Managers as

Decision
Makers

Copyright
Copyright © 2014 Pearson©Education,
2012 Pearson Education,
Inc. publishing as Prentice Hall 6-1
Inc. Publishing as Prentice Hall
Describe the eight steps in the decision-making
process.
Explain the four ways managers make
decisions.
Classify decisions and decision-making
conditions.
Describe different decision-making styles and
discuss how biases affect decision making.
Identify effective decision-making techniques.

Copyright
Copyright © 2014 © Education,
Pearson 2012 PearsonInc.Education,
publishingInc.
as Prentice Hall 6-2
Publishing as Prentice Hall
 The Decision-Making Process

• Decision -
making a
choice from two
or more
alternatives

Copyright
Copyright © 2014 Pearson©Education,
2012 Pearson Education,
Inc. publishing as Prentice Hall 6-3
Inc. Publishing as Prentice Hall
 Exhibit 6-1
Decision-Making Process

Copyright
Copyright © 2014 Pearson©Education,
2012 Pearson Education,
Inc. publishing as Prentice Hall 6-4
Inc. Publishing as Prentice Hall
 The Decision-Making Process (cont.)

• Step 1: Identify a Problem

– Problem - an obstacle that makes it difficult to
achieve a desired goal or purpose.
– Every decision starts with a problem, a
discrepancy between an existing and a
desired condition
– Example - Amanda is a sales manager
whose reps need new laptops

Copyright
Copyright © 2014 Pearson©Education,
2012 Pearson Education,
Inc. publishing as Prentice Hall 6-5
Inc. Publishing as Prentice Hall
 The Decision-Making Process (cont.)

• Step 2: Identify Decision Criteria

– Decision criteria are factors that are
important (relevant) to resolving the
problem
– Example - Amanda decides that memory
and storage capabilities, display quality,
battery life, warranty, and carrying weight
are the relevant criteria in her decision.

Copyright
Copyright © 2014 Pearson©Education,
2012 Pearson Education,
Inc. publishing as Prentice Hall 6-6
Inc. Publishing as Prentice Hall
 The Decision-Making Process (cont.)

• Step 3: Allocate Weights to the Criteria

– If the relevant criteria aren’t equally
important, the decision maker must
weight the items in order to give them
the correct priority in the decision.
– The weighted criteria for our example
are shown in Exhibit 6-2.

Copyright
Copyright © 2014 Pearson©Education,
2012 Pearson Education,
Inc. publishing as Prentice Hall 6-7
Inc. Publishing as Prentice Hall
 Exhibit 6-2
Important Decision Criteria

Copyright
Copyright © 2014 Pearson©Education,
2012 Pearson Education,
Inc. publishing as Prentice Hall 6-8
Inc. Publishing as Prentice Hall
 The Decision-Making Process (cont.)

• Step 4: Develop Alternatives

– List viable alternatives that could resolve
the problem
– Example - Amanda, identifies eight
laptops as possible choices. (See
Exhibit 6-3.)

Copyright
Copyright © 2014 Pearson©Education,
2012 Pearson Education,
Inc. publishing as Prentice Hall 6-9
Inc. Publishing as Prentice Hall
 Exhibit 6-3
Possible Alternatives

Copyright
Copyright © 2014 Pearson©Education,
2012 Pearson Education,
Inc. publishing as Prentice Hall 6-10
Inc. Publishing as Prentice Hall
 The Decision-Making Process (cont.)

• Step 5: Analyze Alternatives

– Appraising each alternative’s strengths
and weaknesses
– An alternative’s appraisal is based on its
ability to resolve the issues related to
the criteria and criteria weight.

Copyright
Copyright © 2014 Pearson©Education,
2012 Pearson Education,
Inc. publishing as Prentice Hall 6-11
Inc. Publishing as Prentice Hall
 The Decision-Making Process (cont.)

• Step 6: Select an Alternative

• Choosing the best alternative
– The alternative with the highest total weight is
chosen.

Copyright
Copyright © 2014 Pearson©Education,
2012 Pearson Education,
Inc. publishing as Prentice Hall 6-12
Inc. Publishing as Prentice Hall
 Exhibit 6-4
Evaluation of Alternatives

Copyright
Copyright © 2014 Pearson©Education,
2012 Pearson Education,
Inc. publishing as Prentice Hall 6-13
Inc. Publishing as Prentice Hall
 The Decision-Making Process (cont.)

• Step 7: Implement the Alternative

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

Copyright
Copyright © 2014 Pearson©Education,
2012 Pearson Education,
Inc. publishing as Prentice Hall 6-14
Inc. Publishing as Prentice Hall
 The Decision-Making Process (cont.)

• Step 8: Evaluate Decision 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?

Copyright
Copyright © 2014 Pearson©Education,
2012 Pearson Education,
Inc. publishing as Prentice Hall 6-15
Inc. Publishing as Prentice Hall
The Manager as Decision Maker
• Decision making is particularly important in a managers job.
• Decision making is part of all four managerial functions.
Managers should make
decisions rationally

•a rational decision maker should be

fully objective and rational

•type of decision-making in which

choices are objective and logical
Managerial decision making will be rational if these conditions are met

Single, well-
defined goal
is to be achieved
All alternatives Problem is
and clear and
consequences unambiguous
are known
Rational
Decision Final choice
Preferences Making will maximize
are clear
payoff

Preferences
No time or cost
are constant
constraints exist
and stable
Making Decisions: The Role of Intuition

• Intuitive decision-
making
– Making decisions on
the basis of
experience, feelings,
and accumulated
judgment.

Copyright
Copyright © 2014 Pearson©Education,
2012 Pearson Education,
Inc. publishing as Prentice Hall 6-19
Inc. Publishing as Prentice Hall
 Exhibit 6-6
What Is Intuition?

Copyright
Copyright © 2014 Pearson©Education,
2012 Pearson Education,
Inc. publishing as Prentice Hall 6-20
Inc. Publishing as Prentice Hall
Structured Problems and Programmed
Decisions

• Structured Problems - straightforward,

familiar, and easily defined problems.
• Programmed decision – a repetitive
decision that can be handled by a routine
approach

Copyright
Copyright © 2014 Pearson©Education,
2012 Pearson Education,
Inc. publishing as Prentice Hall 6-21
Inc. Publishing as Prentice Hall
 Structured Problems and Programmed
Decisions (cont.)

• Procedure - a series of sequential steps used to

respond to a well-structured problem
• Rule - an explicit statement that tells managers
what can or cannot be done
• Policy - a guideline for making decisions

Copyright
Copyright © 2014 Pearson©Education,
2012 Pearson Education,
Inc. publishing as Prentice Hall 6-22
Inc. Publishing as Prentice Hall
 Unstructured Problems and
Nonprogrammed Decisions

• Unstructured Problems - problems that

are new or unusual and for which
information is ambiguous or incomplete.
• Nonprogrammed decisions - unique and
nonrecurring and involve custom made
solutions.

Copyright
Copyright © 2014 Pearson©Education,
2012 Pearson Education,
Inc. publishing as Prentice Hall 6-23
Inc. Publishing as Prentice Hall
 Exhibit 6-7
Programmed Versus
Nonprogrammed Decisions

Copyright
Copyright © 2014 Pearson©Education,
2012 Pearson Education,
Inc. publishing as Prentice Hall 6-24
Inc. Publishing as Prentice Hall
 Decision-Making Styles

• Linear Thinking Style - a person’s tendency to

use external data/facts; the habit of processing
information through rational, logical thinking.
• Nonlinear Thinking Style - a person’s
preference for internal sources of information; a
method of processing this information with
internal insights, feelings, and hunches.

Copyright
Copyright © 2014 Pearson©Education,
2012 Pearson Education,
Inc. publishing as Prentice Hall 6-25
Inc. Publishing as Prentice Hall
 Copyright
Copyright © 2014 © Education,
Pearson 2012 PearsonInc.Education,
publishingInc.
as Prentice Hall 6-26
Publishing as Prentice Hall