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CHAPTER 3:

THE NATURE OF
MANAGERIAL DECISIONMAKING

Learning Objectives
After completing this chapter, students
should be able to:
Discuss the types of the decisionmaking and condition applied
Discuss the decision-making process
Describe the group decision-making
techniques

Definition of Decision
Making
The process through which managers
identify and resolve problems and
capitalize on opportunities.
The process by which a course of
action is selected as the way to deal
with a specific problem.

Nature of Decision Making


Some decisions are critical and
can have a major impact on
personal and organizational lives.
Other decisions are more routine
but still require that we select an
appropriate course of action.

7 Steps in the Decision-Making


Process

Types of Decision Making

Decision-Making Conditions
1.

2.

Certainty

Managers have accurate, measurable and reliable information about


the outcome of various alternatives under consideration

Decision-maker knows exactly what is happening:

The nature of the problem

Possible alternatives

Result of alternatives
Risk

Future conditions that are not always known

Information is available but is not enough

Conditions under risk:

The nature of the problem

Possible alternatives

Probability of each alternative leading to desired outcomes

Decision-Making Conditions
3.

Uncertainty
Face unpredictable external conditions (PESTEL)
Lack of information
Little is known about the alternatives or their outcomes

4.

Ambiguity
Goal or problem to be resolved is unclear
Alternatives are difficult to define
Information about outcomes is not available

Politics
Economy
Social
Technology
Environment
Legal

What is Group ?
Two or more persons
interacting for some
purpose and who
influence one another in
the process.

Group Decision Making


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

Pros & Cons in


Group Decision-Making
Advantages
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

Disadvantages
Greater time requirements
Minority domination
Leader may talk too much
leaving group members
non-participative
Compromise
Concern for individual rather
that group goals
Individuals sidetracked to
win argument in order to
achieve personal goals
Social pressure to conform
Groupthink ***

Groupthink ***
An agreement-at-any-cost mentality that results in
ineffective group decision making.
Conformity in thought and behavior among the members
of a group, especially an unthinking acceptance of
majority opinions
Occurs when groups are :
highly cohesive
have highly directive leaders
insulated so they have no clear ways to get objective
information
because they lack outside information > have little
hope that a better solution might be found than the one
proposed by the leader or other influential group
members

Techniques of Group Decision-Making

Brainstorming
A technique used to enhance
creativity that encourages group
members to generate as many
more novel ideas as possible on a
given topic without evaluating
them
Rules of Brainstorming:
Freewheeling is encouraged
Group members will not
criticize ideas as they are
being generated
Quality is encouraged
The wilder the ideas the better
Piggyback on previously stated
ideas
No ideas are evaluated until
after all alternatives are
generated

Nominal Group Technique (NGT)


A structured process designed to
stimulate creative group decisionmaking where agreement is lacking or
the members have incomplete
knowledge concerning the nature of
the problem
Delphi Technique
Uses experts to make predictions and
forecasts about future events without
meeting face-to-face
Devils Advocacy Approach
An individual or subgroup appointed
to critique a proposed course of action
and identify problems to consider
before the decision is final
Dialectical Inquiry
Approaches a decision from two
opposite points and structures a
debate between conflicting views

Ethical and social implications


15

Able to recognize problems quickly


Able to differentiate between strategic
and operational decisions
Equipped with all techniques that aid
in making decisions
Be familiar with the framework
Create awareness and understanding

Barriers to effective planning

Demands time
Uncertain operating environments
Resistance to change
Lack of commitment
Failure to see the scope of plan
Unclear goals
Lack of information

Overcoming the barriers

Learn to apply the managerial functions better


Involves employees in decision making
Take advantage of different views
Encourage strategic thinking
Clear planning
Ensure effective communication
Forecast future

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