MGT 101 - Principles of Management and Business

The Decision Making Process

Week 4
Objectives

✤ To describe the decision making process

✤ To practice decision making

The Decision Making Process

✤ Definition:

✤A set of eight steps that begins with identifying a problem; it

moves through selecting an alternative that can alleviate the
problem and concludes with evaluating the decision’s effectiveness

✤ This process can be used to describe both individual and group

decisions.
The Decision Making Process

Identification Identification Allocation Development Analysis Selection Implementation

of a of Decision of Weights of of of an of the
Problem Criteria to Criteria Alternatives Alternatives Alternative Alternative

Evaluation
of
Decision
Effectiveness
Step 1: Identification of a
Problem

✤ A Problem: a discrepancy between an existing and a desired state of

affairs

✤ In real world, most problems are not clear.. Thus, problem

identification is not simple

✤ Also, problem identification is subjective

✤ Furthermore, managers who mistakenly solve the wrong problem are

not different from those who don’t solve it!
How Can Managers Identify
Problems?

✤ They need to make comparisons between current state of affairs AND

some standard

✤ The standard can be:

✤ past performance

✤ previously set goals

✤ the performance of some other unit within the organization or some

other organization
Step 2: Identification of Decision
Criteria

✤ Here, we select specific criteria that we will use in making the

decision. The criteria include: price, weight, size, number of
employees, hours needed ... etc.

✤ Decision Criteria (single is criterion): factors that are relevant in a

decision

✤ Every decision making has a criteria whether explicitly stated or not

✤ If a factor is not included, it’s considered irrelevant

Step 3: Allocation of Weights to
Criteria

✤ In this step, we give weights to the criteria identified in the previous

step

✤ A simple approach: Give 10 to the highest important factor, and then

assign weight the rest against that standard

✤ For example: if you give another criterion 5, the standard is twice as

important

✤ Mainly, you use your personal preferences. In a more studied

decisions, you will use data, statistics, studies, analysis, and research
Important Criteria and Weights in
a Car-Buying Decision
Criterion Weight
Price 10
Interior Comfort 8
Durability 5
Repair Record 5
Performance 3
Handling 1
Step 4: Development of
Alternatives

✤ Here, we list all the alternatives that could succeed in solving the
problem

✤ We only list them, without evaluating them

Step 5: Analysis of Alternatives

✤ Each alternative is evaluated by appraising it against the criteria

✤ The strengths and weaknesses of each alternative become both

evident as we compare them to the criteria and weights established in
step 2 and step 3

✤ The assessment is clearly a personal judgement

Assessment of Possible Car
Alternatives

Alternative Initial Interior Repair Total

Price Comfort Durability Record Performance Handling
Mazda
5 6 9 10 7 7 44
C230

Isuzu
7 6 8 6 5 6 38
Ascender

BMW 335 9 7 6 4 4 7 37

Toyota
6 5 10 10 6 6 43
Camry

VW Passat 8 6 6 5 7 8 40
What if?

✤ If one alternative scored 10 on every criterion, we wouldn’t need to

consider the weights

✤ Similarly, if the weights were all equal, you could evaluate each
alternative merely by summing up the appropriate lines
Evaluation of Car Alternatives:
Assessment Criteria x Criteria
Weight
Interior Repair
Alternative Initial Price Comfort Durability Record Performance Handling Total
[10] [8] [5] [5] [3] [1]

Mazda
5 50 6 48 9 45 10 50 7 21 7 7 221
C230

Isuzu
7 70 6 48 8 40 6 30 5 15 6 6 209
Ascender

BMW 335 9 90 7 56 6 30 4 20 4 12 7 7 215

Toyota
6 60 5 40 10 50 10 50 6 18 6 6 224
Camry

VW Passat 8 80 6 48 6 30 5 25 7 21 8 8 212
Step 6: Selection of an
Alternative

✤ Here, we choose the best alternative among those assessed

✤ We merely choose the alternative that scored the highest score in

step 5

✤ In our example: Toyota Camry

Step 7: Implementation of the
Alternative

✤ Decision implementation: putting a decision into action

✤ This includes conveying the decision to those affected and getting

their commitment to it
Step 8: Evaluation of Decision
Effictiveness

✤ Managers appraise the result of the decision to see whether it has

corrected the problem; did the alternative chosen in step 6 and
implemented in step 7 accomplish the desired result?
Learning Outcomes

✤ Decision making is a process of eight steps

✤ Managers use criteria to make decisions, whether they mention them

or not

✤ Managers should make alternatives and evaluate them based on the

criteria

✤ Managers need to evaluate their decisions to make sure they are

solving the right problem