ESSENTIALS OF MANAGEMENT:

An International Perspective
Sixth Edition
Weihrich and Koontz

Chapter 6. Decision Making

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After studying this chapter, you understand:

1. Decision making as a rational process.

2. The development of alternative courses of action
3. The selection from among alternatives.
4. The differences between programmed and
nonprogrammed decisions.
5. Decisions made under conditions of certainty,
uncertainty, and risk.
6. The importance of creativity and innovation in
managing.
7. The major principles, or guides, for planning

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 Decision Making
• Decision making is defined as the
selection of a course of action from
among alternatives

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 Decision Making Process
1. Premising,
2. Identifying alternatives,
3. Evaluating alternatives in terms of the
goal sought, and
4. Choosing an alternative, that is,
making a decision

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Limited, or "Bounded," Rationality

• Limitations of information, time, and

certainty limit rationality, even though a
manager tries earnestly to be
completely rational
• Satisficing is picking a course of action
that is satisfactory or good enough
under the circumstances

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 Development of Alternatives and the
Limiting Factor

• A limiting factor is something that

stands in the way of accomplishing a
desired objective
• The principle of the limiting factor: By
recognizing and overcoming those
factors that stand critically in the way of
a goal, the best alternative course of
action can be selected
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Quantitative and Qualitative Factors

• Quantitative factors are factors that

can be measured in numerical terms
• Qualitative, or intangible, factors are
those that are difficult to measure
numerically

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 Marginal Analysis
• Marginal analysis is to compare
additional revenues and the additional
cost arising from increasing output

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 Cost Effectiveness Analysis
• Cost effectiveness analysis seeks the
best ratio of benefit and cost

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 Selecting an Alternative: Three
Approaches
When selecting from among alternatives,
managers can use:
1. Experience,
2. Experimentation, and
3. Research and analysis.

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 Programmed And Nonprogrammed
Decisions

• Programmed decisions are used for

structured or routine work
• Nonprogrammed decisions are used
for unstructured, novel, and ill-defined
situations of a nonrecurring nature

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 Creativity and Innovation

• Creativity refers to the ability and

power to develop new ideas
• Innovation means the use of new ideas

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 The Creative Process
• The creative process is seldom simple and
linear
• It generally consists of four overlapping and
interacting phases:
1. Unconscious scanning
2. Intuition
3. Insight
4. Logical formulation or verification

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 Rules for Brainstorming
1. No ideas are criticized
2. The more radical the ideas are, the
better
3. The quantity of idea production is
stressed
4. The improvement of ideas by others is
encouraged

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