Chapter 3 :

MANAGERIAL
Decision making
-ANDAL, MARY-ANN P.
MBA
 Characteristics of
Managerial Decisions

Risk Uncertainty

Lack of
Structure Conflict
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 Lack of Structure

Programmed Decisions Nonprogrammed Decisions

- Decisions encountered and made - New, novel, complex decisions
before, having objectively correct having no proven answers
answers, and solvable by using
simple rules, policies or numerical
computations

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 Uncertainty and risk

Certainty Uncertainty
The state that exists when The state that exists when
decision makers have decision makers have
accurate and comprehensive insufficient information.
information.

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RISK
The state that exists when the
probability of success is less than
100 percent and losses may occur.

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Conflict
Opposing pressures
from different sources,
occurring on the level
of psychological
conflict or of conflict
between individuals or
groups.

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 Two Levels of Conflict
Psychological Conflict
This is experienced when several options are
attractive, or when none of the options is attractive

Conflict Between People

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 Stage 6
Evaluating
Stage 5 the Decision
Implementing
Stage 4 the Decision
Making the
Stage 3 Choice
Evaluating
Stage 2 Alternatives
Generating
Stage 1 Alternative
Identifying &
Solutions The Stages of Decision
Diagnosing
the Problem Making
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Generating Alternative Solutions

Ready-made Solutions
Ideas that have been
seen or tried before

Custom-made Solutions
New, creative solutions
designed specifically for
the problem
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Evaluating Alternatives
- Involves determining the value
or adequacy of the alternatives
that were generated

- Which solution will be the

best?

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Contingency Plans
Alternative courses of action that can
be implemented based on how the
future unfolds.

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 Making the Choice
Maximizing
A decision
realizing the best Satisficing
possible outcome Choosing an option
that is acceptable,
although not
Optimizing
necessarily the best
or perfect Achieving the
best possible
balance among
several goals

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 Implementing the decision
Managers should plan implementation carefully. Adequate planning
requires several steps:
Determine how things will look when the decision is fully
operational.
Chronologically order the steps necessary to achieve a fully
operational decision.

List the resources and activities required to implement each step.

Estimate the time needed for each step.

Assign responsibility for each step to specific individuals.

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The BEST Decision
Vigilance
- A process in which a decision
maker carefully executes all
stages of decision making

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BARRIERS To Effective
Decision Making
Psychological Biases

Time Pressure

Social Realities

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Psychological biases
Illusion of Control
People’s belief that they can influence events, even when
they have no control over what will happen

Framing Effects
A decision bias influenced by the way in which a problem or
decision alternative is phrased or presented.

Discounting the Future

A bias weighting short- term costs and benefits more
heavily than longer-term costs and benefits. 16
 Of Decision Making in GROUPS
Larger pool of information One person dominates

More perspectives and Satisficing

approaches
Intellectual stimulation Groupthink

People understand the decision Goal displacement

People are committed to the
decision 17
Groupthink
A phenomenon that occurs in decision making when
group members avoid disagreement as they strive
for consensus

Goal Displacement
A condition that occurs when a decision-making
group loses sight of its original goal and a new,
less important goal emerges.
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 Managing group
Leadership Decision Making Constructive Conflict
1. Avoid domination 1. Air legitimate differences
2. Encourage input 2. Stay task-related
3. Avoid groupthink and 3. Be impersonal
satisficing Effective 4. Play devil’s advocate
4. Remember goals Group Decision
Making

Creativity
1. Avoid domination
2. Encourage input
3. Avoid groupthink and satisficing
4. Remember goals
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Two types of
Constructive Cognitive conflict
Conflict Issue-based differences in
perspectives or judgments

Affective conflict
Emotional disagreement directed
toward other people

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Devil’s Advocate
A person who has the job of criticizing ideas to ensure that
their downsides are fully explored.

Dialectic
A structured debate comparing two conflicting courses of
action.

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Brainstorming
A process in which group members generate
as many ideas about a problem as they can;
criticism is withheld until all ideas have
been proposed.

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Models of Organizational Decision
Bounded Rationality
A less-than-perfect form of rationality in which decision makers
cannot be perfectly rational because decisions are complex and
complete information is unavailable or cannot be fully
processed

Incremental model
Model of organizational decision making in which major
solutions arise through a series of smaller decisions

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Coalitional Model
Model of organizational decision making in which groups with
differing preferences use power and negotiation to influence
decisions.

Garbage Can Model

Model of organizational decision making depicting a chaotic
process and seemingly random decisions.

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 Strategic Actions
Technical and Structural Actions
Elements Evaluation and Diagnostic Actions
of Crisis
Communication Actions
Plan
Psychological and Cultural Actions

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Ultimately, management should be able to answer the
following questions

What kind of crises could your company face?

Can your company detect a crisis in its early stages?

How will it manage a crisis if one occurs?

How can it benefit from a crisis after it has passed?

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“ The business executives is by
profession a decision maker,
uncertainty is his opponent.
Overcoming it is his mission. ”

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Thank you!

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