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

The document outlines an 8-step decision-making process that managers use: 1) Identify the problem 2) Identify decision criteria 3) Assign weights to criteria 4) Develop alternatives 5) Analyze alternatives 6) Select an alternative 7) Implement the alternative 8) Evaluate the decision. It also discusses types of problems (structured vs. unstructured) and decisions (programmed vs. nonprogrammed) that managers face. Key aspects of effective decision-making include understanding cultural differences, knowing when further analysis isn't needed, and using a logical process focused on important information.

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Shafi Shah
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47 views23 pages

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

The document outlines an 8-step decision-making process that managers use: 1) Identify the problem 2) Identify decision criteria 3) Assign weights to criteria 4) Develop alternatives 5) Analyze alternatives 6) Select an alternative 7) Implement the alternative 8) Evaluate the decision. It also discusses types of problems (structured vs. unstructured) and decisions (programmed vs. nonprogrammed) that managers face. Key aspects of effective decision-making include understanding cultural differences, knowing when further analysis isn't needed, and using a logical process focused on important information.

Uploaded by

Shafi Shah
Copyright
© Attribution Non-Commercial (BY-NC)
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
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Decision-Making: The Essence of the Managers Job

Decision Making

A decision is a choice made from two or more alternatives. The decision-making process is defined as a set of different eight steps.

The Decision-Making Process

Step 1: Identifying the Problem


Problem
A situation where there is a gap between a desired state and an existing state.

To make decisions about problems, managers must:


be aware of the gap be motivated to reduce the gap have the knowledge, skills, abilities, and resources to fix the problem

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 likely to be encountered (chance of failure) Outcomes that are desired (growth of the firm)

Step 3: Allocating Weights to the Criteria


Assigning a weight to each item places the items in the correct priority order of their importance in the decision making process.

Criteria and Weights for Computer Replacement Decision

Criterion
Memory and Storage Battery life

Weight
10 8

Carrying Weight
Warranty Display Quality

6
4 3

Step 4: Developing Alternatives


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

Step 5: Analyzing Alternatives


Appraising each alternatives strengths and weaknesses
An alternatives appraisal is based on its ability to resolve the issues identified in steps 2 and 3.

Assessed Values of Laptop Computers Using Decision Criteria

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.

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?

Decisions in the Management Functions

Making Decisions
Rationality Managerial decision making is assumed to be Rational.
Managers make consistent, value-maximizing choices with specified constraints.

Assumptions are that decision makers:

A decision maker who was perfectly rational would be 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.

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.
Satisficing: Accepting solutions that are good enough

The Role of Intuition

Intuitive decision making


Making decisions on the basis of experience, feelings, and accumulated judgment.

Types of Problems and Decisions


1. Structured Problems

Involve goals that clear & straightforward

Are familiar (have occurred before)


Are easily and completely definedinformation about the problem is available and complete. e.g. A customers returning a purchase to a store, A student wanting to drop a class, A server in restaurant spills a drink on a customer's coat

Programmed Decision

A repetitive decision that can be handled by a routine approach.

Three possible programmed decisions


Policy
A general guideline for making a decision about a structured problem.

Procedure
A series of interrelated steps that a manager can use to respond (applying a policy) to a structured problem.

Rule
An explicit statement that limits what a manager or employee can or cannot do.

Policy, Procedure, and Rule Examples


Policy
The customer always comes first and should be satisfied. We promote from within, whenever possible.

Procedure
Follow all steps for giving promotion procedure etc

Rules
Rule about lateness and absenteeism permits supervisor to take decisions rapidly and fairly.

Problems and Decisions (contd)


2 Unstructured Problems
Problems that are new or unusual and for which information is ambiguous or incomplete.e.g Selection of an architect to design a new manufacturing plant, To invest or not in new Technology??

Nonprogrammed Decisions
Decisions that are unique and nonrecurring Decisions that generate unique responses.

Programmed versus Nonprogrammed Decisions

Decision-Making Conditions
Certainty
A situation in which a manager can make an accurate decision because the outcome of every alternative choice is known.

Risk
A situation in which the manager is able to estimate the likelihood (probability) of outcomes that result from the choice of particular alternatives.

Decision-Making Conditions

Uncertainty A situation in which a decision maker has neither certainty nor reasonable probability estimates available.

Decision Making for Todays World

Guidelines for making effective decisions: Understand cultural differences. Know when its time to call it quits.

Use an effective decision-making process.

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.

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