CHAPTER SEVEN

DECISION MAKING
Definition :-decision making is the process
of responding to a problem by searching
for and selecting a solution or course of
action that will create value for
organizational stakeholders´.
•decision making is an essence to problem
solving
•Is the selection of a course of action
amongst all possible alternatives
DEFINITION (CONT’D)
 Decision making is a key to effective
management
 It is a part of planning

 Every manager does require decision making

DECISION MAKING PROCESS

 Identify a problem
 identify decision criteria

 allocating weights to the criteria.

 Developing alternatives

 analyzing an alternative

 selecting an alternative that can resolve the

problem.
 Implemented an alternative

 Evaluating the decision’s effectiveness

STEPS IN THE RATIONAL APPROACH TO
DECISION-MAKING

Evaluating the Identifying

decision’s the Problem
effectiveness

8 1 Identify the
Implementing Decision
7 2
the Criteria
Alternative Allocating
6 3
selecting the
5 4 Weights to
alternative
the
Developi Criteria
ng
Analyzing
Alternati
alternative ves
ss
THE STEPS IN DECISION MAKING(CONT’D)
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.
THE STEPS IN DECISION MAKING(CONT’D)
 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).
THE STEPS IN DECISION MAKING(CONT’D
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.
THE STEPS IN DECISION
MAKING(CONT’D
 Step 4: Developing Alternatives
 Identifying viable alternatives.
 Alternatives are listed ( without
evaluation) that can resolve the
problem.
 Step 5 :Analyzing alternatives
 Appraising each alternatives strengths
and weaknesses
 An alternative’s appraisal is based on
its ability to resolve the issues
identified in step 2 and step3.
THE STEPS IN DECISION
MAKING(CONT’D
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.
THE STEPS IN DECISION MAKING(CONT’D
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?
 TYPES OF DECISIONS

There are basically two kinds of decision that managers called

upon to make:
programmed and non-programmed
Programmed decision
A repetitive decision the can be handled by a routine approach
•Used to solve structured problems
.
TYPES OF DECISIONS(CONT’D)
 Structured decisions for structured problems.
Involved goals that are clear.
Are familiar(have occurred before)

 Are easily and completely defined-

information about the problem is
available and complete.
TYPES OF DECISIONS(CONT’D)
 Non-programmed decisions
 Decision that are unique and nonrecurring.
 Decision that generate unique responses.
 Used to solve unstructured problems
 Unstructured problems
 Problems that are new or unusual and for
which in formation is ambiguous or
incomplete.
 Problems that will require custom-made
solutions.
 PROGRAMMED VS. NON-PROGRAMMED DECISIONS

Characteristics Programmed decisions Non-programmed

decisions

Type of problem Structured Unstructured

Managerial level Lower level Upper level

Frequency Repetitive New, unusual

Information Readily available Ambiguous or incomplete

Time frame for solution Short Relatively long

Solution relies on Procedures, rules, Judgment and creativity

and policies
THE END

Thank you !