Scribd
Upload
79 views22 pages

Ch:6 Decision-Making: The Essence of The Manager's Job

The document outlines the 8 step process for rational decision making that managers use: 1) Identifying the problem, 2) Identifying decision criteria, 3) Allocating weights to criteria, 4) Developing alternatives, 5) Analyzing alternatives, 6) Selecting an alternative, 7) Implementing the alternative, and 8) Evaluating the decision's effectiveness. It also discusses bounded rationality, where managers make rational decisions but are limited by their ability to process information, and the role of intuition in decision making based on experience and feelings. Finally, it identifies characteristics of an effective decision making process.

Uploaded by

Adriana Taylor
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
79 views22 pages

Ch:6 Decision-Making: The Essence of The Manager's Job

The document outlines the 8 step process for rational decision making that managers use: 1) Identifying the problem, 2) Identifying decision criteria, 3) Allocating weights to criteria, 4) Developing alternatives, 5) Analyzing alternatives, 6) Selecting an alternative, 7) Implementing the alternative, and 8) Evaluating the decision's effectiveness. It also discusses bounded rationality, where managers make rational decisions but are limited by their ability to process information, and the role of intuition in decision making based on experience and feelings. Finally, it identifies characteristics of an effective decision making process.

Uploaded by

Adriana Taylor
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 22

Ch:6 Decision-Making: The Essence of the Managers Job

61

What is decision?

A choice from two or more alternatives

62

Decisions, decisions . . .
Former General Motors CEO Alfred P. Sloan is reported to have said at a meeting of one of his top committees: Gentlemen, I take it we are all in complete agreement on the decision here. Everyone around the table nodded assent. Then, continued Mr. Sloan, I propose that we postpone further discussion of this matter until our next meeting to give ourselves time to develop disagreement and perhaps gain some understanding of what the decision is all about.
from Peter Druckers The Effective Executive, Harper & Row, 1966.

63

The Decision-Making Process

64

Step 1: Identifying the Problem


Problem
A discrepancy between an existing and desired state of affairs.

Characteristics of Problems
A problem becomes a problem when a manager becomes aware of it. There is pressure to solve the problem. The manager must have the authority, information, or resources needed to solve the problem.

65

Step 2: Identifying Decision Criteria


Decision criteria are factors that are important (relevant) to resolving the problem.
Costs that will be incurred (investments required)
Risks (chance of failure) Outcomes that are desired (growth of the firm)

Step 3: Allocating Weights to the Criteria


Decision criteria are not of equal importance:
Assigning a weight to each item places the items in the correct priority order of their importance in the decision making process.
66

Criterion
Memory and Storage Battery life

Weight
10 8

Carrying Weight
Warranty Display Quality

6
4 3

67

Step 4: Developing Alternatives


Identifying viable alternatives
Alternatives are listed (without evaluation) that can resolve the problem.

Step 5: Analyzing Alternatives


Determining each alternatives strengths and weaknesses

68

Step 6: Selecting an Alternative


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

Step 7: Implementing the Alternative


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

69

Step 8: Evaluating the Decisions 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?

610

Decisions in the Management Functions

611

Making Decisions(Manager as a decision maker)


Rational decision making
Managers make consistent, value-maximizing choices with specified constraints.
Assumptions are that decision makers:

Are perfectly rational, fully objective, and logical.


Have carefully defined the problem and identified all viable alternatives. Have a clear and specific goal

Will select the alternative that maximizes outcomes in the organizations interests rather than in their personal interests.

612

Assumptions of Rationality

613

Making Decisions (contd)


Bounded Rationality
Managers make decisions rationally, but are limited (bounded) by their ability to process information. Assumptions are that decision makers:

Will not seek out or have knowledge of all alternatives Will satisficechoose the first alternative encountered that satisfactorily solves the problemrather than maximize the outcome of their decision by considering all alternatives and choosing the best.

614

The Role of Intuition


Intuitive decision making
Making decisions on the basis of experience, feelings, and judgment.

615

What is Intuition?

Q: Is it good or bad that managers rely on intuition in making decisions?

616

Types of problems & decisions


1.Structured problems and programmed decisions

2.unstructured problems and Non-programmed decisions

617

Types of Programmed Decisions


Policy
A general guideline for making a decision about a structured problem. Ex: Accept all customer-returned merchandise.

Procedure
A series of interrelated steps that a manager can use to respond (applying a policy) to a structured problem. Ex: Follow all steps for completing merchandise return documentation.

Rule
An explicit statement that tells what a manager or employee can or cannot do. Ex: Managers must approve all refunds over $50.00.

618

Decision making conditions


Certainty Risk Uncertainty

619

Common Decision-Making Errors and Biases

Bias = a subjective point of view Bias distorts reality

620

Decision making styles


Directive style Analytic style Conceptual style Behavioral style

621

Characteristics of an Effective DecisionMaking Process


It focuses on what is important.

It is logical and consistent.


It acknowledges both subjective and objective thinking and blends analytical with intuitive thinking.

It requires only as much information and analysis as is necessary to resolve a particular dilemma.
It encourages and guides the gathering of relevant information and informed opinion. It is straightforward, reliable, easy to use, and flexible.

622

You might also like