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Unit 7 - Managerial Decision Making

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Unit 7 - Managerial Decision Making

Uploaded by

Nathefa Layne
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Managerial

Decision Making
Managing Decision Making

Lecture Seven
Objectives
 At the end of this unit students should be able to:
 Explain the importance of decision making to the
organization.
 Differentiate between programmed and non-
programmed decisions and relate them to the various
degrees of certainty and uncertainty.
 Outline the characteristics of different decision-making
models. Relate the decision-making process to current
organizational issues.
 Distinguish between the personal decision-making
styles used by managers and the advantages and
disadvantages of each.
 Propose techniques for improving decision making in
today’s organizations.
Managerial Decision Making
Managers are decision makers, and all
organizations are impacted as a result of
decisions taken by managers.

Good decision making is a vital part of


good management because decisions
determine how the organization solves
problems, allocates resources and
accomplishes its goals.
Managerial Decision Making

Decision is a choice made


from available alternatives.
Managerial Decision Making

What is decision Making?


Managerial Decision Making
Decision Making is the process of identifying
problems and opportunities and resolving
them

Decision making involves effort both before


and after the actual choice

Example, The government imposing a ban on


single use plastic bags (Process)
Categories of Decisions
Management decisions typically fall into
one of two categories:

 Programmed decisions

 Non-programmed decision
Categories of Decisions
Programmed Decisions

Situations that have occurred often enough to enable


decision rules to be developed and applied in the future

Made in response to recurring organizational problems

Example?????
Categories of Decisions
Non-programmed Decisions –

in response to unique, poorly defined and largely


unstructured, and have important consequences to the
organization

Non-routine, high degree of uncertainty, decisions are


complex

Example??????
Managerial Decision Making
 One primary difference between programmed and
non-programmed decisions relates to the degree
of certainty or uncertainty

 Managers try to obtain information about decision


alternatives that will reduce decision uncertainty
Managerial Decision Making
Decisions can also be categorized in terms of knowledge
about the outcomes of alternatives as follows:

Certainty
Risk
Uncertainty
Ambiguity
Outcome State
Certainty
 All
the information the decision maker needs is fully available
 There is complete and accurate knowledge of the outcome

Risk
 Decision has clear cut goals, good information is available
 future outcomes associated with each alternative are subject

to chance
 Statistical analysis might be used to calculate the probabilities

of success or failure
Outcome State
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
 goals to be achieved or the problem to be solved is unclear
 alternatives are difficult to define

 information about outcomes is unavailable


Decision Making Models
The approach managers use to make decisions usually falls
into one of three types –

 Classical Model

 Administrative

 Political Model
Decision Making Models

 Thechoice of model depends on the manager’s


personal preference, whether the decision is
programmed or nonprogrammed, and the degree
of uncertainty associated with the decision.
Classical Model
 When problems are clear-cut and goals are agreed on
 Decision maker strives for condition of certainty and gathers complete
information
 Decision maker is rational and uses logic
 Criteria for evaluating alternatives are known. The decision maker
selects the alternative that will maximize economic returns to the
organization.
Classical Model

The classical model is most useful when


applied to programmed decisions and to
decisions characterized by certainty or
risk
Administrative Model
Descriptive, it describes how managers actually make
decisions in complex situations rather than how they
should make decision.

In difficult situations, such as those characterized by


nonprogrammed decisions, uncertainty, and ambiguity,
managers are unable to make economically rational
decisions even if they want to.
Administrative Model
 Decision goals often are vague, conflicting and lack
consensus among managers
 Rational procedures are not always used
 Managers’ search for alternatives are limited
 Managers settle for a satisficing rather than a maximizing
solution
 intuition, looks to past experience
Administrative Model
 Bounded rationality, means that people
have limits or boundaries on how rational
they can be.

 Satisficing means that decision maker


choose the first solution alternative that
satisfies minimal decision criteria
Political Model
 This model is useful for making non-programmed decisions
when conditions are uncertain, information is limited, and
there are manager conflicts about goals

 many managers within an organization are pursuing


different goals, and they have to talk with each other to
share information and reach an agreement.

 Managers often engage in coalition building for making


complex organizational decisions.
Managerial Decision Making Process

What are the six (6) steps in the


managerial decision making process?
Managerial Decision Making Process
1. Recognition of Decision Requirement
2. Diagnosis and Analysis of Causes
3. Development of Alternatives
4. Selection of Desired Alternatives
5. Implementation of Chosen Alternative
6. Evaluation & Feedback
Decision Styles

Directive

Analytical

Conceptual

Behavioral
Decision Styles

Directive Style
Used by people who prefer simple, clear-cut solution to
problem.

Managers who use this style often make decisions quickly


– do not like to deal with a lot of information
Decision Styles
Analytical Style
Consider complex solutions based on as much data as
they can gather

Individual carefully consider alternatives and often base


their decisions on objective rational data
Decision Styles

Conceptual Style
Consider many broad alternatives, rely on information from
both people and systems

More socially oriented and like to talk to others about the


problem and possible alternatives – like to solve problem
creatively
Decision Styles

Behavioral Style
Managers using this style like to talk to people one on one
and understand their feelings

Like to talk to people to understand their feelings about the


problem
Techniques for Improving Decision
Making

 Whatare some techniques that can


be used to improve decision
making?
Techniques for Improving Decision
Making

Brainstorming

Rigorous Debate

Avoid Groupthink – Groupthink refers to the


tendency of people in groups to suppress contrary
opinions.
Questions
1. ____ refers to the process of identifying problems and then
resolving them.

2. ____ decisions are associated with decision rules.

3. Uncertainty is by far the most difficult decision situation.


Answers
1. Decision making

2. Programmed decision

3. False
EL FIN!!

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