DECISION MAKING

DECISION MAKING
Introduction
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.
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. This type of
managers are dangerous and “should be removed from their positions as soon
as possible.”
 DECISION MAKING
WHAT IS 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 (i.e., top, middle, and lower
levels) and at various management functions (i.e., planning, organizing,
directing, and controlling). Decision-making "is the heart of all the
management functions”.
 DECISION MAKING
THE DECISION-MAKING PROCESS
Rational decision-making, according to David H. Holt, is a process involving the
following steps:
1. Diagnose the problem
2. Analyze the environment
3. Articulate problem or opportunity
4. Develop viable alternative
5. Evaluate alternatives
6. Make a choice
7. Implement decision
8. Evaluate and adapt decision results
 DECISION MAKING
THE DECISION-MAKING PROCESS
1. Diagnose Problem
If a manager wants to make an intelligent decision, his first move must be to
identify the problem. If the manager fails in this aspect, it is almost impossible
to succeed in the subsequent steps.
What is a problem? A problem exists when there is a difference between
actual situation and a desired situation. For instance, the management of a
construction company entered into a contract with another party for the
construction of a 25-storey 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.
DECISION MAKING

Variance
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THE DECISION-MAKING PROCESS
2. Analyze the environment
The environment where the organization is situated plays a very significant
role in the success or failure of such an organization. It is therefore, very
important that an analysis of the environment be undertaken.
The objective of environmental analysis is the identification of constraints,
which may be spelled out as either internal or external limitations.
Examples of internal limitations are as follows:
1. Limited funds available for the purchase of equipment
2. Limited training on the part of employees
3. Ill-designed facilities
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THE DECISION-MAKING PROCESS
2. Analyze the environment
Examples of external limitations are as follows:
1. Patents are controlled by other organizations
2. A very limited market for the company’s product and services exists.
3. Strict enforcement of local zoning regulations.
When decisions are to be made, the internal and external limitations must be
considered. It maybe costly, later on, to alter a decision because of a constraint
that has not been previously identified.
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THE DECISION-MAKING PROCESS
3. Articulate problem or opportunity
Before a strategy can be explored, a clear articulation of the problem has to
happen. It can be hard to put your finger on what the problem is. A lot of
times, we have a more visceral experience of what is wrong rather than a
concrete way to identify the issues at hand.
Getting clear on what the problem is in any given situation can mean the
difference between spending needless amounts of time and money or putting
energy into the right areas of focus to get real results.
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THE DECISION-MAKING PROCESS
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 the 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
To illustrate: An engineering firm has a problem of increasing its output by
30%. This is the result of 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:
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THE DECISION-MAKING PROCESS
4. Develop Viable Alternatives
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
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 the adverse effects in the long-run profitability of
the firm.
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THE DECISION-MAKING PROCESS
5. Evaluate Alternatives
After determining the viability of the alternatives and a revised list has been
made, an evaluation of the remaining alternatives is necessary. This is
important because the next step involves making a choice. Proper evaluation
makes choosing the right solution less difficult.
How the alternatives will be evaluated will depend on the nature of the
problem, the objectives of the firm, and the nature of alternatives presented.
It is suggested that “each alternative must be analyzed and evaluated in terms
of its value, cost, and risk characteristics.”
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THE DECISION-MAKING PROCESS
5. Evaluate Alternatives
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THE DECISION-MAKING PROCESS
6. 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 correctly undertaken.
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.”
To make the selection process easier, the alternatives can be ranked from the
best to worst on the basis of some factors like benefit, cost, or risk.
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THE DECISION-MAKING PROCESS
7. Implement decision
After a decision has been made, implementation follows. This is necessary, or
decision-making will be an exercise in futility.
Implementation refers to carrying out the decision so that the objectives
sought will be achieved. To make implementation effective, a plan must be
devised.
At this stage, the resources must be made available so that the decision may
be properly implemented. Those who will be involved in implementation,
according to Aldag and Stearns, must understand and accept the solution.
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THE DECISION-MAKING PROCESS
8. Evaluate and Adapt Decision Results
In implementing the decision, the results expected may or may not happen. It
is therefore, important for the manager to use control and feedback
mechanisms to ensure results and to provide information for future decisions.
Feedback refers to the process which requires checking at each stage of the
process to assure that the alternatives generated, the criteria used in
evaluation, and the solution selected for implementation are in keeping with
the goals and objectives originally specified.
Control refers to actions made to ensure that activities performed match the
desired activities or goals that have been set.
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THE DECISION-MAKING PROCESS
8. Evaluate and Adapt Decision Results
In this last stage of the decision-making process, the engineer manager will
find out whether or not the desired result is achieved. If the desired result is
achieved, one may assume that the decision made was good. If it was not
achieved, Ferrell and Hirt suggest that further analysis is necessary. Figure 2.3
presents an elaboration of this last step.
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Fig. 2.3 - Feedback as a control mechanism in the Decision-Making
Diagnose the
Step 1
problem

Analyze the
2
environment

Articulate problem
3
or opportunity

Develop viable
4
alternative

Evaluate
5
alternatives

6 Make a choice

Implement
7
decision

Evaluate and adapt Results Not Determine steps where

8
decision results Achieved error was made

Adopt decision
9 Results Achieved
results