CHAPTER 9: MANAGERIAL DECISION MAKING

*1) When to make decision?

- A decision is a choice made from available alternatives
- Decision making is the process of identifying problems and
opportunities and then resolving them
*2) How many types of decisions?
There are 2 types of decision:
- Programmed decision:
+ Recurring problems
+ Apply rule
- Nonprogrammed decision:
+ Unique situations
+ Poorly defined
+ Unstructured
+ Important consequences
*3) What are the 4 positions on the scale according to the
availability of information and the possibility of failure?
- Certainty: means that all the information the decision maker
needs is fully available. However, few decisions are certain in the
real world. Most contain risk or uncertainty
- Risk: means that a decision has clear-cut goals and that good
information is available, but the future outcomes associated with
each alternative are subject to some chance of loss or failure
- Uncertainty: means that managers know which goals they
wish to achieve, but information about alternatives and future
events is incomplete. Managers may have to make assumptions
from which to forge the decision, even though it will be wrong if
the assumptions are incorrect
- Ambiguity: means that the goals to be achieved or the
problem to be solved is unclear, alternatives are difficult to define,
and information about outcomes is unavailable. A highly
ambiguous situation can create what is sometimes called a
wicked decision problem. Wicked decisions are associated with

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conflicts over goals and decision alternatives, rapidly changing
circumstances, fuzzy information, unclear links among decision
elements, and the inability to evaluate whether a proposed
solution will work. For wicked problems, there often is no “right”
answer
*4) What are the 3 models of decision-making?
- Classical model:
+ Has clear-cut problems and goals
+ The decision maker strives for conditions of certainty
+ The decision maker selects the alternative that will maximize
profit
+ The decision maker is rational and uses logic
+ The classical model is considered to be normative, which
means that it defines how a decision maker should make
decisions
+ The classical model is most useful when applied to
programmed decisions and to decisions characterized by
certainty or risk
- Administrative model:
+ Is based on the work of Herbert A. Simon
+ Is considered to be descriptive
+ Simon proposed 2 concepts that were instrumental in
shaping the administrative model: bounded rationality and
satisficing
+ Bounded rationality means that people have limits, or
boundaries, on how rational they can be
+ Satisficing means that decision makers choose the first
solution alternative that satisfies minimal decision criteria
+ Has vague problems and goals
+ The decision maker strives for conditions of uncertainty
+ Managers’ searches for alternatives are limited because of
human, information, and resource constraints
+ Most managers settle for a satisficing rather than a
maximizing solution

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 + Another aspect of administrative decision making is intuition.
Intuition represents a quick apprehension of a decision situation
based on past experience but without conscious thought. Intuitive
decision making is not arbitrary or irrational because it is based
on years of practice and hands-on experience
+ A new trend in decision making is referred to as
quasirationality, which basically means combining intuitive and
analytical thought
- Political model:
+ Is useful for making nonprogrammed decisions
+ Managers often engage in coalition building for making
complex organizational decisions. A coalition is an informal
alliance among managers who support a specific goal. Coalition
building is the process of forming alliances among managers
+ Decisions are complex and involve many people, information
is often ambiguous, and disagreement and conflict over problems
and solutions are normal
+ Is pluralistic and has conflicting goals
+ The decision maker strives for conditions of uncertainty or
ambiguity
+ Decisions are the result of bargaining and discussion among
coalition members
*5) What are the steps of decision-making?
1. Recognition of Decision Requirement: identify problem or
opportunity
2. Diagnosis and Analysis of Causes: analyze underlying
casual factors
3. Development of Alternatives: define feasible alternatives
4. Selection of Desired Alternative: alternative with most
desirable outcome
5. Implementation of Chosen Alternative: use of marginal
administrative, and persuasive abilities to execute chosen
alternative
6. Evaluation and Feedback: gather information about
effectiveness
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*6) How many personal decision styles?
There are 4 decision styles:
- Directive style: is used by people who prefer simple, clear-cut
solutions to problems
- Analytical style: is used by managers who prefer complex
solution based on a lot of data
- Conceptual style: is used by people who like a broad amount
of information. However, they are more socially oriented than
those with an analytical style and like to talk to others about the
problem and possible alternatives for solving it
- Behavioral style: is often the style adopted by managers
having a deep concern for others as individuals