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Managerial Decision Making

This document discusses different models and approaches to managerial decision making: 1) The Classical model assumes decisions are made logically based on complete information to achieve known goals in the organization's best economic interests. 2) The Administrative model better reflects how non-programmed decisions are actually made under uncertainty, where goals and solutions may be vague and rational procedures are not always followed. 3) The Political model most closely mirrors reality, where the environment is complex, conflict is normal, and decisions involve building informal coalitions among managers with different goals.

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RajendraPrasad
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72 views

Managerial Decision Making

This document discusses different models and approaches to managerial decision making: 1) The Classical model assumes decisions are made logically based on complete information to achieve known goals in the organization's best economic interests. 2) The Administrative model better reflects how non-programmed decisions are actually made under uncertainty, where goals and solutions may be vague and rational procedures are not always followed. 3) The Political model most closely mirrors reality, where the environment is complex, conflict is normal, and decisions involve building informal coalitions among managers with different goals.

Uploaded by

RajendraPrasad
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 PDF, TXT or read online on Scribd
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Managerial Decision Making

Economic Decision Making


• Decision making is not easy
• It must be done amidst
–ever-changing factors
–unclear information
–conflicting points of view

Manager’s Challenge: Tupperware

10
Decisions and Decision Making

• Decision = choice made from available


alternatives

• Decision Making = process of identifying


problems and opportunities and resolving
them

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Certainty, Risk, Uncertainty, Ambiguity

● Certainty
● all the information the decision maker needs is fully available
● Risk
● decision has clear-cut goals
● good information is available
● future outcomes associated with each alternative are subject to
chance
● Uncertainty
● managers know which goals they wish to achieve
● information about alternatives and future events is incomplete
● managers may have to come up with creative approaches to
alternatives
● Ambiguity
● by far the most difficult decision situation
● goals to be achieved or the problem to be solved is unclear
● alternatives are difficult to define
● information about outcomes is unavailable

12
Categories of Decisions
• Programmed Decisions
– Situations occurred often enough to
enable decision rules to be developed and
applied in the future
– Made in response to recurring
organizational problems
• Nonprogrammed Decisions –
in response to unique, poorly defined and
largely unstructured, and have important
consequences to the organization
Ethical Dilemma: The No-Show Consultant

13
Selecting a Decision Making Model

• Depends on the manager’s personal


preference
• Whether the decision is programmed or
non-programmed
• The decision is characterized by risk,
uncertainty, or ambiguity

14
Classical Model
Logical decision in the organization’s best economic interests
Assumptions
 Decision maker operates to accomplish goals that are
known and agreed upon
 Decision maker strives for condition of certainty –
gathers complete information
 Criteria for evaluating alternatives are known
 Decision maker is rational and uses logic
Normative = describes how a manager should and
provides guidelines for reaching an ideal decision

15
Administrative Model
How nonprogrammer decisions are made--uncertainty/ambiguity
● Managers actually make decisions in difficult situations characterized
by non-programmed decisions, uncertainty, and ambiguity

● Decision goals often are vague, conflicting and lack consensus among
managers;
● Rational procedures are not always used
● Managers’ searches for alternatives are limited
● Managers settle for a satisfying rather than a maximizing solution
● intuition, looks to past experience

● Descriptive = how managers actually make decisions--not how they


should

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Political Model
Closely resembles the real environment
● Closely resembles the real environment in which most
managers and decision makers operate
● Useful in making non-programmed decisions
● Decisions are complex
● Disagreement and conflict over problems and solutions
are normal

● Coalition = informal alliance among


manages who support a specific goal

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