Steps in the

Decision-Making
Process, Group
Decision Making,

McGraw-Hill/Irwin Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.
 The Nature of Managerial
Decision Making
Decision Making
 The process by which managers respond to
opportunities and threats that confront them by
analyzing options and making determinations
about specific
organizational
goals and courses
of action.

7-2
 The Nature of Managerial
Decision Making
Decisions in response Decisions in response
to opportunities to threats
 occurs when managers  events inside or
respond to ways to outside the
improve organizational organization are
performance to adversely affecting
benefit customers, organizational
employees, and other performance
stakeholder groups

7-3
 Decision Making
Programmed Decision
 Routine, virtually automatic process
Decisions have been made so many times in the
past that managers have developed rules or
guidelines to be applied when certain situations
inevitably occur

7-4
 Decision Making
Non-Programmed Decisions
 Nonroutine decision making that occurs in
response to unusual, unpredictable opportunities
and threats
Rules do not exist because the situation is
unexpected or uncertain and managers lack the
information they would need to develop rules to
cover it.

7-5
 Decision Making
Intuition Reasoned judgment
 feelings, beliefs, and  decisions that take
ideas that come time and effort to
readily to mind, make and result from
require little effort and careful information
information gathering gathering, generation
and result in on-the- of alternatives, and
spot decisions evaluation of
alternatives

7-6
 The Classical Model
Classical Model of Decision Making
 A prescriptive model of decision making that
assumes the decision maker can identify and
evaluate all possible alternatives and their
consequences and rationally choose the most
appropriate course of action.

7-7
 The Classical Model
Optimum decision
 The most appropriate decision in light of what
managers believe to be the most desirable future
consequences for their organization.

7-8
 The Classical Model of Decision
Making
Figure 7.1

7-9
 The Administrative Model
Administrative Model
 An approach to decision making that explains why
decision making is inherently uncertain and risky
and why managers usually make satisfactory
rather than optimum decisions.

7-10
 The Administrative Model
Bounded rationality Incomplete
 Cognitive limitations information
that constrain one’s  Because of risk and
ability to interpret, uncertainty, ambiguity,
process, and act on and time constraints
information.

7-11
 Why Information Is Incomplete
Figure 7.2

7-12
Causes of Incomplete Information
Risk
 The degree of probability that the possible
outcomes of a particular course of action will
occur.
Uncertainty
 the probabilities of alternative outcomes cannot
be determined and future outcomes are unknown

7-13
Causes of Incomplete Information
Ambiguous Figure 7.3

Information
 Information that can
be interpreted in
multiple and often
conflicting ways.

Young Woman or
Old Woman
7-14
 Causes of Incomplete Information
Time constraints and information costs
 managers have neither the time nor money to
search for all possible alternatives and evaluate
potential consequences
Satisficing
 Searching for and choosing an acceptable, or
satisfactory response to problems and
opportunities, rather than trying to make the best
decision

7-15
 Six Steps in Decision Making
Figure 7.4

7-16
 General Criteria for Evaluating
Possible Courses of Action
Figure 7.5

7-17
 Feedback Procedure
1. Compare what actually happened to what
was expected to happen as a result of the
decision
2. Explore why any expectations for the
decision were not met
3. Derive guidelines that will help in future
decision making

7-18
 Group Decision Making
Superior to individual making
Able to draw on combined skills of group
members
Improve ability to generate feasible
alternatives

7-19
 Group Decision Making
Potential Disadvantages:
1.Can take much longer than individuals to make
decisions
2.Can be difficult to get two or more managers to
agree because of different interests and
preferences

7-20
 Group Decision Making
Groupthink
 Pattern of faulty and biased decision making that
occurs in groups whose members strive for
agreement among themselves at the expense of
accurately assessing information relevant to a
decision

7-21