Decision Making
CHAPTER
9
Learning Objectives
In this chapter, you will:
Learn why decision making is considered a
fundamental part of management effectiveness.
Learn why decision making is an important
component of good management.
Know the difference between programmed and
non-programmed decisions.
Know the forms of decision making.
Know what is meant by satisficing and bounded
rationality.
9.1 The Nature of Decision
Making
Decision making is a conscious process of
making choices from one or more
alternatives for getting the desired outcome.
A decision is the alternative picked from a
number of alternatives.
9.1.1 Programmed Decisions
Know what kind of decision that needs to be
made and when, and who will be consulted,
etc.
This kind of programmed decision is
something that is routine and often repetitive.
9.1.2 Non-Programmed
Decisions
Requires a lot of thinking and consultation.
Occurs under unfamiliar situations.
9.2 General Decision-Making
Styles
How an individual perceives and reacts to
information reflects his decision-making
style.
Decision-making styles vary along two
dimensions: value orientation and tolerance
for ambiguity.
9.2.1 Value Orientation vs
Tolerance for Ambiguity
Value orientation refers to the extent a
person pays attention to either task or
people in making decisions.
Tolerance for ambiguity indicates the level
of structure a person needs in his or her life.
Some people dislike uncertainties or
ambiguities and these kind of people prefer
a very structured life.
9.2.2 Decision-Making Styles
Directive: Directive style people are action
oriented and they focus on facts.
Analytical: Analytical people tend to overanalyse a
situation and they always take into
consideration of more information
before they make their decisions.
Conceptual: The conceptual style takes a broad
perspective at solving problems.
Behavioural: They are very people oriented.
9.3 Rational Decision Making
The rational model, or known as the Classical
model by some, is based on economic
assumptions (Daft, 2006).
Managers are expected to make decisions
that are in the best interest of the
organizations.
9.3.1 Assumptions Underlying the
Rational Model
The decision maker operates to accomplish
common goals.
Decision maker strives for conditions of certainty.
All alternatives and potential results are
calculated.
Decision maker selects alternative that will
maximize the economic return of the organization.
The decision maker is rational and makes
decision that will maximize the attainment of
organizational goals.
9.3.2 Four Stages Associated With
Rational Decision Making
Stage 1
Identify the problem or opportunity
Stage 2
Think of alternative solutions
Stage 3
Evaluate alternatives and select solution
Stage 4
Implement and evaluate solution chosen
9.4 Non-Rational Decision
Making
The non-rational model, or generally known as
the administrative model, describes how
managers make decisions in difficult situations
where there is an abundance of uncertainties
and ambiguities.
Due to uncertainties and ambiguities, managers
are unable to make economically rational
decisions. Therefore, managers try to make the
best out of what is available.
9.4.1 The Administrative Model
Administrative model is based on two
concepts: bounded rationality and satisficing.
Bounded rationality as stated by Daft (2006)
means that people have limits, or boundaries, on
how rational they can be.
Making decisions which satisfice means that
managers have to choose the first solution that
satisfies minimal decision criteria.
9.4.2 Assumptions Underlying the
Non-Rational Model
Decision goals are often vague, conflicting and
lack consensus among managers.
Rational procedures are not always used. Even
when they are, they are confined to a simplistic
view of the problem.
Managers’ searches for alternatives are limited
due to constraints.
Most managers settle for satisficing rather than
maximizing solution.
9.5 Group Decision Making
Advantages
Greater pool of knowledge.
Different perspectives.
Intellectual stimulation.
Better understanding of decision rationale.
Deeper commitment to the decision.
9.5 Group Decision Making
(cont.)
Disadvantages
A few people may dominate.
Groupthink.
Satisficing.
Goal displacement.
Review Questions
1. Why is decision making considered a
fundamental part of management effectiveness?
2. Why decision making is an important component
of good management
3. What is the difference between programmed and
non-programmed decisions?
4. What are the forms of decision making?
5. What is meant by satisficing and bounded
rationality?
