Learning Objectives

After completing this chapter, students

should be able to:
Discuss the nature of the decision-making
process
Describe the rational of decision-making
Describe the participative approach to
decision-making
DEFINITIONS OF DECISION
MAKING
 Definition of Decision Making
The process by which a course of action is selected as
the way to deal with a specific problem
The process through which managers and leaders
identify and resolve problems and capitalize on
opportunities.
Problem
A condition that occurs when some aspect of
organizational performance is less than desirable.
Opportunity
Any situation that has the potential to provide additional
beneficial outcomes.
TYPES OF DECISION MAKING

Programmed Decisions
Non-Programmed Decisions
 Types Of Decision Making
Programmed Decisions
It is structured. A repetitive decision that can be
handled by a routine approach.
Routine, virtually automatic decision making that
follows established rules or guidelines
A decision that is fairly structured or recurs with some
frequency (or both)
Example: Rules & regulations
i.e. when storage shelves are three quarter empty, order
more copy paper
i.e. whenever student enrollment increase by 40% hire
a new lecturer
 Types Of Decision Making
Non-Programmed Decisions
 Deals with unique, unusual or exceptional problem. It is
unstructured and requires higher level management
 Non-routine decision making that occurs in response to unusual
unpredictable opportunities and threat
 A decision that is relatively unstructured and occurs much less
often than a Programmed Decision
 i.e. enter a new market, expand internationally, managing a
rescue work for a plane crash
 E.g.: Government’s decision to prevent H1N1 by stopped all the
travelling outside country.
 Depend heavily on judgment and intuition
 Judgment – develop opinion based on the information on
hand
 Intuition – make decision based on past experience and
immediate feeling about information on hand
Responses to Decision Situations
Programmed Nonprogrammed
Decisions Decisions

Alternatives are not

Alternatives are familiar
familiar to decision
to decision makers.
makers.

Responses require
Responses are routine.
creativity.
TYPES OF CONDITIONS UNDER
DECISION MAKING

Condition Under Certainty

Condition Under Risk
Condition Under Uncertainty
Types of Conditions Under Decision Making
Condition Under Certainty
 Decision maker know exactly what will happen and able to
predict the outcome precisely
 E.g.: If you put RM1000 in bank under fixed deposit or a year at 5%
interest, then interest earned will be RM50 after 1 year
Condition Under Risk
 Refer to future conditions that are not always known in
advance
 Some information is available, but it is not enough to answer all
questions about the outcomes
Condition Under Uncertainty
 Situation in which the individual cannot even assign
probabilities to each of the possible states of nature and
assumption is made that the individual has no information or
intuitive judgment.
7 STEPS IN THE DECISION-
MAKING PROCESS
7 Steps in the Decision-Making Process
Identifying opportunities and
diagnosing problems

Identifying objectives

Generating alternatives

Evaluating alternatives

Reaching decisions

Choosing implementation
strategies

Monitoring and evaluating

 Step 1: Identifying opportunities and
diagnosing problems
Managers regularly review data related to their
areas of responsibility, including both outside
information and reports and information from
within the organization
The clear identification of opportunities or the
diagnosis of problems that require a decision.
An assessment of opportunities and problems
will only be as accurate as the information on
which it is based
 Step 2: Identifying objectives
Objectives reflect the results the
organization wants to attain. Also called
targets, standards or ends.
 The quantity and quality of the desired results
should be specified, for these aspects will
ultimately guide the decision maker in selecting
the appropriate course of action.
 Objectives can be measured on a variety of
dimensions (monetary units, output per hour, %
of defects, etc.) and whether the objectives are
long-term versus short-term.
Objectives can be short range or long range
 Step 3: Generating alternatives
Once an opportunity has been identified or a
problem diagnosed correctly, a manager develops
various ways to solve the problem and achieve
objectives.
The alternatives can be standard and obvious as
well as innovative and unique.
Alternatives – Strategies that might be implemented
in the decision-making situation
Creativity and imagination are often required in this
step
 Step 4: Evaluating alternatives
Assess the value or relative advantages or
disadvantages of each alternative under consideration
Determining the value or adequacy of the alternatives
generated.
Predetermined decision criteria may be used in the
evaluation process.
Quality desired

Anticipated costs
Benefits
Uncertainties
Risks
 Step 5: Reaching decisions
Making a final choice
Decision making is commonly associated with making a
final choice.
Although choosing an alternative would seem to be a
straightforward proposition, in reality the choice is rarely
clear-cut.
The best decisions are often based on careful judgments,
making a good decision involves carefully examining all
the facts, determining whether sufficient information is
available, and finally selecting the best alternatives
 Step 6: Choosing implementation
strategies
 The bridge between reaching a decision and evaluating the
results.
 The keys to effective implementation are:
 Sensitivity to those who will be affected by the decision.
 Proper planning and consideration of the resources necessary
to carry out the decision.
 When decisions involve taking action or making changes, choosing
ways to put these actions or changes into effect become an essential
managerial task
 The key to effective implementation are:
 Sensitivity to those who will be affected by the decision
 Proper planning and considerating of the resources necessary
to carry out the decision
 Step 7: Monitoring and evaluating
feedback
No decision-making process is complete until the impact
of the decision has been evaluated
Managers must observe the impact of the decision and
take further action if it becomes necessary
 Group Decision Making Techniques
Group decision making is becoming more
common as organizations focus on improving
customer service and push decision making to
lower levels
 Participative Decision Making:
Group Size
In general, as group size increases:
 The leader becomes more psychologically distant
from the other members.
 The demands on the leaders time and attention are
greater
 The group’s tolerance of direction from the leader is
greater, and the team’s decision making becomes
more centralized.
 The atmosphere is less friendly, less personal and, in
general, less satisfying.
 Rules and procedures become more formalized.
 Advantages and Disadvantages of
Group Decision Making
Advantages Disadvantages
• Experience and expertise of • Greater time requirement
several individuals available
• Minority domination
• More information, data, and
• Compromise
facts accumulated
• Concern for individual rather
• Problems viewed from several
than group goals
perspectives
• Social pressure to conform
• Higher member satisfaction
• Groupthink
• Greater acceptance and
commitment to decisions
 Techniques for Quality in
Group Decision Making
Brainstorming
Nominal Group Technique
Delphi Technique
Devil’s Advocacy Approach
Dialectical Inquiry
 Techniques for Enhancing the Quality of
Participative Decision-Making
1) Brainstorming – A technique used to enhance creativity that
encourages group members to generate as many novel ideas as
possible on a given topic without evaluating them
 Can enhance creativity by overcoming pressures for conformity that
can retard the development of creative decision-making
 Focuses on generating ideas rather than on choosing an alternative
 Rules of Brainstorming
Freewheeling is encouraged.
Ideas are not criticized as they are being generated.
Quality is encouraged.
The wilder the ideas, the better.
Piggyback on previously stated ideas.
Ideas are evaluated after alternatives are generated.
 Techniques for Enhancing the Quality of
Participative Decision-Making
2) Nominal group technique (NGT) – A structured
process designed to stimulate creative group decision-
making in which agreement is lacking or the members
have incomplete knowledge concerning the nature of the
problem
Individual members list their ideas on the specific
problem and present the ideas at one time, without
discussion
Members’ ideas are recorded so that everyone can see
them
After all members’ ideas are presented, the group
discusses the ideas to clarify and evaluate them
 Techniques for Enhancing the Quality of
Participative Decision-Making
3) Delphi technique – An approach that uses the experts to
make predictions and forecasts about future events without
meeting face-to-face
Using survey instruments or questionnaires, a group leader
collects written expert opinions on a topic
4) Devil’s Advocacy - An individual or subgroup appointed
to critique a proposed course of action and identify
problems to consider before the decision is final.
5) Dialectical Inquiry - Approaches a decision from two
opposite points and structures a debate between conflicting
views.
Advantages of Group Decision Making
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 of Group Decision
Making
Greater time requirement
Minority domination
Compromise
Concern for individual rather than group goals
Social pressure to conform
Groupthink

END OF CHAPTER 3