MANAGEMRASK AESR

RAQUEL B.
RANCHEZ
DSECISION MDRM 402
Decision - a choice or
judgement
- making a choice from

two or more alternatives

RATIONAL DECISION MAKING
A method for systematically selecting among

possible choices that is based on reasons and

facts.
In a rational decision making process, a manager
will often employ a series of analytical steps to
review relevant facts, observations and possible
outcomes before arriving to a particular
DECISION MAKING
1. Identification o f the purpose o f the decision
PROCESS
2. Information gathering
3. Principles for judging the alternatives
4. Brainstorm and analyze the different
choices
5. Evaluation o f alternatives
6. Select the best alternatives
7. Execute the decision
8. Evaluate the
1. IDENTIFICATION OF THE PURPOSE OF
DECISIO
THE
N

-the problem is thoroughly analyzed and usually

accompanied by these questions:
a. W h a t exactly is the problem?
b. W h y the problem should b e solved?
c. W ho are the affected parties of the
problem?
d. Does the problem have a deadline or a
2. INFORMATION GATHERING
- In an organization, there are a lot of
people involved.
- In this process you must gather as
much
information needed from the persons,
departments, and stakeholders who were
affected by the problem.
3. PRINCIPLES FOR JUDGING THE
ALTERNATIV
ES
- In this step, the baseline criteria for judging the
alternatives should be set up. When it comes to
defining the criteria , organizational goals as
well as corporate culture should be taken into
consideration. Likewise, baseline principles
should be identified related to the problem at
hand.
4. BRAINSTORM AND ANALYZE THE
DIFFERENT
CHOICES
- In this step, you must list all ideas or causes
of the problem and you must prioritize these

causes, and from these causes you can

generate some alternatives in solving the
problem at hand.
5. EVALUATION OF THE ALTERNATIVES

- In this step, you must use your judging

principles and decision making criteria to
evaluate each alternatives. In this process,
experience in judging principles is vital
and
getting the advantages and disadvantages
for each of the alternative should be
6. SELECT THE BEST ALTERNATIVE
- Once you go through from step 1 to step 5,
this next one is easy. In addition, the selection
of the best alternative is an informed decision

since you have already followed a

methodology to derive and select the best
alternative.
7. EXECUTE THE DECISION

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ientcou tae pthlea np oa
l rn a by yourself or with
the help of your subordinates.
8. EVALUATE THE RESULTS

- Evaluate the outcome of your decision. See

if there is anything you should learn and then
correct in future decision making. This is one

of the best practices that will improve your

decision making skills.
P rogrammed Decisions

Are those that a manager has

eisncaouronutetrineed and
mreapdetitnivtehepproacse.tsstI, wherein
the
manager follows certain rules
and guidelines.
Example of Programmed Decision

An individual naturally make programmed

decision on a daily basis.
Ex. Issuance of memorandums to schools
to participate in the National
Simultaneous
Earthquake Drill.
Unprogra m m e d Decision

Unp rogr am m ed d ec isions involve

sc enar ios that ar e new or novel
and for which no proven answers

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MANAGEMENT FUNCTIONS

1. PLANNING
2. ORGANIZING
3. STAFFING
4. DIRECTING
5. CONTROLLING
Making Decisions

Rationality
Managers make consistent, value-maximizing choices
with specified constraints.
Assumptions are that decision makers:
- A re perfectly rational, fully objective, and logical.
-Have carefully defined the problem and identified
all viable alternatives.
- Have a clear and specific goal
- Will select the alternative that maximize
outcomes
inter est.
Assumptions of Rationality
Making Decisions

B o- u nMda enadg eRr sa t imo nakael i t yd ec isions r at ionally, but

ar e lim it ed (bounded) by their
ability t o process information.
- Assumptions are that decision makers:
.Will not seek out o r have knowledge of all alternatives
.Will satisfice –  choose t he first alternative encountered
that 
satisfactorily solves the problem –  rather than maximize
the

ochutocoosmni egtohfe tbheesirt. decision by considering all

The Role of Intuition

Intuitive Decision Making

Making d ec isions on the basis of

experience, a nd accumulated
feelings,
 judgement.
What is
Intuition ?
Types of Problems and Decisions
Structured Problems
- Involve goals that are clear.
- A re familiar (have o c c u r ed before).
-Are easily a nd completely defined – information
about the problem is available and
complete.

Programmed Decision
- A repetitive decision that can
be handled
Types of Programmed Decisions
Polic y
- A general guideline fo r making a
decision
about a structured problem.
Procedure
- A series of inter elated steps that a
manager
can use to respond (applying a policy) to a
structured problem.
Rule
- An explicit statement that limits what a
Examples of Policy, Procedure and Rule
Policy
- A c c e p t all customer-returned merchandise.
Procedure

retu- Fronl ldowoc aulml setnetpast ifonr completing

merchandise Rules
- Managers must approve all refunds over P50.00
- No c redit purchases are refunded fo r
cash
Problems and Decisions
Unstructured Problems
-Are problems that requires the use of
intuition, reasoning and memory.
Ex. 1. H ow can w e eradicate w o rl d hunger?
2. Is there life after death?

Non-programmed Decisions
-These are decisions that are situational and non-
routine.
Ex. If a cu s t o me r has a negative reactions to a
p ro d u c t o r
service, a company would not reply routinely but research
the issue before responding.
 Decision-Making
CConditions
e r t ai nty
A situation in which a manager can make
an
accurate decision because the outcome
of every alternative choice is known.
Risk
A situation in which the manager is able
to estimate the likelihood (probability) of
outcomes that result from the choice of
 Decision-Making
Conditions
Uncertainty
Limited information prevents estimation of outc ome
probabilities for alternatives associated with the problem
and may force managers to rely on intuition,
hunches, and “gut 
 feelings”.
  M a x i m a x : the optimistic manager’s choice t o maximize the
m Maaxximm umni :payof
i the pessimistic manager’s choice t o
the
f  minimum payoff 
maximize
  M i n i m a x : the manager’s choice to minimize
maximum
Decision-Making Styles
Linear-nonlinear thinking
style ?
Ty p e s of Decision
Makers Directive
Use minimal information
and consider few
alternatives.
Analytic
Make careful decisions in
unique situations.
Conceptual
Maintain a broad outlook and consider many alternatives in
making
Avoid decisions.
conflict by working we l with others and
receptive to
 Decision-Making Biases and
Errors
Heuristics
◦
Using “rules of thumb” to simplify decision making.

Overconfidence Bias
◦
Holding unrealistica ly positive views of one’s self
andone’s performance.

Immediate Gratification Bias

◦
Choosing alternatives that offer immediate rewards and that
to avoid immediate costs.
A n c h o r i n g Ef ect 
◦
Fixating on initial information and
ignoring subsequent information.

Selective Perception Bias

◦
Selecting organizing and interpreting
events based on the
decision maker’s biased perceptions.
Confirmation Bias
◦
Seeking out information that rea firms
past choices
Framing Bias
◦
Selecting and highlighting certain aspects of
a situation while ignoring other aspects.
Availability Bias
◦
Losing decision-making objectivity by focusing on
the most recent events.
Representation Bias
◦
Drawing analogies and seeing identical
situations when none exist.
Randomness Bias
◦
S u n k Costs Er ors
◦
Forge ting that cu rent actions cannot influence
past events and relate only to future
consequences.
Self-Serving Bias
◦
Taking quick credit for successes and blaming
outside factors for failures.
H i n d s i g h t Bias
◦
Mistakenly believing that an event could have been
predicted once the actual outcome is known (after-
the-
 E fective Decision Making in Today’s Wo r l d
◦
Understand cultural di ferences.
◦
Know when it’s time to call it quits.
◦
Use an ef ective decision-making process.
H a b i t s of highly reliable organizations
(HROs)
◦
Are not tricked by their success.
◦
Defer to the experts on the front line.
◦
Let unexpected circumstances provide the
solution.
 ◦
Anticipate, but also anticipate their limits.

Characteristics of an Ef ective Decision

Making
Process
 It focuses on what is important.

 It is logical and consistent.

 It acknowledges both subjective and objective thinking
and

blends analytical with intuitive thinking.
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inafroitrcmuaal tirodnli eamndm an.alysis as is
 It is straightforward, reliable, easy to use, and
flexible.