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Making Decisions

The document discusses decision making processes and approaches. It defines decision making as making a choice between two or more alternatives. It then outlines an 8 step rational decision making process: 1) identifying the problem, 2) identifying decision criteria, 3) allocating weights to criteria, 4) developing alternatives, 5) analyzing alternatives, 6) selecting an alternative, 7) implementing the alternative, and 8) evaluating the decision's effectiveness. It also discusses bounded rationality, intuitive decision making, and types of decisions.

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19 views

Making Decisions

The document discusses decision making processes and approaches. It defines decision making as making a choice between two or more alternatives. It then outlines an 8 step rational decision making process: 1) identifying the problem, 2) identifying decision criteria, 3) allocating weights to criteria, 4) developing alternatives, 5) analyzing alternatives, 6) selecting an alternative, 7) implementing the alternative, and 8) evaluating the decision's effectiveness. It also discusses bounded rationality, intuitive decision making, and types of decisions.

Uploaded by

3032220068ihya
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Making decisions

1 2 3
Decision-making Approaches to Types of
process decision-making decisions and
decision-making
conditions

Materials
Reference
Robbins, S. P., & Coulter, M. (2018).
Management: Global Edition (14th edition).
Pearson.
Decision making process
Decision Making
• Decision
+ Making a choice from two or more
alternatives.
• The Decision-Making Process
+ Identifying a problem and decision
criteria and allocating weights to the
criteria.
+ Developing, analyzing, and selecting an
alternative that can resolve the problem.
+ Implementing the selected alternative.
+ Evaluating the decision’s effectiveness.
Step 1: Identifying the Problem

Characteristics of
Problem
Problems

The manager must


A discrepancy A problem becomes a
There is pressure have the authority,
between an existing problem when a
to solve the information, or
and desired state manager becomes
problem. resources needed to
of affairs. aware of it.
solve the problem.
• 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 2: Identifying
Decision Criteria
6–7
• 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.

Step 3: Allocating Weights to the


Criteria
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.
• Putting the chosen alternative into
action.
+ Conveying the decision to and gaining
commitment from those who will carry out
the decision.

Step 7: Implementing the


Alternative
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 management
functions
Approaches to decision making
Rationality

• Rationality
+ Managers make consistent, value-maximizing choices with specified
constraints.
+ Assumptions are that decision makers:
• Are perfectly rational, 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.
Assumptions of Rationality
Bounded Rationality

• 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.
+ Influence on decision making
• Escalation of commitment: an increased commitment to a previous
decision despite evidence that it may have been wrong.
The Role of Intuition

• Intuitive
decision making
+ Making
decisions on
the basis of
experience,
feelings, and
accumulated
judgment.
Evidence-based management (EBMgt)

… the systematic use of the best available evidence to improve management practice.

The four essential elements of EBMgt:


(1) the decision maker’s expertise and judgment;
(2) external evidence that’s been evaluated by the decision maker;
(3) opinions, preferences, and values of those who have a stake in the decision;
(4) relevant organizational (internal) factors such as context, circumstances, and organizational members.

The key for managers: recognize and understand the mindful, conscious choice as to
which elements are most important and should be emphasized in making a decision.
Types of decisions and
decision-making conditions
Types of Problems and Decisions

Structured Problems

• Involve goals that clear.


• Are familiar (have occurred before).
• Are easily and completely defined—information about the
problem is available and complete.

Programmed Decision

• A repetitive decision that can be handled by a routine


approach.
Policy

Types of Programmed • A general guideline for making a


decision about a structured
Decisions 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.
Types Problems and Decisions (cont’d)
Unstructured Problems

• Problems that are new or unusual and for which


information is ambiguous or incomplete.
• Problems that will require custom-made solutions.

Nonprogrammed Decisions

• Decisions that are unique and nonrecurring.


• Decisions that generate unique responses.
Programmed versus Nonprogrammed Decisions
Decision-Making Conditions
A situation in which a manager can make an accurate decision because the
Certainty outcome of every alternative choice is known.

A situation in which the manager is able to estimate the likelihood


Risk (probability) of outcomes that result from the choice of particular
alternatives.

Limited information prevents estimation of outcome probabilities for alternatives associated


Uncertainty with the problem and may force managers to rely on intuition, hunches, and “gut feelings”.
•Maximax: the optimistic manager’s choice to maximize the maximum payoff
•Maximin: the pessimistic manager’s choice to maximize the minimum payoff
•Minimax: the manager’s choice to minimize maximum regret.
Decision-Making Styles
• Dimensions of Decision-Making Styles
+ Ways of thinking

• Rational, orderly, and consistent

• Intuitive, creative, and unique

+ Tolerance for ambiguity

• Low tolerance: require consistency and order

• High tolerance: multiple thoughts simultaneously


Decision-Making Styles (cont’d)
• Types of Decision Makers
+ Directive
• Use minimal information and consider few alternatives.
+ Analytic
• Make careful decisions in unique situations.
+ Conceptual
• Maintain a broad outlook and consider many alternatives in making decisions.
+ Behavioral
• Avoid conflict by working well with others and being receptive to suggestions.
Decision-Making Matrix
It acknowledges both
subjective and
It focuses on what is It is logical and
objective thinking and
important. consistent.
blends analytical with
intuitive thinking.

It requires only as It encourages and


much information and guides the gathering It is straightforward,
analysis as is of relevant reliable, easy to use,
necessary to resolve a information and and flexible.
particular dilemma. informed opinion.

Characteristics of an Effective Decision-Making


Process

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