THE NATURE OF

MANAGERIAL DECISION
MAKING

BY:
Nathaniel Navarro
 Definition:
 Decision making- the process by which managers
respond to opportunities and threats by analyzing options
and making determinations about specific organizational
goals and courses of action.

• Decision making in response to opportunities

• Decision making in response to threats
 Decision making: Programmed or non- Programmed

 Programmed decision making

- routine, virtually automatic decision making that
follows established rules or guidelines

Examples of establish rules.

An office manager.
6. When the storage shelves are three-quarters
empty, order more copy paper
7. When ordering paper, order enough to fill the
shelves
 Non programmed decision making
 Nonroutine decision making that occurs in response
to unusual, unpredictable opportunities and threats.

 Occurs when there are no ready-made decision

rules.

Question:
How do managers make decisions in the absences of
decision rules?
 Answer!?
- Search for information about
alternative course of action, then
- Reply on intuition and judgment to
choose wisely among alternatives
Model
 1.The classical model(
economic)
A perspective approach to decision
making based on the assumption
that the decision maker can identify
and evaluate all possible alternatives
and their consequences and
rationally choose the most
appropriate course of action
 Classical model of decision
making
List of alternative
courses of action/ Assumes all information about
consequences alternatives is available to
managers

Rank (least- most preferred) Assumes managers

according to personal pref. possess the mental facility
to process this information

Select alternatives that Assumes that managers know

lead to desired future what future courses of action is
consequences best for organization

Classical model Optimum decision

 2. Administrative model
(March and Simon)
 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.

 Three important concept:

1. Bounded rationality
2. Incomplete information
3. Satisficing
 Why Information incomplete?

Uncertainty and risk Ambiguous information

Incomplete
information

Time constraints and information costs

Thank you