Contemporary Management Q&A Chapter 2: Decision Making

1. What is “Decision Making”? It is the process of choosing among alternatives.

2. What is the decision-making process?
I. Identify the problem {The problem is the difference between existing & desired condition}
II. Identify decision criteria {What is important & relevant to resolving the problem}
III. Allocate weights to the criteria {in case not all criteria are equally important}
IV. Develop alternatives {alternatives are only listed, not evaluated yet}
V. Analyzing alternatives {Use criteria in number 2}
VI. Select an alternative {Highest total in last step}
VII. Implement the alternative
VIII. Evaluate effectiveness
3. What are the types of “Decision Makings Processes”?

Type Process Problem info Solution alternatives Result

& Possible outcomes
Rational Objective & logical Clear & available Clear and Well- Maximize
(linear With specific goal known
thinking
style)
Bounded Logically but limited by manager ability to Satisfice
Rationality process information, or by org. culture,
internal politics, escalation of commitment
Intuitive • Experience-based Satisfice
decision- • Affect-initiated
making • Cognitive based
(non-linear • Subconscious mental processing
thinking • Values & ethics based
style)
4. What are the types of “Problems” and their proposed “Decisions”?

Characteristics Structured Problems Unstructured Problems

Decision Programmed Non-programmed
Managerial level Lower levels Higher levels
Frequency Repetitive / routine New / unusual
Information Readily available Ambiguous or incomplete
Goals Clear & Specific Vague
Solution period Short Relatively longer
Solution relies on Procedures, rules & policies Judgment & creativity
5. Define procedure, rule & policy?

Definition
Procedure A procedure is a series of sequential steps in response to a structured problem.
Rule What can or can not be done.
Policy General parameters and guidelines for decision making
6. Decision making conditions?
I. Certainty (100% “A” leads to “B”)
II. Risk {have info enough to estimate} (30% to 40% “A” leads to “B”)
III. Uncertainty {Due to limited info} (“A” may or may not leads to “B”)
7. Optimistic manager: Maximax; Maximize the maximum possible payoff
8. Pessimistic manager: Maximin; Maximize the minimum possible payoff

Prepared by: Muhammed Afify