Decision Making

Decision Making

Decision making is the selection of a course of action from among alternatives.

Decision - Making Process

1.
2. 3.

4.

Premising Identifying alternatives Evaluating alternatives in terms of the goal sought Choosing an alternative, that is, making a decision

Limited, or Bounded, Rationality

Limitations of information, time, and certainty limit rationality, even though a manager tries earnestly to be completely rational. Satisficing is picking a course of action that is satisfactory or good enough under the circumstances.

Development of Alternatives and the Limiting Factor

A limiting factor is something that stands in the way of accomplishing a desired objective. The principle of the limiting factor: By recognizing and overcoming those factors that stand critically in the way of a goal, the best alternative course of action can be selected.

Quantitative and Qualitative Factors

Quantitative factors are factors that can be measured in numerical terms. Qualitative, or intangible, factors are those that are difficult to measure numerically.

Marginal Analysis

Marginal analysis is to compare the additional revenue and the additional cost arising from increasing output.

Cost-Effectiveness Analysis

Cost-effectiveness analysis seeks the best ratio of benefit and cost.

Selecting an Alternative: Three Approaches

When selecting from among alternatives, managers can use: 1. Experience. 2. Experimentation. 3. Research and analysis.

Bases for Selecting From Among Alternative Courses of Action

Programmed and Non-programmed Decisions

Programmed decisions are used for structured or routine work. Non-programmed decisions are used for unstructured, novel, and ill-defined situations of a nonrecurring nature.

Nature of Problems and Decision Making in the Organization

Creativity and Innovation

Creativity refers to the ability and power to develop new ideas. Innovation means the use of new ideas.

The Creative Process

The creative process is seldom simple and linear. It generally consists of four overlapping and interacting phases: 1. Unconscious scanning 2. Intuition 3. Insight 4. Logical formulation or verification

Rules for Brainstorming

1.
2. 3.

4.

No ideas are criticized. The more radical the ideas are, the better. The quantity of idea production is stressed. The improvement of ideas by others is encouraged.