copyright © 2009 pearson education, inc. publishing as prentice hall 8-1


ObjectivesObjectivesObjectivesObjectives1.A fundamental understanding of the term decision

2.An understanding of each element of the decision situation

3.An ability to use the decision-making process

4.An appreciation for the various situations in which decisions are made

6.Insights into groups as decision makers


FUNDAMENTALS OF DECISIONSFUNDAMENTALS OF DECISIONSFUNDAMENTALS OF DECISIONSFUNDAMENTALS OF DECISIONS


Definition of a DecisionDefinition of a DecisionDefinition of a DecisionDefinition of a DecisionA Decision: is a choice made between two or more available

alternatives

Decision Making: is the process of choosing the best alternative for reaching objectives.

Managers make decisions in all managerial functions (in planning, organizing, influencing, & controlling).

Some decisions affect a large number of organization members, cost more, or have a long-term effect on the organization. But other decisions are not.


Types of DecisionsTypes of DecisionsTypes of DecisionsTypes of Decisions1. Programmed Decisions: are routine and repetitive, and the

organization typically develops specific ways to handle them.

2. Non-programmed Decisions: are one-shot decisions that are usually less structured than programmed decisions

Programmed decisions typically require less time and effort as compared to nonprogrammed decisions


Types of DecisionsTypes of DecisionsTypes of DecisionsTypes of Decisions


Types of DecisionsTypes of DecisionsTypes of DecisionsTypes of DecisionsSome decisions are neither programmed nor nonprogrammed, but

actually falling somewhere between the two.

(Check the Decision Programming Continuum in the next slide)


Types of DecisionsTypes of DecisionsTypes of DecisionsTypes of Decisions


The Responsibility for Making Organizational DecisionThe Responsibility for Making Organizational DecisionThe Responsibility for Making Organizational DecisionThe Responsibility for Making Organizational DecisionOrganizational decisions are so varied, that’s why Who will make

a decision in an org is based on two factors:

1. Scope of the decision: is the proportion of the total management system that the decision will affect

(the greater this proportion, the broader the scope of the decision is)

2. Level of management: are simply lower-level management, middle-level management, and upper-level management

(the broader the scope of a decision, the higher the level of the manager responsible for making that decision)


The Responsibility for Making Organizational DecisionThe Responsibility for Making Organizational DecisionThe Responsibility for Making Organizational DecisionThe Responsibility for Making Organizational Decision


The Responsibility for Making Organizational DecisionThe Responsibility for Making Organizational DecisionThe Responsibility for Making Organizational DecisionThe Responsibility for Making Organizational DecisionDecision makers can ask the advice of other managers or

subordinates, or use groups to make certain decisions.

Consensus: is an agreement on a decision by all the individuals involved in making that decision

It occurs after lengthy deliberation and discussion by members of the decision group, Who are they?

Sometimes the group is unable to arrive at a consensus/decision, because:Lack of technical skills, orPoor interpersonal relations(What should a manager do in this case?)

What are some of the advantages and disadvantages of Consensus?


Elements of the Decision SituationElements of the Decision SituationElements of the Decision SituationElements of the Decision SituationElements of the Decision Situation:

The Decision Makers (more details in the next slide)Goals to Be ServedRelevant Alternatives (what is a relevant alternative?)Ordering of Alternatives (how?)Choice of Alternatives


Elements of the Decision SituationElements of the Decision SituationElements of the Decision SituationElements of the Decision SituationThe Decision Makers

The individuals or groups that actually make the choice among alternatives

The four orientation of weak (bad) decision makers:1. Receptive orientation2. Exploitative orientation3. Hoarding orientation4. Marketing-oriented(what does each mean?)

The ideal decision maker are free of these four qualities, plus:Realize the organization and the decision maker potentialTry to use all their talents such as reason and sound judgment


The Rational Decision-Making ProcessThe Rational Decision-Making ProcessThe Rational Decision-Making ProcessThe Rational Decision-Making ProcessThe Rational Decision-Making Process: The steps the decision

maker takes to arrive at this choice

If managers use an organized and systematic decision making process, most probably they will make a sound (good) decision

This model is based on three assumptions (for optimal decisions):1. Human are economic beings with the objective of maximizing

satisfaction or return2. All alternatives and their possible consequences are known3. Decision makers have some priority system to guide them in

ranking each alternativeIn real life, one or more of these assumptions is often not met!

less optimal decisions


The Rational Decision-Making ProcessThe Rational Decision-Making ProcessThe Rational Decision-Making ProcessThe Rational Decision-Making Process

1. Identify an existing problem

2. List possible alternatives for solving the problem

3. Select the most beneficial of these alternatives

4. Implement the selected alternatives

5. Gather feedback to find out whether the implement alternative is

solving the identified problem.


The Rational Decision-Making ProcessThe Rational Decision-Making ProcessThe Rational Decision-Making ProcessThe Rational Decision-Making Process1. Identifying an Existing Problem

Decision making is a problem-solving process that eliminates barriers to organizational goal attainment

Problems are brought to the attention of managers by:

1. Orders issued by managers’ supervisors

2. Situations relayed to managers by their subordinates

3. The normal activity of the managers themselves


The Rational Decision-Making ProcessThe Rational Decision-Making ProcessThe Rational Decision-Making ProcessThe Rational Decision-Making Process2. Listing Alternative Solutions

Limitations on the number of problem-solving alternatives available:

1. Authority factors

2. Biological or human factors

3. Physical factors

4. Technological factors

5. Economic factors


The Rational Decision-Making ProcessThe Rational Decision-Making ProcessThe Rational Decision-Making ProcessThe Rational Decision-Making Process3. Selecting the Most Beneficial Alternative - After Evaluation

Alternatives evaluation steps:

1) List the potential effects of each alternative

2) Assign a probability factor to each of the potential effects

3) Compare each alternative’s expected effects and the respective probabilities of those effects

4. Implementing the Chosen Alternative

5. Gathering Problem-Related Feedback

Feedback determines implemented alternative’s effect on problem

If problem is not solved, seek out and implement another alternative


Decision-Making and IntuitionDecision-Making and IntuitionDecision-Making and IntuitionDecision-Making and IntuitionDecision–Making Conditions: Risks and Uncertainty

It is impossible to know/predict what is the future consequences of an implemented alternative will be, because organizations and their environments are constantly changing.

Risk: situations in which statistical probabilities can be attributed to alternative potential outcome.

Uncertainty: situations where the probability that a particular outcome will occur is not known in advance.

Managers dislike uncertainty and it discourages them from taking actions, more than risk does


Group Decision MakingGroup Decision MakingGroup Decision MakingGroup Decision MakingAdvantages and Disadvantages of Using Groups to Make

Decisions:Advantages:More and better decision alternatives (Why?)Members will support the implementation of the decision moreThey will perceive the decision as their own, so they will strive to

implement it successfully(What are other advantages?)

Disadvantages:Longer timeMore costCan be of lower quality if they are affected by Groupthink:

compromising the quality of a decision to maintain friendly relationships within a group


Group Decision MakingGroup Decision MakingGroup Decision MakingGroup Decision MakingProcesses for Making Group Decisions:

Brainstorming

Nominal Group Technique

Delphi Technique


Processes for Making Group DecisionsProcesses for Making Group DecisionsProcesses for Making Group DecisionsProcesses for Making Group DecisionsBrainstorming:A group decision-making process in which negative feedback on

any suggested alternative by any group member is forbidden until all members have presented alternatives that they perceive as valuable


Processes for Making Group DecisionsProcesses for Making Group DecisionsProcesses for Making Group DecisionsProcesses for Making Group Decisions


Processes for Making Group DecisionsProcesses for Making Group DecisionsProcesses for Making Group DecisionsProcesses for Making Group DecisionsNominal Group Technique:It is designed to ensure that each group member has equal

participation in making the group decision

Step 1—Each group member writes down individual ideas

Step 2—Each member presents individual ideas orally, and are written on a board

Step 3—After members present ideas, entire group discusses ideas simultaneously, unstructured and spontaneous

Step 4—When discussion completed, a secret ballot is taken. The idea with most votes is adopted and implemented


Processes for Making Group DecisionsProcesses for Making Group DecisionsProcesses for Making Group DecisionsProcesses for Making Group DecisionsDelphi Technique:Involves circulating questionnaires on a specific problem among

group members, sharing the questionnaire results with them, and then continuing to recirculate and refine individual responses until a consensus regarding the problem is reached.

Group members don’t need to meet face to face


Processes for Making Group DecisionsProcesses for Making Group DecisionsProcesses for Making Group DecisionsProcesses for Making Group DecisionsDelphi Technique:

Step 1—A problem is identified

Step 2—Group members are asked to offer solutions to the problem anonymously (secretly) by answering a questionnaire

Step 3—Responses of all group members are compiled and sent out

Step 4—Members are asked to generate a new individual solution

Step 5 – Steps 3 and 4 are repeated until a consensus is reached


Evaluating Group Decision-Making ProcessesEvaluating Group Decision-Making ProcessesEvaluating Group Decision-Making ProcessesEvaluating Group Decision-Making Processes

Brainstorming Nominal Group Technique Delphi Technique

Advantages •Encourage expression and contribution from all members•Provide many valuable alternatives

•No fear of recrimination •Useful for too geographically separated group members ,or busy to meet face to face

Disadvantages •Wasting time •No way to know why they voted that way

•Unable to ask questions of one another

copyright © 2009 pearson education, inc. publishing as prentice hall 8-1

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