in their personal interests.
Making Decisions (cont’d)
• Bounded Rationality
 Managers make decisions rationally, but are limited
(bounded) by their ability to process information.
 Assumptions are that decision makers:
 Will not seek out or have knowledge of all alternatives
 Will satisfice—choose the first alternative encountered that
satisfactorily solves the problem—rather than maximize the
outcome of their decision by considering all alternatives and
choosing the best.
 Satisficing: Accepting solutions that are “good enough”
The Role of Intuition
Intuitive decision making

Making decisions on the basis of
experience, feelings, and
accumulated judgment.
Types of Problems and Decisions
1. Structured Problems
 Involve goals that clear & straightforward
 Are familiar (have occurred before)
 Are easily and completely defined—information
about the problem is available and complete. e.g.
A customer’s returning a purchase to a store, A
student wanting to drop a class, A server in
restaurant spills a drink on a customer's coat…
 Programmed Decision
 A repetitive decision that can be handled by a
routine approach.
Three possible programmed decisions
• Policy
 A general guideline for making a decision about a
structured problem.
• Procedure
 A series of interrelated steps that a manager can use
to respond (applying a policy) to a structured problem.
• Rule
 An explicit statement that limits what a manager or
employee can or cannot do.
Policy, Procedure, and Rule Examples
• Policy
 The customer always comes first and should be
satisfied.
 We promote from within, whenever possible.
• Procedure
 Follow all steps for giving promotion procedure etc…
• Rules
 Rule about lateness and absenteeism permits
supervisor to take decisions rapidly and fairly.
Problems and Decisions (cont’d)
2 Unstructured Problems
 Problems that are new or unusual and for which
information is ambiguous or incomplete.e.g Selection
of an architect to design a new manufacturing plant,
To invest or not in new Technology??
• Nonprogrammer Decisions
 Decisions that are unique and nonrecurring
 Decisions that generate unique responses.
Programmed versus Nonprogrammed Decisions
Decision-Making Conditions
• Certainty
 A situation in which a manager can make an accurate
decision because the outcome of every alternative
choice is known.
• Risk
 A situation in which the manager is able to estimate
the likelihood (probability) of outcomes that result
from the choice of particular alternatives.
Decision-Making Conditions
• Uncertainty
A situation in which a decision maker
has neither certainty nor reasonable
probability estimates available.
Decision Making for Today’s World
• Guidelines for making effective
decisions:
Understand cultural differences.
Know when it’s time to call it quits.
Use an effective decision-making
process.
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.

Decision Making 30072024 014715pm

Uploaded by

Copyright:

Available Formats

Decision Making 30072024 014715pm

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Decision Making 30072024 014715pm

Uploaded by

Copyright:

Available Formats

Decision-Making:

The Essence of the

Step 3: Allocating Weights to the Criteria

Step 5: Analyzing Alternatives

Step 7: Implementing the Alternative

Intuitive decision making

You might also like