MANAGERIAL PROBLEM

SOLVING & DECISION

MAKING
After completing the lesson,
students are expected to :
1. differentiate problem solving and decision
making;
2. describe steps that managers should take to make
the best decisions;
3. explain the traps that affect decision making and
lead managers to poor decisions;
4. describe the PDCA (plan, do, check, act) cycle of
group decision-making process;
5. discuss group decision-making styles and tools;
and
6. apply the problem-solving process to relevant
management issue.
 Definition of Terms:

PROBLEM SOLVING: DECISION MAKING:

The process of identifying The process of choosing
& defining the problem & among several alternatives;
determining what usually goal-oriented
happened to cause it &
what steps or possible
solutions will be
necessary to solve it.
Problems can be STRUCTURED or
UNSTRUCTURED

• STRUCTURED PROBLEMS
• Tend to be routine, recurring & involve
an almost automatic process.
• They have a high degree of certainty
regarding outcome.
• Managers have established rules or
guidelines to make decisions.
• Examples:
• ordering of lab supplies
• making a staff schedule
Problems can be STRUCTURED or
UNSTRUCTURED

• UNSTRUCTURED PROBLEMS
• are nonroutine, nonrecurring, have
uncertain outcome, & require new &
often addressed.
• There are no rules to follow.
• Examples:
• Investigate a new technology
• reorganizing a laboratory section
Steps of Problem-Solving Process

(1) problem identification/

recognition;
(2) problem analysis/investigation
(3) criteria establishment/definition
(4) alternative development &
decision making
(5) problem solution & feedback
Steps of Problem-Solving Process

1. Problem identification.
• Problem exists because there is a
discrepancy between what one would
like to happen & what is actually
happening.
• Comes from different sources:
patient/physician complaints or flags
in QC data
• Identify the problem before discussion
of solutions to avoid waste of resources
Steps of Problem-Solving Process

2. Problem analysis
• Analyzing the evidence more
thoroughly & looking for relevant data
that may explain why the problem
exists.
• Includes collecting data, interviewing
staff, gathering information
• Managers should be on guard to
ancillary issues that may have
contributed to the problem but were
not at first readily apparent.
Steps of Problem-Solving Process

3. Criteria establishment
• This determines the exact extent &
boundaries of the problem
• This involves establishing criteria on
which potential solutions will be
evaluated.
• There is clear specifications of:
- What the decision has to accomplish
- What minimum goals must be attained
- What objectives the decision has to reach
- What conditions it has to satisfy
Steps of Problem-Solving Process

4. Alternative development &

decision making
• Managers may solicit advice from
staff
• Manager at this time should avoid
the temptation to examine each
alternative in depth until a
number of solutions are gathered.
• Needs time to avoid settling on a
poor choice
Steps of Problem-Solving Process

5. Problem solution &

feedback
• Often a decision is made & not
implemented because it is most
time-consuming
• Feedback must test the validity &
effectiveness of the decision.
• Without feedback managers never
learn from experience & will make
the same mistake again
DECISION MAKING TRAPS

Anchoring trap
- Is an approach that many
negotiators use to influence
an individual’s perception by
giving information up front
that later affects the decision
that is made.
DECISION MAKING TRAPS

Status-quo trap
- Individuals instinctively stay
with what seems familiar
- Managers can avoid this trap by
first thinking about their
objectives & goals when
preparing to make a decision
DECISION MAKING TRAPS

Sunk-cost trap ( or the justify-past-

actions trap)
- Is the escalation of commitment because
of an individual’s past decisions, believe
they must continue in that direction,
although the reason is no longer valid.
- Managers can help themselves & their
subordinates to make better decisions by
setting an example of admitting mistakes
in their choices & changing course
DECISION MAKING TRAPS

Confirming-evidence trap
- A mental bias that leads managers to seek
out information to support their existing
point of view while avoiding information
that contradicts it.
- This bias affects where they go to collect
the data to reinforce a current perspective
& how they interpret the facts received.
- To avoid this trap, managers must have
devil’s advocate or build
counterarguments themselves.
DECISION MAKING TRAPS

Framing trap
- Deals with how you review your
choices or how you frame the
questions around the problem
- Because the first step in problem
solving is identifying & defining
the problem, this trap can be
dangerous.
DECISION MAKING TRAPS

Framing trap
- This trap can also bring managers
into other traps in the process.
- To avoid this trap, managers must
find ways to restate the problem or
situation presented to them in their
own way & take the opportunity to
see it from different sides to envision
various outcomes
DECISION MAKING TRAPS

The following 3 traps are based

on the ability of a manager to
estimate & forecast uncertain
events
DECISION MAKING TRAPS

Overconfidence trap
- Managers believe they are better at
making forecasts or estimates than
they actually are.
- Overly confident about their ability
to predict, most managers set too
narrow a range of possibilities
- The harder the task, the more
people are apt to make decisions
with confidence
DECISION MAKING TRAPS

Prudence trap
- Overly of cautious or prudent in
forecasting
- Adjusting estimates or forecasts to
be on the safe side
- Can be as dangerous as
overconfident
DECISION MAKING TRAPS

Recallability trap
- An association bias in terms of
“ it worked before”
GROUP DECISION MAKING

• The type of group involvement

should be determined by the quality
of decision needed, the amount of
information available, the degree of
group acceptance needed for success.
• The amount of subordinate/group
involvement in the decision-making
process is referred to as decision
participation.
FOUR DECISION MAKING
STYLES

Autocratic style
➢leader makes decision using the
information provided by the team at
that particular time. There is no
consultation with others.
Consultative style
➢leader obtains suggestions & idea from
group members and then makes
decision that may or may not reflect
the team members’ influence.
FOUR DECISION MAKING
STYLES
Joint decision
➢is also called democratic style.
➢Leader & members generate alternatives &
attempt to reach agreement (consensus) on a
solution.
➢The leader does not influence the group to
adopt a solution& is willing to accept &
implement any solution made.
Delegation
➢the leader turns over the problem to the
group and lets them generate & evaluate
alternatives to reach an agreement without
any leader involvement.
SHEWHART CYCLE

• As common causes of problems are

inherent in every process & are not
attributable to the worker, only a
data-driven, scientific approach that
involves participants in the process
can identify & eliminate these causes.
• Shewhart cycle includes 4 steps:
plan,do, check & act
DECISION MAKING
STRATEGIES & TOOLS

Benchmarking
✓To identify where
improvement will be most
beneficial using standards
set
DECISION MAKING
STRATEGIES & TOOLS

Brainstorming
✓A method for developing
creative solutions to
problems.
✓To generate, clarify, &
evaluate a sizeable list of
ideas, problems or issues.
DECISION MAKING
STRATEGIES & TOOLS

Scatter diagrams
✓a plot of one variable
versus another to see if
there is any relationship
between the two
DECISION MAKING
STRATEGIES & TOOLS

Scatter diagram
DECISION MAKING
STRATEGIES & TOOLS

Pareto charts
✓Help to identify major factors &
distinguish between the “vital
few” causes & potentially less
significant ones.
✓To rank order causes from most
to least significant
✓Often referred to as 80-20 rule
(80% of the problems can be
attributed to 20% of the causes)
DECISION MAKING
STRATEGIES & TOOLS
DECISION MAKING
STRATEGIES & TOOLS

PMI-plus/minus/interesting
✓stands for
“plus/minus/interesting”
✓uses a table to determine the
pros & cons
DECISION MAKING
STRATEGIES & TOOLS
PMI-plus/minus/interesting
DECISION MAKING
STRATEGIES & TOOLS
Decision trees
✓A graphic diagram consisting of nodes
& branches.
✓There are 2 nodes:
❖1st node is a rectangle that represents the
decision to be made. There are branches
emanating from decision nodes. These are
the alternative choices.
❖2nd node is a circle to represent “chance”
node. These chance alternatives have
some element of uncertainty
DECISION MAKING
STRATEGIES & TOOLS
Fish bone/honeycomb cause & effect
✓Systematically analyzes cause-and
effect relationships & identifies
potential root cause of a problem.
✓are used to display the relationships
between a given effect & its
potential causes.
DECISION MAKING
STRATEGIES & TOOLS
Fish bone/honeycomb cause & effect
DECISION MAKING
STRATEGIES & TOOLS
Cost-benefit analysis
✓Refers to the several approaches
for determining & comparing the
forward looking, incremental costs,
benefits, & values of solution
alternatives.
✓Determines whether the results of
a particular course of action are of
sufficient benefit to justify the cost
of taking the action.