Chapter 6

Managerial Decision Making

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Types of Decisions
Programmed decisions
 situations that occur often enough to enable decision
rules to be developed.

Nonprogrammed decisions
 are made in response to situations that are unique,
are poorly defined and largely unstructured.

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Decision Making Conditions
 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.

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Decision Making Conditions (contd.)
 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.

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Decision Making Conditions (contd.)
 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.

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 Conditions That Affect the Possibility of
Ex. 6.1
Decision Failure
Organizational
Problem

Low Possibility of Failure High

Certainty Risk Uncertainty Ambiguity

Programmed Nonprogrammed
Decisions Decisions

Problem
Solution
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Three Decision Making Models

Political
 PoliticalModel
Model

Administrative
 AdministrativeModel
Model

Classical
 ClassicalModel
Model

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Selecting a Decision Making Model

 Depends on the manager’s personal preference.

 Whether the decision is programmed or non-
programmed.
 Extent to which the decision is characterized
by risk, uncertainty, or ambiguity.

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Assumptions of the Classical Model
 Accomplishes goals that are known and agreed upon.
 Strives for certainty by gathering complete information.
 Criteria for evaluating alternatives are known.
 Decision maker is rational and uses logic.

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Administrative Model
 How managers actually make decisions in situations
characterized by non-programmed decisions, uncertainty,
and ambiguity.
 Two concepts are instrumental in shaping the administrative
model.
 bounded rationality: means that people have limits or boundaries
on how rational they can be.
 satisficing: means that decision makers choose the first solution
alternative that satisfies minimal decision criteria.

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Political Model
 Closely resembles the real environment in which
most managers and decision makers operate.
 Decisions are complex.
 Disagreement and conflict over problems and
solutions are normal.
 Coalition building is important.

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 Characteristics of Classical, Administrative,
Ex. 6.2
and Political Decision-Making Models

Classical Model Administrative Model Political Model

Clear-cut problem and goals. Vague problem and goals. Pluralistic; conflicting goals.
Condition of certainty. Condition of uncertainty. Condition of uncertainty/ambiguity.
Full information about Limited information about Inconsistent viewpoints; ambiguous
alternatives and their outcomes. alternatives and their outcomes. information.
Rational choice by individual Satisficing choice for resolving Bargaining and discussion among
for maximizing outcomes. problem using intuition. coalition members.

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Ex. 6.3 Six Steps in the Managerial Decision-Making Process

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 Diagnosis Questions
(Kepner & Tregoe)

 What is the state of disequilibrium affecting us?

 When did it occur?
 Where did it occur?
 How did it occur?
 To whom did it occur?
 What is the urgency of the problem?
 What is the interconnectedness of events?
 What result came from what activity?

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Personal Decision Making Styles
 Directive
 Analytical
 Conceptual
 Behavioral

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Personal Decision Making Styles
 Directive
1. Used for Quick Decisions
2. May Only Consider a few Alternatives
3. Generally Efficiency Based Managers

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Personal Decision Making Styles
 Analytical
1. Acquires as Much Data as Possible
2. Carefully Considers all Alternatives
3. Rational, Objective Decisions

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Personal Decision Making Styles
 Conceptual
1. More Socially Oriented
2. Seeks Group Consensus
3. Rely on Information from People and
Systems

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Personal Decision Making Styles
 Behavioral
1. Deep Concern for Others
2. Understands Feelings of Those Involved
3. Concerned with Personal Development
Affected by Decisions

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 Personal Decision Framework

Situation: Personal Decision Style: Decision Choice:

· Programmed/non-programmed ·Directive ·Best Solution to Problem
· Classical, administrative, ·Analytical
political ·Conceptual
· Decision steps ·Behavioral

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 Group Decision Making
Questions to Determine Group Participation
in Decision Making
 Decision significance
 Importance of commitment
 Leader expertise
 Likelihood of commitment
 Group support for goals
 Group expertise
 Team competence
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 Group Decision Making
Advantages
1. Greater Pool of Knowledge
2. Different Perspectives
3. Intellectual Stimulation
4. Better Understanding by Employees
5. Deeper Commitment to the Decision

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 Group Decision Making
Disadvantages
1. A Few people May Dominate
2. Groupthink
3. Satisficing
4. Goal Displacement

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 Group Decision Making
Concerns for Managers
1. Less Efficient
2. Size Affects Quality Inversely
3. Group May Be Too Confident
4. Knowledge Counts

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 Group Decision Making
Best Times to Utilize Groups
1. When It Can Increase Quality
2. When It Can Increase Acceptance
3. When It Can Increase Development

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