Lesson 2

DECISION-MAKING
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.”
 The definition indicates that the engineer manager must adapt
a certain procedure designed to determine the best option
available to solve certain problems.
 Decisions are made at various management levels and at
various management functions.
MANAGERIAL DECISION MAKING

DECISION MAKING
The process by which managers respond to opportunities and threats by
analyzing options and making decisions about goals and course of action.

DECISION IN RESPONSE TO OPPORTUNITIES

Managers respond to ways to improve organization performance.

DECISION IN RESPONSE TO THREATS

OCCURS WHEN MANAGERS ARE IMPACTED BY ADVERSE EVENTS
TO THE ORGANIZATION.
MANAGERIAL DECISION-MAKING
• Managers of all kinds and types, including the engineer
manager, are primarily tasked to provide leadership in the
quest for the attainment of the organization’s objectives.
• If become effective, the manager must learn the intricacies of
decision-making.
• Many times, the manager will be confronted by situations
where he will have to choose from among various options.
• Whatever the manager’s choice, it will have effects, immediate
or otherwise, in the operations of this organization.
MANAGERIAL DECISION-MAKING
• The engineer manager’s decision-making skills will be very
crucial to his success as a professional.
• A major blunder in decision-making may be sufficient to
cause the destruction of any organization.
• Good decisions on the other hand, will provide the right
environment for continuous growth and success of any
organized effort.
 TYPES OF DECISION MAKING
PROGRAMMED NON-PROGRAMMED
DECISIONS DECISIONS

01 PROGRAMMED

⮚routine, almost automatic ⮚ unusual situations that have not

process. been often addressed
⮚Managers have made decision NON- ⮚ No rules to follow since the
many times before PROGRAMMED 02 decision is new.
⮚There are rules or guidelines to ⮚ These decisions are made
follow. based on information, and a
manager’s intuition and
Example: Deciding to reorder judgment.
project materials
Example: Should the firm
invest in a new technology?
THE CLASSICAL MODEL

CLASSICAL MODEL OF
LIST ALTERNATIVE & Assumes all
DECISION MAKING CONSEQUENCES information is
a prescriptive model that tells how the available to manager
decision should be made

⮚Assumes managers have access to all RANK EACH Assumes manager

the information needed to reach a ALTERNATIVE FROM can process
LOW TO HIGN information
decision.
⮚Managers can then make the optimum
decision by easily ranking their own Assumes manager
preferences among alternatives.
knows the best future
⮚Unfortunately, managers often do not SELECT BEST
have all (or even most) required course of the
ALTERNATIVE
information. organization
THE ADMINISTRATIVE MODEL
WHY INFORMATION IS INCOMPLETE?
ADMINISTRATIVE MODEL
OF DECISION MAKING
challenges the classical assumptions Uncertainty & Ambiguous
that managers have and process all the Risk Information
information.
⮚As a result, decision making is risky. INCOMPLETE
INFORMATION

BOUNDED RATIONALITY
there is a large number of alternatives
and information is vast so that managers
cannot consider it all.
Time Constraints
⮚Decisions are limited by people’s & Information
cognitive abilities.
Cost
THE 8 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
 DECISION MAKING STEPS
01 DIAGNOSE PROBLEM
• If a manager wants to make an intelligent
decision, the first move must be to identify the
problem.
08 • If the manager fails in this aspect, it is almost
07 impossible to succeed in the subsequent steps.
• An expert once said, “identification of the
06 problem is tantamount to having the problem
05 half-solved.”
04
03
02
01
 DECISION MAKING STEPS
01 DIAGNOSE PROBLEM

What is a problem?
 A problem exists when there is a difference
between an actual situation and a desired
08 situation.
07
06
05
04
03
02
01
IDENTIFYING THE PROBLEM SAMPLE
CRITICAL THINKING!
For instance, the management of a construction company
entered a contract with another party for the construction of a
25-storey building on a certain site.

Determine the desired situation, actual situation, and the

problem.
IDENTIFYING THE PROBLEM SAMPLE
CRITICAL THINKING!
For instance, the management
of a construction company
entered a contract with
another party for the
construction of a 25-storey
building on a certain site.
ANSWER!
Actual Situation
- The company has not yet constructed
the building.
Desired Situation
- Finished 25-storey building.
Problem
- Construction of the 25-storey building.
 DECISION MAKING STEPS
ANALYZE THE
02 ENVIRONMENT
 The environment where the organization is
situated plays a very significant role in the
success or failure of such an organization. It is,
08 therefore, very important that an analysis of the
07 environment be undertaken.
06
05
04
03
02
01
 DECISION MAKING STEPS
ANALYZE THE
02 ENVIRONMENT
 Objective of this step is to identify the
constraints, which may be spelled out as either
internal or external limitations
08
07
06
05
04
03
02
01
 COMPONENTS OF THE ENVIRONMENT
 Internal Environment refers to organizational activities within a
firm that surrounds decision-making.
INTERNAL ENVIRONMENT

Organizational Aspects
Like org. structure, policies, procedures, rules, EXTERNAL
ability of management, etc. ENVIRONMENT

Marketing Aspects
Like product strategy, promotion strategy, etc.
DECISION
Personnel Aspects
Like recruitment practices, incentive systems, etc.

Product Aspects EXTERNAL

Like plant facility layout, inventory control, etc. ENVIRONMENT

Financial Aspects
Like liquidity, profitability, etc.

Figure: The Engineering Firm and the Internal Environment in Decision-Making

COMPONENTS OF THE ENVIRONMENT
 External Environment refers to variables that are outside the
organization and not typically within the short-run control of top
management.
Government

Engineers Labor Unions

ENGINEERING
Clients Supplier
FIRM

Competitors Banks

Public

Figure: The Engineering Firm and its External Environment

 DECISION MAKING STEPS
ARTICULATE PROBLEM
03 OR OPPORTUNITY

 Discuss the problem with the members of the

organization and gather data and information for
future references.
08
07
06
05
04
03
02
01
 DECISION MAKING STEPS
DEVELOP VIABLE
04 ALTERNATIVES

 Oftentimes, problems may be solved by any of

the solutions offered. The best among the
alternative solutions must be considered by
08 management. This is made possible by using a
07 procedure with the following steps:
06 1. Prepare a list of alternative solutions.
05 2. Determine the visibility of each solutions.
04 3. Revise the list by striking out those which are
03 not viable.
02
01
DEVELOP VIABLE ALTERNATIVES SAMPLE
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 client.
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.
 DECISION MAKING STEPS
EVALUATE
05 ALTERNATIVES
 After determining the viability of the alternatives
and a revised list has been made, an evaluation
08 of the remaining alternatives is necessary.
07  This is important because the next step involves
06 making a choice. Proper evaluation makes
05 choosing the right solution less difficult.
04
03
02
01
 DECISION MAKING STEPS
EVALUATE
05 ALTERNATIVES
 How the alternatives will be evaluated will
depend on the nature of the problem, the
08 objectives of the firm, and the nature of
alternatives presented.
07
06  According to Wm. E. Souder suggests that
05 “each alternative must be analyzed and
evaluated in terms of its value, cost, and risk
04 characteristics.”
03
02
01
EVALUATE ALTERNATIVES SAMPLE
An engineer manager is faced with a problem of choosing
between three applicants to fill up a lone vacancy for a cadet
electrical engineer. The engineer manager will have to set up
certain criteria for evaluating the applicants.

If the evaluation is not done by a professional human resources

officer, then the engineer manager will be forced to use a
predetermined criteria.
 EVALUATION SHEET
Title of Vacant Position: CADET ELECTRICAL ENGINEER
Date of Evaluation: December 31, 1995
Total
Applicant Education Training Experience Age
Points

1. Engr. Dhie P. Nile 40 38 6 7 91

2. Engr. Philip P. Ines 40 36 5 9 90

3. Engr. Mendacoy T. Napay 40 35 4 10 89

Evaluator:
Engr. Honeygirl G. Pukyutan
Manager, Engineering Division III
 DECISION MAKING STEPS
06 MAKE A CHOICE
 After the alternatives have been evaluated, the
decision-maker must now be ready to make a
choice. This is the point where he must be
convinced that all the previous steps were
08 correctly undertaken.
07
06  Choice-making refers to the process of
selecting among alternatives representing
05 potential solutions to a problem.
04
03  To make the selection process easier, the
02 alternatives can be ranked from best to worst
on the basis of some factors like benefit, cost,
01 or risk.
 DECISION MAKING STEPS
07 IMPLEMENT DECISION
 After a decision has been made,
implementation follows. This is necessary, or
decision-making will be an exercise in futility.
08
 Implementation refers to carrying out the
07 decision so that the objectives sought will be
06 achieved. To make implementation effective, a
05 plan must be devised.
04
03
02
01
 DECISION MAKING STEPS
07 IMPLEMENT DECISION
 At this stage, the resources must be made
available so that the decision may be properly
implemented.
08
 Those who will be involved in implementation,
07 according to Ramon J. Aldag and Timothy M.
06 Stearns, must understand and accept the
05 solution.
04
03
02
01
 DECISION MAKING STEPS
EVALUATE AND ADAPT
08 DECISION RESULTS

 In implementing the decision, the results

expected may or may not happen. It is,
therefore, important for the manager to use
08 control and feedback mechanisms to ensure
07 results and to provide information for future
06 decisions.

05  Feedback refers to the process which requires

04 checking at each stage of the process to assure
03 that the alternatives generated, the criteria used
02 in evaluation, and the solution selected for
implementation are in keeping with the goals
01 and objectives originally specified.
APPROACHES IN SOLVING PROBLEMS
Qualitative Evaluation
 Refers to evaluation of alternatives using intuition and
subjective judgment. William J. Stevenson states that
managers tend to use the qualitative approach when:

1. The problem is fairly simple.

2. The problem is familiar
3. The costs involved are not great.
4. Immediate decisions are needed.
APPROACHES IN SOLVING PROBLEMS
In decision-making, the engineer manager is faced with
problems which may either be simple or complex.

To provide him with some guide, he must be familiar

with the following approaches:
1. Quanlitative evaluation, and
2. Quantitative evaluation
APPROACHES IN SOLVING PROBLEMS
An example of an evaluation using the qualitative
approach is as follows:

A factory operates on three shifts with the following schedule:

First shift – 6:00 A.M. to 2:00 P.M.
Second shift – 2:00 P.M. to 10:00 P.M.
Third shift – 10:00 P.M. to 6:00 A.M.

Each shift consists of 200 workers manning 200 machines.

APPROACHES IN SOLVING PROBLEMS
On September 11, 1995, the operations went smoothly
until the factory manager an electrical engineer, was
notified at 1:00 P.M. that five of the workers assigned to
the second shift could not report for work because of
injuries sustained in a traffic accident while they were on
their way to the factory.
APPROACHES IN SOLVING PROBLEMS

AS A RESULT!........

Because of time constraints, the manager made an

instant decision on who among the first shift workers
would work overtime to man the five machines.
APPROACHES IN SOLVING PROBLEMS
Quantitative Evaluation
 This terms refers to the evaluation of alternatives using
any technique in a group classified as rational and
analytical.
DECISION MAKING STEPS
DIAGNOSE PROBLEM

ANALYZE THE ENVIRONMENT

ARTICULATE PROBLEM OR OPPORTUNITY

DEVELOP VIABLE ALTERNATIVES

EVALUATE ALTERNATIVES

MAKE A CHOICE

IMPLEMENT DECISION

EVALUATE AND ADAPAT DECISION

RESULTS
Thank You
REFERENCES

⮚ https://www.slideshare.net/BALASRIPRASADKAMARAP/po
m-unitii-principles-of-management-notes-bba-i-semester-ou
⮚ https://www.managementstudyguide.com/managementprinci
ples_importance.htm
⮚ https://fellow.app/blog/engineering/principles-of-engineering-
management/