Chapter 6

Decision Making process

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 I. Introduction
 An organization is a nexus of decisions with information
needs supplied by an Information System
 Information, Decisions, and Management – the type of
information required by decision makers is directly related
to the level of management decision making and the
amount of structure in the decision situation
 Strategic Management – executive level, long-range plans,
organizational goals and policies, and objectives
 Tactical Management – mid-level management, medium- and
short-range plans to support objectives made by executives, and
allocation of resources and performance monitoring of
organizational subunits
 Operational Management – short-range plans, day-to-day
operations, direct the use of resources and performance of tasks

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 I. Introduction
 Information Quality – characteristics of information
products
 Timeliness – was information present when needed?
 Accuracy – was the information correct & error free?
 Completeness – was all the needed information there?
 Relevance – was the information related to the situation?
 Decision Structure
 Structured – operational level, occur frequently, much
information available
 Semistructured – managerial level (most business decisions
are here), not as frequent, less information available
 Unstructured – executive level, infrequent, little information
available

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 I. Introduction

Information Requirements of Decision Makers

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Dimensions of Information

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 Decision Making Defined
The process through which managers identify
and resolve problems and capitalize on
opportunities.

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 Steps in the Decision-Making Process
Slide 1 of 7

• Step 1: Identifying Opportunities and

Diagnosing Problems
– The first step in the decision making process is the
clear identification of opportunities or the
diagnosis of problems that require a decision.
– An assessment of opportunities and problems will
only be as accurate as the information on which it
is based.

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 Steps in the Decision-Making Process
Slide 2 of 7

• Step 2: Identifying Objectives

– Objectives reflect the results the organization
wants to attain.
– Both the quantity and quality of the desired
results should be specified, for these aspects of
the objectives will ultimately guide the decision
maker in selecting the appropriate course of
action.

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 Steps in the Decision-Making Process
Slide 3 of 7

• Step 3: Generating Alternatives

– Once an opportunity has been identified or a
problem diagnosed correctly, a manager develops
various ways to solve the problem and achieve
objectives.
– The alternatives can be standard and obvious as
well as innovative and unique.

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 Steps in the Decision-Making Process
Slide 4 of 7

• Step 4: Evaluating Alternatives

– The fourth step in the decision-making process
involves determining the value or adequacy of the
alternatives generated.
– Predetermined decision criteria such as the
quality desired, anticipated costs, benefits,
uncertainties, and risks of each alternative may be
used in the evaluation process.

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 Steps in the Decision-Making Process
Slide 5 of 7

• Step 5: Reaching Decisions

– Decision making is commonly associated with
making a final choice.
– Although choosing an alternative would seem to
be a straightforward proposition, in reality the
choice is rarely clear-cut.

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 Steps in the Decision-Making Process
Slide 6 of 7

• Step 6: Choosing Implementation Strategies

– The bridge between reaching a decision and
evaluating the results is the implementation phase
of the decision-making process.
– The keys to effective implementation are:
• Sensitivity to those who will be affected by the
decision.
• Proper planning and consideration of the
resources necessary to carry out the decision.

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 Steps in the Decision-Making Process
Slide 7 of 7

• Step 7: Monitoring and Evaluating

– No decision-making process is complete until the
impact of the decision has been evaluated.
– Managers must observe the impact of the
decision as objectively as possible and take further
corrective action if it becomes necessary.

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 Models of Decision Making
• Rational-Economic Model
– A prescriptive framework of how a decision should
be made that assumes managers have completely
accurate information.
• Behavioral Decision Model
– Unlike the rational-economic model, the
behavioral decision-making model acknowledges
human limitations that make rational decisions
difficult to achieve.

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 What Makes a Quality Decision?

Vigilance can make a good decision more

likely. Vigilance means being concerned for
and attentive to the correct decision-making
procedures.

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 Group Considerations in Decision
Making
Group decision making is becoming more
common as organizations focus on
improving customer service and push
decision making to lower levels.

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 Impact of Group Size on
Participation in Decision Making
Slide 1 of 2

In deciding whether a participative model of

decision making is appropriate, a manager
must consider the size of the group.

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 Impact of Group Size on
Participation in Decision Making
Slide 2 of 2
• In general, as group size increases, the
following changes in the decision-making
process are likely to be observed:
– The leader becomes more psychologically
distant from the other members.
– The group’s tolerance of direction from the
leader is greater, and the team’s decision
making becomes more centralized.
– The atmosphere is less friendly.
– Rules and procedures become more
formalized.
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Advantages of Group Decision Making
• Experience and expertise of several individuals
available.
• More information, data, and facts
accumulated.
• Problems viewed from several perspectives.
• Higher member satisfaction.
• Greater acceptance and commitment to
decisions.

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 Disadvantages of Group Decision
Making
• Greater time requirement
• Minority domination
• Compromise
• Concern for individual rather than group goals
• Social pressure to conform
• Groupthink

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 Guidelines for Decision Making
by Richard Denhardt
Slide 1 of 3

• Be committed to the decision-making

process; use it, and let data, not emotions,
drive decisions.
• Seek employees’ input before you make key
decisions.
• Believe in, foster, and support group
decision making in the organization.

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 Guidelines for Decision Making
by Richard Denhardt
Slide 2 of 3

• Believe that the best way to improve the

quality of decisions is to ask and listen to
employees who are doing the work.
• Seek and use high-quality information.
• Avoid “top-down” power-oriented decision
making wherever possible.

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 Guidelines for Decision Making
by Richard Denhardt
Slide 3 of 3
• Encourage decision-making creativity
through risk taking, and be tolerant of
honest mistakes.
• Develop an open atmosphere that
encourages organizational members to
offer and accept feedback.

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