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 ˜
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 ³ the process of responding to a problem by searching for

and selecting a solution or course of action that will
create value for organisational stakeholders´.
 There are basically two kinds of decision that managers
called upon to make:

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Types of Problems and Decisions

 Structured problems
* Involved goals that clear.
*Are familiar(have occurred before)
*Are easily and completely defined- information
about the problem is available and complete.

 Programmed decision
*A repetitive decision the can be handled by a
routine approach.
Problems and Decisions ( cont¶d)
 Unstructured problems
* Problems that are new or unusual and for which
information is ambiguous or incomplete.
* Problems that will require custom-made
solutions.
 Non-programmed decisions
* Decision that are unique and nonrecurring.
* Decision that generate unique responses.
 Types of 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.
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   Structured Unstructured


   Lower level Upper level

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 Repetitive New,unusual

#  Readily available Ambiguous or

incomplete
   Short Relatively long
" 
"    Procedures,rules, and Judgment and creativity
policies
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rather facts and Select the best Follow up and

develop alternative. evaluate the chosen
alternatives. alternative.
 Decision Making Process
 Identify a problem and decision criteria
and allocating weights to the criteria.
 Developing, analyzing, and selecting an
alternative that can resolve the problem.
 Implemented and selected alternatives.
 Evaluating the decision¶s effectiveness.
 Step 1: Identifying the Problem
 Problem
* A discrepancy between an existing and desired
state of affairs.
 Characteristics of Problems
* A problem becomes a problem when a manager
becomes aware of it.
* there is a pressure to solve the problem.
* the manager must have the authority,
information, or resources needed to solve the
problem.
Step 2: Identify the Decision
Criteria
 Decision criteria are factors that are
important ( relevant) to resolving the
problem.
* Costs that will be incurred (investment
required).
* Risks likely to be encountered ( chance
of failure).
* Outcomes that are desired ( growth of the
firm).
 Step 3: Allocating Weights to
the Criteria
 Decision criteria are not of equal
importance:
* Assigning a weight to each item.
* Places the items in the correct priority
order of their importance in the decision
making process.
Step 4: Developing Alternatives
 Identifying viable alternatives.
* Alternatives are listed ( without evaluation) that
can resolve the problem.
Step 5 :Analyzing alternatives
 Appraising each alternative¶s strengths and
weaknesses
* An alternative¶s appraisal is based on its ability
to resolve the issues identified in step 2 and step
3.
Step 6: selecting the alternative

 Choosing the best alternative

* The alternative with the highest total
weight is chosen.
Step 7: Implementing the Alternative
 Putting the decision to and gaining
comment from those whose will carry out
the decision.
Step 8: Evaluating the decision¶s
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 resolve, what
went wrong?
 
 

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Identification of a problem &    '
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Identification of Decision Criteria   

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  , *- *
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Allocation of weights to criteria   
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Development of alternatives
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Analyzing of alternatives
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  *, *| 
Selection of alternatives

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Implementation of alternatives 6 '*  *, *| 

Evaluation of decision alternatives &()

The role of intuition

 Intuitive decision making

* Making decisions on the basis of
experience, feelings, and accumulated
judgment.
 - # " 7
Their past experiences

Ethical values
and culture Experience-based Feelings or emotions
Decisions
Values or ethics- Affect-Initiated
based Decisions  "  Decisions

Subconscious Cognitive-Based
mental processing Decisions

Data from Skills,knowledge, and

subconscious mind training
 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
* limited information prevents estimation of
outcome probabilities for alternatives associated
with the problem and may force managers or rely
on intuition, hunches, and ³gut feelings´.
'Maximax: The optimistic manager¶s choice to
maximize the maximum payoff.
# Maximin: The pessimistic manager¶s choice to
maximize the minimum payoff.
# Minimax: The manager¶s choice to minimize
maximum regret.
 Decision-making styles
 Dimensions of decision-making styles
* Ways of thinking
* Rational,orderly, and consistent.
* Intuitive, creative, and unique.
 Tolerance of ambiguity
*Low tolerance:require consistency and order.
*High tolerance: multiple thoughts simultaneously.
Decision-Making Styles (cont¶d)
 Types of Decision Makers
* Directive
# Use minimal information and consider few
alternatives.
* Analytic
# Make careful decisions in unique situations.
* Conceptual
# Maintain a broad outlook and consider many
alternatives in making decisions.
* Behavioral
# Avoid conflict by working well with others
and being receptive to suggestions.
 Common decision-Making
errors and Biases
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 Characteristics of an Effective
Decision-Making
 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.
6  
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6  |
 
 

 Improving the Flow of Knowledge

± The flow of constructive tacit knowledge
between coworkers is a priority.
± Knowing what you know, what you don¶t
know, and how to find what you know yields
better and more timely decisions.
 9 :;

 Knowledge Management (KM): A Tool for

Improving the Quality of Decisions
± Developing a system to improve the creation
and sharing of knowledge critical for decision
making.
± 
  ' 
 personal, intuitive, and
undocumented private information.
± $%
  ' 
 readily sharable public
information in verbal, textual, visual, or
numerical form.
Rational (Logical) Decision Model
Steps


   " 6identifying a signal that a
decision should be made.
Receipt of authoritative communications from
superiors.
Cases referred for decision by subordinates.
Cases originating from the manager.
  
 as routine, apply the
appropriate decision rule; as nonprogrammed,
begin comprehensive problem solving.
 '" as necessary.
#" |
 


   
Underlying personality dispositions toward the treatment of
information, selection of alternatives, and evaluation of
consequences.
  

 
people who approach a problem by structuring it in terms of
some formal method.
# "  
 
people who approach a problem with multiple methods in an
unstructured manner, using trail and error to find a solution.
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Models of decision making that take into account the

structural and political characteristics of an organization.
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where decisions are shaped by the organization¶s standard

operating procedures(SOPs).

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where decisions result from competition and bargaining

among the organization¶s interest groups and key leaders.

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where states that organizations are not rational and that
decisions are solutions that become attached to problems
for accidental reasons.
  
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 Decision Making
± The process of identifying and choosing alternative courses
of action to meet the demands of a situation.
 Trends in Decision Making
± The pace of decision making is accelerating: managers
report making á
  and having 
á to make
them.
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 9 :;

 Dealing with Complex Streams of Decisions

± "  
  to be satisfied by a decision.
± # 
 that often determine decision alternatives.
±  "
   about decision alternatives.
± ,
 
  of the effects of the choice of a
particular alternative.
± # 
" increases the number of
persons to be consulted before a decision is made.
 9 :;

± Pooled decision making increases the number of

persons playing a part in the decision process.
± Value judgments by differing participants in the
process create disagreement over whether a decision is
right or wrong, good or bad, and ethical or unethical.
± Unintended consequences occur because the
results of purposeful actions cannot always be predicted.
 
|
 

Classical model of management

Traditional description of management that focused on its
formal functions of planning, organizing, coordinating,
deciding and controlling.

Behavioral models
Descriptions of management based on behavioral
scientists observations of what managers actually do in
their jobs.
6"   

  

 Categorical interpretation- the problem should be
defined properly.
 Application of limiting factor- limiting factor should
be taken into account in order to analyze the external S &
W.
 Adequate information- more quantity of reliable
information leads to effective decision making.
 Considering other views- various views at the same
point are taken into account for quality decision.
 Timeliness- decision should be ,made at proper time to
meet the competitive advantages.
 
!" 

 

 Brainstorming ± idea generation for decision making.

 Nominal group technique (NrT)- problem outlined,
presentation of solution in written form, discussion over
written solutions, and final decision.
 Delphi technique- decision made on the basis of
questionnaire filled by the respondents.
 Consensus mapping- decision made on the basis of the
report presented by the representative of each group after