EBUS1624/EFBM2625

General Management
Study pack

Chapter 6
Decision-making

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 SECTION A
PDF slides

These slides are a summary of the chapter. It

is highly recommended to read through the
chapter in the textbook.

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EBUS1624 / EFBM2625
Chapter 6: Decision-making
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 Learning outcomes

• Explain the nature of decision-making.

• Identify the different type of decisions made on different
management levels.
• Evaluate the four types of conditions under which a
manager makes decisions.
• Explain the three types of decisions managers can make.
• Identify the factors that influence decision-making.
• Differentiate between the three decision-making models.
• Apply the six steps of the decision-making process.
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 Introduction

• Everyone inevitably has to make decisions some time or another.

• Regardless of the effort that is put into making a decision, it has

to be accepted that some decisions will not be the best possible
choice, and almost any decision involves some conflict or
dissatisfaction.

• Despite the changing environment and uncertainty as a result of

The Fourth Industrial Revolution (4IR), all these developments are
a reflection of the decisions made by humankind - human
decision-making ability is at the core of this revolution.

• Decision-making is also one of the skills that differentiate a good

manager from a great manager in business.

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 Introduction

•Can you think of the decisions

that you have made when you
completed matric?

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 Introduction

•Some of the decisions include…..

choosing the university…..how you

ended up at UFS?
Choosing the degree at varsity
Residence – on or off campus
choosing a friend(s) at varsity
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 Introduction (cont.)
• Decision-making takes place during each stage of all four
management functions and at all the management levels.

“Decision-making can be defined as a process of choosing the

best course of action from all the available alternatives. It can
also be defined as an act of choosing between two or more
courses of action.”

• Decision-making is a skill and skills can usually be acquired

and improved.
• It is a cognitive process in which a manager follows a
deliberate process of some steps.
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 Nature of decision-making
You still recall
that we
covered the Strategic decisions
management • Top management
levels in
chapter 1
Tactical decisions
• Middle management

Operational decisions
• First-line managers

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 Conditions and types of decision-making (cont.)

• Factors affecting decision-making

–Personal issues: Perception varies according to the

perceiver, the object, and the situation.

–Organisational issues: These include policies, procedures,

hierarchy, and organisational politics.

–Environmental issues: All the external factors that affect

the organisation.

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 Conditions and types of decision-making (cont.)

• Based on the influencing issues, four conditions

can be identified, namely certainty, risk,
uncertainty, and ambiguity.

• These conditions result in three types of decisions:

routine, adaptive, and innovative.

• One should ask three questions and the responses

(yes or no) to these questions will determine under
which condition a decision is being taken – see the
Table 6.1 next slide.
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 Conditions and types of decision-making (cont.)

Question Certainty Risk Uncertainty Ambiguity

Do I know what the problem is? Yes Yes Yes No

Do I know what the alternative solution Yes Yes No No

to this problem is?

Do I know the outcomes of the action I Yes No No No

am taking?

Type of decision made under this Routine Adaptive Innovative Innovative

condition:

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 Conditions and types of decision-making (cont.)

Condition under
Example of
Type of decision which decision is
decision
made

Routine
(directed by policies, rules Certainty Reorder inventory
and procedures)

Adaptive Risk Open a new outlet

Andrew Mason
Uncertainty and/or
Innovative founded his online
ambiguity
store, Groupon

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 Factors influencing decisions

Personal experiences

Decision-making styles

Biases

Structure and culture of an organisation

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Lets explain the factors influencing decisions
• Personal experience – experienced managers make
decisions with more openness, diverse viewpoints,
and interactions with other.
• Decision-making styles – managers do not make
decisions in the same way.
• Biases – some common errors or biases when making
decisions are as follows: immediate gratification, anchoring
effect, selective perception, confirmation, framing,
availability, representation, self-serving, hindsight, and
overconfidence.

• Structure and culture of an organisation – influence

how and when information is communicated, and it also
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determines who gets involved in which decisions.

 Decision-making styles

Individual
decision-making Group decision-
styles making styles
• Autocratic group decision-
• Directive style making
• Analytic style • Democratic group decision-
making
• Conceptual style • Collective group decision-
• Behavioural style making
• Consensus group decision-
making

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 Decision-making styles (cont.)

Individual decision-making styles

• Influence the way managers make decisions.

• Decision-making can be grouped into four main

styles, namely, directive, analytic, conceptual, and
behavioural.

• Most managers use a combination of styles, but

usually each manager has a dominant style.

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 Individual decision-making styles (cont.)
Directive style
• Managers that have this style regard structure as
very important.
• Such managers take charge of a situation, make
quick decisions and expect those “under” them to
carry out those decisions immediately, with no
questions asked.
• Style is aggressive and expects immediate results.
• They are also excellent verbal communicators.
• On the negative side, with this type of style
managers act quickly and often without all the
facts. 18
 Individual decision-making styles (cont.)

Analytical style
• An analytical decision-maker enjoys solving
problems and puzzles.
• Such a person is innovative and uses lots of
information to make decisions after considering all
alternative courses of action.
• He or she is adaptable and can function well even under
challenging situations.
• On the negative side – managers with this style of decision-
making are slow and take a lot of time because they want to
use direct observation, data, and facts.
• They also tend to want to control every aspect of the
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process.
 Individual decision-making styles (cont.)

Conceptual style
• Prefer to have a large amount of information
available.
• Tend to look at problems from an artistic angle and
they may ask the people involved for their inputs.
• Look for solutions that are outside the box.
• They are achievement oriented.
• On the negative side, a conceptual style decision-
maker may take some risks in decision-making.

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 Group decision-making styles

Autocratic group decision-making

• Leader takes complete control and ownership of
the decision – completely responsible.
• The autocratic leader does not ask for suggestions
or ideas from the team – base decisions on his or
her own internal information and perception of the
situation.
• Maybe the best type of decision-making in an
emergency situation, but can result in less-than-
desired effort from employees.
• Morale of employees may be low – not part of
decision and leader may lose credibility.
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 Group decision-making styles (cont.)

Democratic group decision-making

• Democratic group decision-making involves
participation of employees.
• The leader gives up the ownership and control of a
decision and allows the group to vote for the best
course of action – majority vote will decide.
• The disadvantage of this style – lack of individual
responsibility.
• It opens up the possibility that someone will deny
responsibility for the outcome, because he or she
voted against the group’s decision.
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 Group decision-making styles (cont.)

Collective group decision-making

• The leader involves the members of the organisation or
group in the decision-making process, but he or she will
make the final decision alone.
• The leader encourages group members to participate by
giving their ideas, perceptions, knowledge and information.
• Leader is in complete control of the final decision and is
completely responsible for the decision and the results.
• The advantage of this style is the involvement and
participation of the group.
• The disadvantage is that this can be a very slow decision-
making process.
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 Group decision-making styles (cont.)

Consensus group decision-making

• The leader gives up complete control of the decision.
• The whole group is totally involved and invested in the
decision and there is no individual responsibility for the
leader.
• Everyone must agree and reach consensus on the decision.
• If group members cannot reach total agreement, the
decision becomes democratic – they vote for the best
course of action.
• Involving everyone completely fosters strong group
commitment.
• It is a very slow process.
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 Decision-making styles (cont.)
Decision-making styles
Management in action 6.4

Decision-making styles

Consider the four

management styles,
which one do you think
explains your decision-
making style the best?
Explain why you think so.

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 Decision-making models

Figure 6.1 The different models of decision-making

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 Classical Model

Six step
Also known as decision-
ASSUMPTION:
Rational Model making
process

Decision-makers • Identifying the problem or

know the problem objectives.
and the goals, as • Set the goals and decision-
Based on rational well as the
economic assumptions criteria.
alternatives to
and the manager’s beliefs • Search, evaluate, and select
solve the problem,
about what an ideal the best course of action.
and the outcomes
decision should be. of these • Implement the decision.
alternatives are • Compare the actual and
known. planned outcomes,
objectives, or goals.
• Respond to divergences
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from the plan.
 The rational decision-making process
Step 1: Identify, • Difference between desired and actual state
diagnose, and • Determine the underlying causes or factors leading to the
analyse the problem problem or opportunity

Step 2: Set the goals • Goals: Results that a manager wants to achieve
and decision criteria • Decision criteria: Standards used to guide judgments

• Take longer than all the other steps

• Use qualitative or quantitative methods to evaluate
the alternatives –
Step 3: Search,
evaluate, and select • Quantitative methods are used to calculate the
the best course of weighted average of each option.
action
• The next slide illustrate how to use weighted
average method (WAM) to choose the best
option 28
Step 3: Search, evaluate,
and select the best
course of action – using
the WAM

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Using the weighted average method to make a decision

Assume you are the manager of a national courier company,

SpeedCouriers. The company has decided to buy a new
delivery van and the purchasing dept has submitted two
quotes to you. Apply the weighted average method to select
the best vehicle.
The criteria used when selecting the vehicles are price,
comfort, durability, after sales service and handling. The
weights (degree of importance) attached to each of the
criteria are 10, 8, 5, 5, and 1 respectively.
Vehicle A gets the following points in terms of the criteria:
Price: 7, Comfort:6, Durability: 6, After sales service: 7 and
Handling: 1.

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Using the weighted average method to make
a decision
Vehicle B gets the following points in terms of the
criteria: Price: 6, Comfort:7, Durability: 7, After
sales service: 6 and Handling: 6.
Required:
(a) Use the weighted average method to select
the best vehicle (illustrate in a tabular
presentation)

(b) Indicate clearly which vehicle is the best and

motivate your answer.
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 Suggested Solution
Weighted average method
Evaluate alternatives and choose the best one

(a)
Criteria Weight Car A Car B
(Degree of
importance)
Price 10 7 6
Comfort 8 6 7
Durability 5 6 7
After sale 5 7 6
service
Handling 1 7 6

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 Weighted average method
Weight
Criteria (Degree of Car A Car B
importance)
Price 10 7 x 10 70 6 x 10 60
Comfort 8 6x8 48 7x8 56
Durability 5 6x5 30 7x5 35
After sale 5 7x5 35 6x5 30
service
Handling 1 7x1 7 6x1 6

TOTAL 190 187

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 Weighted average method
Weight
Criteria (Degree of Car A Car B
importance)
Price 10 7 x 10 70 6 x 10 60
Comfort 8 6x8 48 7x8 56
Durability 5 6x5 30 7x5 35
After sale 5 7x5 35 6x5 30
service
Handling 1 7x1 7 6x1 6

TOTAL 190 187

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 Weighted average method
(b)

Choose alternative with highest

weighted score.
•i.e. Car A = 190

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•Now lets continue to STEP 4

–Of the rational decision-

making process

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 The rational decision-making process

• Manager needs credibility and competency

Step 4: Implement the
decision • Communication, motivation, and leadership are
essential management activities

Step 5: Compare the actual • Follow up and ensure that the results are
and planned outcomes, satisfactory
objectives, or goals • Feedback

Step 6: Respond to • Constant change

divergences from the desired
outcome • Corrective action if it is needed
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 Lets recap - all the steps of the rational decision-making
process..…..
• Difference between desired and actual state
Step 1: Identify, diagnose, and
analyse the problem • Determine the underlying causes or factors leading
to the problem or opportunity

• Goals: Results that a manager wants to achieve

Step 2: Set the goals and
decision criteria • Decision criteria: Standards used to guide
judgments

Step 3: Search, evaluate, and • Take longer than all the other steps
select the best course of • Use qualitative or quantitative methods to
action evaluate the alternatives – e.g WAM

• Manager needs credibility and competency

Step 4: Implement the
decision • Communication, motivation, and leadership are
essential management activities

Step 5: Compare the actual • Follow up and ensure that the results are
and planned outcomes, satisfactory
objectives, or goals • Feedback

Step 6: Respond to • Constant change

divergences from the desired
outcome • Corrective
38 action if it is needed
 Administrative model

Bounded rationality
refers to the limits
and boundaries that Bounded Satisfy
managers have rationality
when it comes to This model
rationality, due to
the complexity of
puts
the organisation and emphasis on
decision, the
external two key Due to these reasons,
managers tend to
environment, limited
time, resources, and
concepts select a good enough
information. goal or course of
action that satisfies
minimal decision
criteria and they do
not try to optimise, but
rather, satisfy.

Managers using this model during decision-making engage in:

• Limited search for the best course of action.
• Misinterpreted or insufficient information when making a decision.
• Use their intuition when making decisions.
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 Political model

Closest to real life decision-making

Involves interaction with other managers and subordinates

Taking environmental factors and other events into

consideration

Coalition building
Forming an informal alliance with other managers with similar
goals, values, and interests that may lead to faster decision-
making, as a consensus is developed without too many formal
meetings and discussions.
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 Summary
• Managers want to make good decisions
because it is in the best interests of the
organisation.
• Decision-making is essential during each of
the management functions.
• Different issues regarding decision-making is
important.
• Managers can use different styles and
models to help make good decisions.
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 SECTION B
Work activities

These activities will assist you when you work

through the chapter and to make your own
summary of the content

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Chapter Synopsis and Activities

CHAPTER 6: DECISION-MAKING

OUTCOMES

After studying this chapter, you should be able to:

 Explain the nature of decision-making

 Identify the different type of decisions made on different management levels
 Evaluate the four types of conditions under which a manager makes decisions
 Explain the three types of decisions manager can make
 Identify the factors that influence decision-making
 Differentiate between the three decision-making models
 Apply the six steps of the decision-making process

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6.1 The Nature of Decision-making

What is decision making?

Remember this? Now use the pyramid and link the theory from this chapter to it.

6.2 Four Conditions under which Decisions are Taken

Identify the prevalent condition in the examples below:

A. You have a headache and take a tablet you know always works to cure your headache.

B. Tomorrow you are writing the end of semester exam for EFBM2625. You have been too lazy to
study all semester. Panic sets in and you decide to take last year’s exam paper and just study the
theory that has not been asked in that exam paper.

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 C. A close friend of yours has just been diagnosed with a rare disease. He/she would like to recover
fully and has heard that there are some treatments available for this disease, but at this stage
he/she is not quite sure which treatments.

D. Develop your own example of what an “ambiguous” condition could be.

6.3 THE 3 TYPES OF DECISIONS MANAGERS CAN MAKE

Decision
Types

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6.4 Differentiating Between the 3 Decision-Making Models

Use the table below to summarise the differences between the 3 decision-making models:

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6.5 The 6 Steps of the Decision-making Model

Exercise: Your little brother/sister is almost finishing matric. He/she admires you and values your
opinion and experience. He/she asks you to help him/her decide which tertiary educational
institution they should go and study at.

Step 1: Review the steps of the decision-making model.

Step 2: Use these steps and write notes on how each step can be used to help your brother/sister
with his/her decision. Remember that you should make these steps applicable to the given
scenario.

The end

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 SECTION C

Practice questions and answers

These questions and answers were taken

from previous tests and exams. Sometimes
special exercise questions are also included
to help you reflect and master the content.

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Practise Questions
Question 1
Read the following case study and answer all the questions that follow:

Assume you are the manager of a shuttle company in Bloemfontein, Campus Shuttle. The
organisation has decided to buy a new 13-seater quantum mini-bus and the purchasing
department has submitted two quotations to you assess.

Use the weighted average method to select the best vehicle to be purchased. The criteria used
when selecting the vehicles are price, comfort, durability, after sales service and handling. The
weights (degree of importance) attached to each of the criteria used are 10, 8, 5, 5, and 1
respectively.

In terms of the criteria, vehicle A is scored as follows: Price: 7; Comfort: 6; Durability: 6; After
sales service: 7 and Handling: 1.

In terms of the criteria, vehicle B is scored as follows: Price: 6; Comfort: 7; Durability: 7; After
sales service: 6 and Handling: 6.

1.1 In a tabular format, calculate the weighted average of both vehicles.

[1 x 8 = 8]

1.2 Indicate clearly which vehicle is the best and motivate your answer
[1 x 2 = 2]

Question 2

Ford’s Board of Directors are deciding to manufacture a new SUV that will replace the Kuga-product line.
As a company, Ford knows what the problem is and is also aware of the alternative solutions to the
problem. However, Ford does not know what the outcome will be in terms of customers remaining loyal
to Ford and trusting their brand. Name the type of decision Ford made when deciding to recall their
vehicles as well as the condition under which such a decision was made.
(2)

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Question 3

__________ is when a manager has to make a decision, but the goal or the problem has not yet been
identified, alternatives to solve the problem have not yet been defined and information about the
outcome of each alternative is unavailable.
a. Uncertainty
b. Adaptive
c. Ambiguity
d. Risk

Answers:

Question 1

Suggested Solution
1.1

Criteria Weight Vehicle A Vehicle B

(Degree of
importance)

Price 10 7 x 10=70 ½ 6 x 10= 60 ½

Comfort 8 6 x 8=48 ½ 7 x 8 = 56 ½
Durability 5 6 x 5 =30 ½ 7 x 5 = 35 ½
After sale service 5 7 x 5 =35 ½ 6 x 5 = 30 ½
Handling 1 7 x 1=7 ½ 6 x 1= 6 ½

TOTAL 190 187

 layout mark
1.2
Choose alternative with highest weighted average score. 
• i.e. Vehicle A = 190 

Question 2

Type of decision: Adaptive 

Condition: Risk 

Question 3

Correct answer C

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 SECTION D
Questions to ask your academic
partner*

These questions will either be discussed in

the collaboration session or were included to
stretch your mind. Feel free to ask your
academic partner if you have trouble
answering them.

* “Academic partner” could be anyone who is part of the teaching team.

This includes lecturers, facilitators, tutors, etc.

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Tutorial discussion questions
Video: Decision Making

This video was uploaded as part of the study pack for this chapter on Blackboard.

Question 1
Based on the environmental issues that influence the circumstances under which a
manager makes a decision. Managers of businesses must make decisions under difficult
circumstances. Referring to the three types of decisions, discuss how Janet Hill took each
decision. Motivate your answers.

Scenarios:

Question 2
Due to Covid 19 pandemic the university of Free State had to make various decisions
to ensure that the 2021 academic year is completed.
i. Identify the decisions that the UFS has taken because of the pandemic.
ii. Indicate whether the decision can be categorised as an individual or group
decision making style. Motivate your answer.

Question 3

Analyse three decisions that you have made over the past six months. (At least one with
a positive and one with a negative outcome.) Under which conditions did you make these
decisions and what types of decision were they? Motivate your answer

Question 4

The manufacturing cost of your electronic products dropped by 50% after the
implementation of a new operational system. The best friend of the CEO, at your
company, is one of your regular clients. The CEO told his friend about the new operating
system and the decrease in costs. The client places an order via e-mail in which he
communicates to you that he knows about the decrease and thus expects to get a
discount. As a manager you approve this discount and the sale goes ahead. Shortly
afterwards, one of your long-standing clients orders a large number of electronic
products. He is one of your best friends, but you have not told him yet about the new
operating system and the cost savings.

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 i. Would you tell your friend about the reduction in manufacturing costs and offer him
a similar discount or would you withhold the information and let him pay the full price
as you receive commission on each sale? The commission money is enough to pay for
your son’s school tour.

*We will discuss these answers in your online tutorial discussion session for Chapter 6.

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 SECTION E
Videos

Videos are uploaded separately on

Blackboard. Have a look at these videos to
enrich your understanding of the work.

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Two videos are available on Blackboard for chapter 6 to assist in the understanding of the
content

Video 1: 12 Cognitive biases

Video 2: Tutorial video

We hope you enjoy watching the videos!

Reference list:

Video 1: 12 Cognitive biases

Practical Psychology (2016). 12 Cognitive Biases Explained – How to Think Better and More
Logically Removing Bias. Available at: https://www.youtube.com/watch?v=wEwGBIr_RIw
(Accessed: 25 August 2021)

Video 2: Tutorial video

QMSMooTube (2014). Planning for Profit Case Study video –janet Hill. Available at:
https://www.youtube.com/watch?v=cfbez0Ns0Hg (Accessed 7 September 2020)

End of the study pack ☺

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