4- managing decision making

MANAGING DECISION MAKING

LECTURE 4 Lecturer: Sara Aslam

Fall 2011

Kinnaird College for Women

THE NATURE OF DECISION MAKING

Decision Making

The act of choosing one alternative from among a set of

alternatives.

Managers make decisions about both

problems and opportunities.

Principles of Management

Instructor: Sara Aslam

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TYPES OF DECISIONS

Programmed Decisions

A decision that is a fairly structured decision or recurs

with some frequency or both.

Example: Starting your car in the morning.

Non-programmed decisions

A decision that is relatively unstructured

and occurs much less often than a

programmed decision.

Example: Choosing a vacation destination.

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DECISION-MAKING CONDITIONS

Level of ambiguity and chances of making a bad decision

Lower Higher Moderate

Certainty Uncertainty Risk

The decision

maker faces

conditions of...

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CERTAIN, RISK, & CERTAINTY

Just as there are different kinds of decisions, there are also

different conditions under which decisions are made

Decision Making under Certainty:

when the decision maker knows with reasonable certainty what

the alternatives are and what conditions are associated with

each alternative, a state of certainty exists. E.g. McD’s and

suppliers

Decision Making under Risk:

A more common decision making condition is a state of risk.

Under this, the availability of each alternative and its potential

pay-offs and costs are all associated with probability estimates. (example: union relations that might cause a lot of cost if wrongly

estimated)

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CERTAIN, RISK, & CERTAINTY

Decision Making under uncertainty:

A condition in which the decision maker does not know all the

alternatives, the risks associated with each, or the

consequences each alternative is likely to have.

Managers must rely on their past experiences in such complex

situations.

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DISTINGUISHING BETWEEN

DECISION MAKING CONDITIONS

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RATIONAL PERSPECTIVES ON

DECISION MAKING

The Classical Model of Decision Making:

Is a perspective approach that tells managers how they

should make decisions. It assumes that managers are logical

and rational and that they make decisions that are in the best

interests of the organisation.

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RATIONAL PERSPECTIVES ON

DECISION MAKING (CONT’D)

The Classical Model of Decision Making

When faced with a

decision situation,

managers should . . .

. . . and end up with

a decision that best

serves the interests

of the organization.

• obtain complete

and perfect information

• eliminate uncertainty

• evaluate everything

rationally and logically

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EVALUATING ALTERNATIVES IN THE

DECISION-MAKING PROCESS

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Is the alternative

feasible?

Eliminate from

consideration

Is the alternative

satisfactory?

Are the alternative’s

consequences

affordable?

Retain for further

consideration Yes Yes Yes

Eliminate from

consideration

Eliminate from

consideration

No No No



STEPS IN THE RATIONAL

DECISION-MAKING PROCESS

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Step Detail Example

1. Recognizing and defining the decision situation

Some stimulus indicates that a decision must be made. The stimulus may be positive or negative.

A plant manager sees that employee turnover has increased by 5 percent.

2. Identifying alterna-tives

Both obvious and creative alternatives are desired. In general, the more important the decision, the more alternatives should be considered.

The plant manager can increase wages, increase benefits, or change hiring standards.

3. Evaluating alterna-tives

Each alternative is evalu-ated to determine its feasibility, its satisfactoriness, and its consequences.

Increasing benefits may not be feasible. Increasing wages and changing hiring standards may satisfy all conditions.



STEPS IN THE RATIONAL

DECISION-MAKING PROCESS (CONT’D)

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Step Detail Example

4. Selecting the best alternative

Consider all situational factors, and choose the alternative that best fits the manager’s situation.

Changing hiring standards will take an extended period of time to cut turnover, so increase wages.

5. Implementing the chosen alternative

The chosen alternative is implemented into the organizational system.

The plant manager may need permission from corporate headquarters. The human resource department establishes a new wage structure.

6. Following up and evaluating the results

At some time in the future, the manager should ascertain the extent to which the alternative chosen in step 4 and implemented in step 5 has worked.

The plant manager notes that, six months later, turnover has dropped to its previous level.



Thank You!

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4- managing decision making

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