DECISION

MAKING
GROUP 1
WHAT IS A DECISION ?
Decision
- a choice made from available alternatives.

- defined as “the process of identifying and choosing alternative

courses of action in a manner appropriate to the demands of the
situation.
BASIC DECISION
BASIC DECISION
1. Routine decision- decision that are to carry out the day-
to-day activities.
2. Group decision- are taken by a group of persons.
3. Individual decision- the decision is taken by one person.
4. Policy decision - is made at top levels. These decisions
are taken to determine the basic policies and goals of the
organization.
5. Operating decision- are taken to execute the policy
decisions. These decisions are taken at middle and lower
management levels and are related to routine activities of
business.
BASIC DECISION
6. Organizational decision- are made by the executive in
his/her capacity as manager in order to achieve the best
interest in organization. This decision can be delegated
other members in the organization.
7. Personal decision-is one you make on your own and it's
probably about something that concerns you
8. Major decision - the decision with regard to the quality of
the product, price of the product and developing a new
product
DECISION MAKING

- according to Nickel and the other, “is the heart

of all the management functions.”
DECICION-MAKING
AS A MANAGEMENT
RESPONSIBILITY
DECISION-MAKING AS A
MANAGEMENT RESPONSIBILITY
Decision-making is a responsibility of the engineer manager. It is
understandable for managers to make wrong decisions at time. The
wise manager will correct them as soon as they are identified. The
bigger issue is the manager who cannot or do not want to make
decision.

Management must strive to choose a decision option as correctly as

possible. Since they have that power, they are responsible for whatever
outcome their decisions bring. The higher the management level is, the
bigger and the more complicated decision-making becomes.
EXAMPLE
The production manager of a certain company has received
a written request from a section head regarding the purchase of
an air conditioning unit. Almost simultaneously, another
request from another section was forwarded to him requiring
the purchase of a forklift. The production manager was
informed by his superior that he can only buy one of the two
requested items due to budgetary constraints.
CHARACTERISTICS OF
DECISION MAKING
CHARACTERISTICS OF DECISION MAKING
1 GOAL-ORIENTED
PROCESS.
6
RESPONSIBILITIES AT
DIFFERENT LEVELS

2 AIMS AT ACHIEVING
CERTAIN SPECIFIED GOALS

7
INVOLVES DEEP AND
CAREFUL THINKING
3 BEST ALTERNATIVES SOURCES
OF ACTION IS CHOSEN

8
CAN BE BOTH POSITIVE
OR NEGATIVE
4 A CONTINUOUS
PROCESS

9
MADE FOR FURTHER
COURSE OF ACTION
5
CONSIDER IS A BOTH
SCIENCE AND ART
THE
DECISION-MAKING
PROCESS
THE DECISION-MAKING PROCESS

Develop
Diagnose Analyze Evaluate
viable
Problem Environment Alternatives
Alternatives

Evaluate and
Adapt Implement Make a
Decision Decision Choice
Results
 THE DECISION-MAKING PROCESS
Diagnose problem - if a manager wants to make an intelligent decision, his first
move must be to identify the problem. If the manager fails in this aspect, it is
almost impossible to succeed in the subsequent steps.

Analyze the environment - the environment where the organization is situated

plays a very significant role in the success or failure of such an organization. It is
therefore, very important that an analysis of the environment be undertaken.

Components of the Environment. The environment consists of two major

concerns: the internal and external
• Internal environment - refers to organizational activities within a firm that
surrounds decision-making.
• External environment - refers to variables that are outside the organization
and not typically within the short-run control of top management.
 THE DECISION-MAKING PROCESS
Develop Viable Alternatives - oftentimes, problems may be solved by any
of the solutions offered. The best among the alternative solutions must be
considered by management. This is made possible by using a procedure
with the following steps:
• Prepare a list of alternative solutions.
• Determine the viability of each solutions.
• Revise the list by striking out those which are not viable.

Evaluate Alternatives - after determining the viability of the alternatives

and a revised list has been made, an evaluation of the remaining
alternatives is necessary. This is important because the next step involves
making a choice.
 THE DECISION-MAKING PROCESS

Make a choice - after the alternatives have been evaluated,

the decision-maker must now be ready to make a choice. This
is the point where he must be convinced that all the previous
steps were correctly undertaken. To make the selection
process easier, the alternatives can be ranked from best to
worst on the basis of some factors like benefit, cost, or risk.

Implement Decision - refers to carrying out the decision so

that the objectives sought will be achieved. To make
implementation effective, a plan must be devised.
 THE DECISION-MAKING PROCESS

Evaluate and Adapt Decision Results - In implementing the decision, the

results expected may or may not happen. It is, therefore, important for the
manager to use control and feedback mechanisms to ensure results and to
provide information for future decisions.
• Control - refers to actions made to ensure that activities performed match
the desired activities or goals, that have been set.
• Feedback - refers to the process which requires checking at each stage of
the process to assure that the alternatives generated, the criteria used in
evaluation, and the solution selected for implementation are keeping with
the goals and objectives originally specified.
IMPORTANCE OF
DECISION MAKING
IMPORTANCE OF DECISION MAKING
1. Decision making is an important aspect of planning

2. Without decision nothing can be done

3. Performing various aspect of management function

like planning, organizing, etc.

4. It helps to set objectives, prepare plans of action,

introduce innovation, determine organizational
structure of the concern.
 FACTORS OF
DECISION MAKING
FACTORS OF DECISION MAKING

Certainty Risk
All the information Decision has clear-cut goal
the decision maker Good information is
needs is fully available
available Future outcomes
associated with each
alternative are subject to
chance
APPROACHES IN
SOLVING PROBLEMS
FACTORS OF DECISION MAKING
Uncertainty Ambiguity
Managers know which By far the most difficult
goals they wish to achieve decision situation
Information about Goals to be achieved or the
alternatives and future problem to be solved is
events is incomplete unclear
Managers may have to Alternatives are difficult to
come up with creative define
approaches to alternatives Information about
outcomes in unavailable
APPROACHES IN SOLVING PROBLEMS
Qualitative evaluation - refers to evaluation of
alternatives using intuition and subjective judgment.
Stevenson states that managers tend to use the
qualitative approach when:
• The problem is fairly simple.
• The problem is familiar.
• The costs involved are not great.
• Immediate decisions are needed.
Quantitative evaluation - refers to the alternatives using
any technique in a group classified as rational and analytical.
QUANTITATIVE MODELS FOR
DECISION-MAKING
Inventory models - consists of several types all designed to help the
engineer manager make decisions regarding inventory. They are as follows:
• Economic order quantity model - this one is used to calculate the
number of items that should be ordered at one time to minimize the total
yearly cost of placing orders and carrying the items in inventory.
• Production order quantity model - this is and economic order quantity
technique applied to production orders.
• Back order inventory model - this is an inventory model used for
planned shortages.
• Quantity discount model - an inventory model used to minimize the
total cost when quantity discounts are offered by suppliers.
QUANTITATIVE MODELS FOR
DECISION-MAKING
Queuing theory - is one that describes how to determine the number of
service units that will minimize both customer waiting time and cost of
service. The queuing theory is applicable to companies where waiting lines
are a common situations.

Network models - these are models where large complex tasks are broken
into smaller segments that can be managed independently. The tow most
prominent network models are:
• The program evaluation review technique - a technique which enables
engineer managers to schedule, monitor, and control large and complex
projects by employing three time estimates for each activity.
• The critical path method - this is a network technique using only one time
factor per activity that enables engineer managers to schedule, monitor, and
control large and complex projects.
QUANTITATIVE MODELS FOR
DECISION-MAKING
Forecasting - there are instances when engineer managers make decision
that will have implications in the future.

Regression analysis - the regression model is a forecasting method that

examines the association between two or more variables. It uses date from
previous period to predict future events. Regression analysis may be simple or
multiple depending on the number of independent variables presents. When
one independent variable is involved, it is called simple regression, when two
or more independent variables are involved, it us called multiple regression.

Simulation - is a model constructed to represent reality, on which conclusions

about real-life problems can be used. It is a highly sophisticated tool by means
of which the decision maker develops a mathematical model of the system
under consideration.
 QUANTITATIVE MODELS FOR
DECISION-MAKING
Linear programming - is a quantitative technique that is used to produce an
optimum solution within the bounds imposed by constraints upon the decision.
Linear programming is very useful as a decision making tool when supply and
demand limitations at plants, warehouse, or market areas are constraints upon
the system.

Sampling theory - is a quantitative technique where samples of populations are

statistically determined to be used for a number of processes, such as quality
control and marketing research. When data gathering is expensive, sampling
provides an alternative. Sampling, in effect, saves time and money.

Statistical Decision-theory - refers to the "rational way to conceptualize, analyze,

and solve problems in situations involving limited, or partial information about
the decision environment."
THANK
YOU