Chapter Nine

Managing Decision
Making and Problem
Solving
Slide content created by Charlie Cook, The University of West Alabama
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 Learning Objectives
After studying this chapter, you should be able to:
1. Define decision making and discuss types of
decisions and decision-making conditions.
2. Discuss rational perspectives on decision making,
including the steps in rational decision making.
3. Describe the behavioral aspects of decision making.
4. Discuss group and team decision making, including
the advantages and disadvantages of group and
team decision making and how it can be more
effectively managed.

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 The Nature of Decision Making
• Decision Making
– The act of choosing one alternative from among a
set of alternatives.
• Decision-Making Process
– Recognizing and defining the nature of a decision
situation, identifying alternatives, choosing the
“best” alternative, and putting it into practice.
• An effective decision optimizes some set of factors such
as profits, sales, employee welfare, and market share.
• Managers make decisions about both problems and
opportunities.

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 Types of Decisions
• Programmed Decisions
– A decision that is a fairly structured
decision or recurs with some
frequency or both.
• Example: Starting your car in the morning.
• Nonprogrammed Decisions
– A decision that is relatively
unstructured and occurs much less
often a programmed decision.
• Example: Choosing a vacation
destination.

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 Decision-Making Conditions
• Decision Making Under Certainty
– The decision maker knows with reasonable certainty
what the alternatives are and what conditions are
associated with each alternative.
• Decision Making Under Risk
– The availability of each alternative and its potential
payoffs and costs are all associated with risks.
• Decision Making Under Uncertainty
– The decision maker does not know all the
alternatives, the risks associated with each, or the
consequences of each alternative.

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 Figure 9.1: Decision-Making
Conditions

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Figure 9.2: The Classical Model
of Decision Making

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Table 9.1:
Steps in
the
Rational
Decision-
making
Process

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 Figure 9.3: Evaluating
Alternatives in the Decision-
making Process

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 Figure 9.4: The Administrative
Model of Decision Making

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Behavioral Aspects of Decision
Making (cont’d)
• Bounded Rationality
– Decision makers are limited by their values and
unconscious reflexes, skills, and habits.
• Satisficing
– The tendency to search for alternatives only until one
is found that meets some minimum standard of
sufficiency to resolve the problem.
• Coalition
– A positive or negative political force in decision
making which consists of an informal alliance of
individuals or groups formed to achieve a goal.

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 Group and Team Decision
Making in Organizations
• Forms of Group Decision Making
– Interacting group or team
• Consists of an existing group or newly formed team
interacting and then making a decision.
– Delphi groups
• Developing a consensus of expert opinion from a panel
of experts who individually contribute through a
moderator.
– Nominal groups
• Generating ideas through the individual contributions of
alternatives that are winnowed down to reach a decision.

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 Table 9.2: Advantages and
Disadvantages of Group and
Team Decision Making

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 Managing Group and Team
Decision-Making Processes
• Managers can promote the effectiveness of group and
team decision making by:
– Being aware of the pros and cons of having a group or team
make a decision.
– Setting deadlines for when decisions must be made.
– Avoiding dominance problems by managing group
membership.
– Having each group member individually critically evaluate all
alternatives.
– Not making your position known too early.
– Appointing a group member to be a “devil’s advocate.”
– Holding a follow-up meeting to recheck the decision.

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 Key Terms
• decision-making • bounded rationality
• decision-making process • satisficing
• programmed decision • coalition
• nonprogrammed decision • intuition
• state of certainty • escalation of commitment
• stage of risk • risk propensity
• state of uncertainty • interacting groups
• classical decision model • Delphi group
• steps in rational decision • nominal group
making
• groupthink
• administrative model

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