Professional Documents
Culture Documents
2 Decision Making
2 Decision Making
CHAPTER 2
DECISION-MAKING AS A
MANAGEMENT
RESPONSIBILITY
Decision-making is a responsibility of
the engineer manager. It is understandable
for managers to make wrong decisions at
times. The wise manager will correct them
as soon as they are identified. The bigger
issue is the manager who cannot or do not
want to make decisions. Delaney
concludes that this type of managers are
dangerous and “should be removed from
their position as soon as possible.”
Example
The production manager of a certain company
has received a written request from a section head
regarding the purchase of an air conditioning unit.
Almost simultaneously, another request from
another section was forwarded to him requiring the
purchase of a forklift. The production manager was
informed by his superior that he can only buy one of
the two requested items due to budgetary
constraints.
The production manager must now make a
decision. His choice, however, must be based on
sound arguments for he will be held responsible,
later on, if he had made the wrong choice.
WHAT IS DECISIONMAKING?
Decision-making may be defined as
“the process of identifying and choosing
alternative courses of action in a manner
appropriate to the demands of the
situation.”
Decision-making according to Nickels
and others, “is the heart of all the
management functions.”
THE DECISION-MAKING PROCESS
Rational decision-making, according to David
H. Holt, is a process involving the following
steps:
1. diagnose problem
2. analyze environment
3. articulate problem or opportunity
4. develop viable alternatives
5. evaluate alternatives
6. make a choice
7. implement decision
8. evaluate and adapt decision results
1. Diagnose Problem
An expert once said “identification of
the problem is tantamount to having
the problem half-solved.”
What is a problem? A problem exists
when there is a difference between an
actual situation and a desired
situation.
Example:
The management of a construction
company entered into a contract with
another party for the construction of a 25storey building on a certain site. The
actual
situation of the firm is that it has not yet
constructed the building. The desired
situation is the finished 25-storey building. In
this case, the actual situation is different
from the desired situation. The company,
therefore, has a problem and that is, the
construction of the 25-storey building.
2. Analyze the Environment
The objective of environmental analysis is the
identification of constraints, which may be
spelled out as either internal or external
limitations.
Example of internal limitations:
1. Limited funds available for the purchase of
equipment.
2. Limited training on the part of employees.
3. Ill-designed facilities.
Example of external limitations:
1. Patents are controlled by other organizations.
2. A very limited market for the company’s
products and services exists.
3. Strict enforcement of local zoning
regulations.
Example:
The president of a new chemical manufacturing company
made a decision to locate his factory in a place adjacent to
a thickly populated area. Construction of the building was
made with precision and was finished in a short period.
When the clearance for the commencement of operation
was sought from local authorities, this could not be given. It
turned out that the residents opposed the operation of the
firm and made sure that no clearance is given.
The president decided to relocate the factory but not after
much time and money has been lost. This is a clear example
of the cost associated with management disregarding the
environment when decisions are made. In this case, the
president did not consider what the residents could do.
Components of the Environment. The environment
consists of two major concerns:
1. internal and
2. external
The internal environment refers to organizational
activities within a firm that surrounds decision-making.
Shown in figure 2.1 are the important aspects of the
internal environment.
The external environment refers to variables that
are outside the organization and not typically within
the short-run control of top management. Figure 2.2
shows the forces comprising the external environment
of the firm.
THE ENGINEERING FIRM
Fig. 2.1
3. Articulate Problem or Opportunity
4. Develop Viable Alternatives
Oftentimes, problems may be solved by
any of the solutions offered. The best among
the alternative solutions must be considered
by management. This is made possible by
using a procedure with the following steps:
1. Prepare a list of alternative solutions.
2. Determine the viability of each solutions.
3. Revise the list by striking out those
which are not viable.
Example
An engineering firm has a problem of increasing its output
by 30%. This is the result of a new agreement between the
firm and one of its clients.
The list of solutions prepared by the engineering manager
shows the following alternative courses of action:
1. Improve the capacity of the firm by hiring more workers
and building additional facilities;
2. Secure the services of subcontractors;
3. Buy the needed additional output from another firm;
4. Stop serving some of the company’s customers; and
5. Delay servicing some clients.
The list was revised and only the first three were deemed
to be viable. The last two were deleted because of adverse
effects in the long-run profitability of the firm.
5. EVALUATE ALTERNATIVES
• Evaluation sheet
6. MAKE A CHOICE
• Choice-making refers to the process of
selecting among alternatives representing
potential solutions to a problem. At this
point , Webber advises that “… particular
effort should be made to identify all
significant consequences of each choice.”
7. IMPLEMENT DECISION