Decision-making in

Management

PA 214 (A) – Prof. Girlie B. Miguel

DEFINITION
Decision-making is the selection based on some criteria
from two or more possible alternatives. —George R. Terry

A decision can be defined as a course of action consciously

chosen from available alternatives for the purpose of
desired result —J.L. Massie

decision is an act of choice, wherein an executive forms a

conclusion about what must be done in a given situation. A
decision represents a course of behaviour chosen from a
number of possible alternatives. -—D.E. Mc. Farland
Elements:
1. Decision–making is a selection process and is concerned with selecting the best type of
alternative.
2. The decision taken is aimed at achieving the organisational goals.
3. It is concerned with the detailed study of the available alternatives for finding the best
possible alternative.
4. Decision making is a mental process. It is the outline of constant thoughtful consideration.
5. It leads to commitment. The commitment depends upon the nature of the decision whether
short term or long term.

ELEMENTS
 Features or Characteristics:

1. Rational Thinking
2. Process
3. Selective
4. Purposive
5. Positive
6. Commitment
7. Evaluation
 ENVIRONMENT OF DECISION MAKING

1. Certainty – information is available and at hand,

data is easy to attain and not very expensive.
Manager create a closed system that he will choose
to only focus on some of the alternatives.
2. Uncertainty – information available to the manager
is incomplete, insufficient and often unreliable
3. Risk – the possibility of more than one event taking
place, which means the manager has to first
ascertain the possibility and probability of the
occurrence or non-occurrence of the event.
 Phases of Decision-making
(Mintzberg, 1976)
1. Identification Phase
 Decision recognition routine -occurs when a manager
recognizes a problem about which a decision must be
made.
 Diagnosis routine – wherein issues around the
problem are clarified and defined.
 Phases of Decision-making
(Mintzberg, 1976)
2. Development Phase – the heart of the decision-making
process, the set of activities that leads to one or more
solutions to a problem
 Search routine – managers look for a solutions to a
problem situation.
 Design routine – if the search procedure is not successful, a
custom-made solution is developed. Designers group along
building their solution brick by brick without really
knowing what it will look like until it is completed.
 Phases of Decision-making
(Mintzberg, 1976)
3. Selection Phase – here a choice is made about a solution.
 Screening routine – used when there are too many ready-
made alternatives and a custom design is not required.
During screening, certain alternatives are rejected so that a
usable number can be handled.
 Evaluation-choice routine – evaluation and choice can be
determined either by judgment, bargaining or analysis.
Phases of Decision-making
(Mintzberg, 1976)

 Authorization routine – the final routine, it occurs when the

person or group making the decision does not have the
necessary power to commit the organization to the
particular solution.
 Types of Decisions
Strategic Decisions and Routine Decisions
1. STRATEGIC DECISIONS 2. ROUTINE DECISIONS
• Are important decisions of the firm • Are those that the manager makes in
• Require analysis and careful study the daily functioning of the
• Usually taken by upper and middle- organization
level management • Do not require a lot of evaluation,
analysis or in-depth study.
• Usually delegate by the high level
managers to their subordinates
 Types of Decisions
Programmed Decisions and Non-Programmed
Decisions
3. PROGRAMMED DECISIONS 4. NON-PROGRAMMED DECISIONS
• Relate to those functions that are • Arise out of unstructured problems
repetitive in nature • These are not routine or daily
• Dealt with by following a specific occurrences
standard procedure • No standard procedure or process to deal
• Usually taken by lower management with such issues
• Decisions are left to upper management
Example:
 Granting leave to employees Example:
 Purchasing spare parts  Opening a new branch office
 Types of Decisions
Policy Decisions and Operating Decisions
5. POLICY DECISIONS 6. OPERATING DECISIONS
• These are tactical decisions pertaining to • Are the decisions necessary to put the
the policy and planning of the firm policy decisions into action
• Have a long term impact on the firm and • These decisions help implement the
require a great deal of analysis plans and policies taken by the high-
• Usually reserved for the firm’s top level managers
management officials • Usually taken by middle and lower
management
Example:
 The company announces a bonus issue Example:
 The calculation and implementation of
such bonus issue
 Types of Decisions
Organizational Decisions and Personal Decisions

7. ORGANIZATIONAL DECISIONS 8. PERSONAL DECISIONS

• When an executive takes a decision in • If the executive takes a decision in a
an official capacity, on behalf of the personal capacity, that does not relate to
organization the organization in any way
• Can be delegated to subordinates • These decisions cannot be delegated
 Types of Decisions
Individual Decisions and Group Decisions

9. INDIVIDUAL DECISIONS 10. GROUP DECISIONS

• Any decision taken by an individual in • Are taken up by a group or a collective
an official capacity of the firm’s employees and
• Usually rely on organizations that are management
smaller and have an autocratic style of
management Example:
 Decisions taken by the board of
directors
 The 5 main decision-making models:
1) RATIONAL DECISION-MAKING MODEL
The rational decision-making model involves identifying the criteria that
will have the biggest impact on your decision's outcome and then evaluating
possible alternatives against those criteria. The steps of the rational decision-
making model are:
Step #1) Define the problem: You'll want to start by identifying the issue
you are trying to solve or the goal you are trying to achieve with your
decision.
Step #2) Define criteria: The next step is to define the criteria you are
looking for in your decision. For instance, if you are deciding on a new car,
you might be looking for criteria such as space, fuel efficiency, and safety.
Step #3) Weight your criteria: If all of the criteria you define are equally
important to you, then you can skip this step. If some factors are more
important, you will want to assign a numerical value to your criteria based on
how important each factor is.
Step #4) Generate alternatives: Having defined and weighted the criteria
you are looking for, it's time to brainstorm ideas and develop a few
alternatives that meet your criteria.
Step #5) Evaluate your alternatives: For each possible solution you come
up with, you should evaluate it against your criteria, giving extra
consideration to the criteria you weighted more heavily.
Step #6) Choose the best alternative: After evaluating all possible
alternatives, select the option that best matches your weighted criteria.
Step #7) Implement the decision: The next to last step in the rational
decision-making model is simply putting your decision into practice.
Step #8) Evaluate your results: It's essential to evaluate your results anytime
you make a decision. Looking at your decision from a retrospective point of
view can help you decide if you should use the same decision-making process
in the future.
RATIONAL DECISION-MAKING MODEL

When to use this model

The rational decision-making model is best

employed when you have numerous options to
consider and plenty of time to evaluate them. One
example of a scenario where this model might prove
useful is choosing a new hire from a pool of
candidates.
2) BOUNDED RATIONALITY DECISION-MAKING
MODEL
Sometimes, taking action quickly and choosing a "good
enough" option is better than getting bogged down in searching
for the best possible solution. The bounded rationality decision-
making model dictates that you should limit your options to a
manageable set and then choose the first option that meets your
criteria rather than conducting an exhaustive analysis of each
one. Going with the first option that meets your minimum
threshold of requirements is a process known as "satisficing."
While this may not be the best process for every decision, a
willingness to satisfice can prove valuable when time constraints
limit you.
BOUNDED RATIONALITY DECISION-MAKING MODEL

When to use this model

The bounded rationality decision-making model is best

employed when time is of the essence. It's the best model to
use when inaction is more costly than not making the best
decision. For example, suppose your company has
encountered an issue causing extended downtime. In that
case, you may want to use the bounded rationality decision-
making model to quickly identify the first acceptable solution
since every minute wasted is costly.
3) VROOM-YETTON DECISION-MAKING MODEL
The Vroom-Yetton decision-making model presents seven
"yes or no" questions for a decision-maker to answer followed
by five decision-making styles for them to choose from. It's the
most complex decision-making model on our list, requiring
decision-makers to utilize a decision tree to arrive at the right
decision-making style based on their answers to the model's
questions.
VROOM-YETTON DECISION-MAKING MODEL

When to use this model

The Vroom-Yetton decision-making model was

specifically designed for collaborative decision-
making and is best employed when you involve
multiple team members in the decision-making
process. In fact, one of the main objectives of this
model is to determine how much weight should be
given to the input from a leader's subordinates.
4) INTUITIVE DECISION-MAKING MODEL
Rather than logical reasoning, the intuitive decision model uses
feelings and instinct to make decisions. Often, team leaders or
managers use this model to make quick decisions when they
don't have a lot of time for research or planning.
The process of an intuitive decision is less structured and may
use previous knowledge of similar goals or obstacles to
determine a useful solution.
For example, if you don't have much information to consider,
instinct may be the only tool for finding the best solution that
you have available. Likewise, trusting your instinct can often
yield the best results in cases where you are already deeply
experienced with the matter at hand since nothing hones instinct
better than experience.
INTUITIVE DECISION-MAKING MODEL

When to use this model

The intuitive decision-making model probably shouldn't be the
first model you turn to when you need to make a decision, but
there are instances where it can be useful. We've mentioned a
couple already, including cases where there isn't enough
information for you to make a more informed decision and
instances where your own experience is more reliable than the
available information.

The intuitive decision-making model can also be useful in cases

where you don't have a lot of time and need to make a decision
quickly.
5) THE RECOGNITION PRIMED MODEL
The recognition primed model is similar to the intuitive
decision-making model in that it relies heavily on the decision-
maker's experience and instinct. However, the recognition
primed model is a little more structured than intuitive decision-
making and includes the following steps:
Step #1) Analyze available information to identify possible
solutions: The first step in the recognition primed model is to
brainstorm possible solutions based on your available
information.
Step #2) Run scenarios through your head: For each possible
solution, run the scenario through your head and see how it plays
out.
Step #3) Make a decision: The recognition primed model
dictates that the solution that leads to the best possible outcome
when you visualize it in your mind is the solution that you
should choose.
THE RECOGNITION PRIMED MODEL

When to use this model

Like the intuitive decision-making model, the recognition
primed model works best in instances where:
• You don't have a lot of information available.
• You trust your instinct and experience.
• Time constraints are a factor.
With that said, using this model effectively does require a certain
degree of creativity and imagination since you will have to
visualize the outcome of each possible solution.
 Individual decision making
techniques
1. Linear Programming
2. Decision Tree
3. Simulation
 Decision-making process
Step 1: Identify the decision
In this step, the problem is thoroughly analysed. There are a couple of questions one should ask
when it comes to identifying the purpose of the decision.

What exactly is the problem?

Why the problem should be solved?

Who are the affected parties of the problem?

Does the problem have a deadline or a specific time-line?

Step 2: Gather relevant information

Collect some pertinent information before you make your decision: what information is
needed, the best sources of information, and how to get it. This step involves both
internal and external “work.” For the process of information gathering, tools such as
'Check Sheets' can be effectively used.
 Decision-making process

Step 3: Identify the alternatives

As you collect information, you will probably identify several possible paths of action, or
alternatives. You can also use your imagination and additional information to construct new
alternatives. In this step, you will list all possible and desirable alternatives.

Step 4: Weigh the evidence

Draw on your information and emotions to imagine what it would be like if you carried out each
of the alternatives to the end. Evaluate whether the need identified in Step 1 would be met or
resolved through the use of each alternative. As you go through this difficult internal process,
you’ll begin to favor certain alternatives: those that seem to have a higher potential for reaching
your goal. Finally, place the alternatives in a priority order, based upon your own value system.

Step 5: Choose among alternatives

Once you have weighed all the evidence, you are ready to select the alternative that seems to be
best one for you. You may even choose a combination of alternatives. Your choice in Step 5 may
very likely be the same or similar to the alternative you placed at the top of your list at the end of
Step 4.
 Decision-making process

Step 6: Take action

You’re now ready to take some positive action by beginning to implement the alternative you
chose in Step 5.

Step 7: Review your decision & its consequences

In this final step, consider the results of your decision and evaluate whether or not it has resolved
the need you identified in Step 1. If the decision has not met the identified need, you may want to
repeat certain steps of the process to make a new decision. For example, you might want to gather
more detailed or somewhat different information or explore additional alternatives.

Step 8: Evaluate the results

Evaluate the outcome of your decision. See whether is anything you should learn and
then correct in future decision making. This is one of the best practices that will
improve your decision-making skills.
 Conclusion:
When it comes to making decisions, one should always
weigh the positive and negative business consequences
and should favour the positive outcomes.

This avoids the possible losses to the organization and

keeps the company running with a sustained growth.
Sometimes, avoiding decision making seems easier;
especially, when you get into a lot of confrontation after
making the tough decision.

But, making the decision and accepting its

consequences is the only way to stay in control of your
corporate life and time.
 References
The 5 main decision-making models, Retrieved from:
https://www.range.co/blog/decision-making-models

Decision-Making Models: A Decision-Maker’s Guide to 4 Types, Retrieved

from:
https://www.indeed.com/career-advice/career- development/decision-
maker-model

Decision-making process, Retrieved from:

https://www.umassd.edu/fycm/decision-making/process/

Reading material/s from Prof. Girlie B. Miguel

Thank you!
Presented by:
Merinissa M. Agao