CHAPTER 3:

The Nature of
Decision
Making
FUNDAMENTALS OF
MANAGEMENT (MGT 162)
 ◦Definition of decision making
◦Types of decision making
◦ Programmed decision

LEARNING ◦ Non-programmed decision

◦Types of condition under decision making
OBJECTIVES ◦The rationale of decision making
◦Decision making process
◦Group decision making techniques
 ◦ The process through which managers
identify and resolve problems and capitalize
on opportunities.
DEFINITION ◦ The process by which a course of action is
selected as the way to deal with a specific
problem.
 Program Non-Program
It is unstructured and requires higher

TYPES OF It is structured level management.

It usually deals with unique, unusual or
exceptional problem

DECISION A repetitive decision that can be

handled by a routine approach
Non-routine decision making that
occurs in response to unusual,
unpredictable opportunities and threat

MAKING Example: Rules & regulations i.e.

UiTM Dress Code, Usage of Student
ID
Example: Government’s decision to
prevent H1N1
TYPES OF CONDITIONS UNDER
DECISION MAKING
• Decision maker know exactly what will happen and able to predict the
outcome precisely
Certainty • 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

• A condition under which there is not full knowledge of the problem and
reasonable probabilities for alternative outcomes cannot be
UnCertainty determined.
• A situation in which a decision maker has neither certainty nor
reasonable probability about the outcome

• Refer to future conditions that are not always known in advance

• Decision maker is able to estimate the likelihood of certain outcome
Risk based on personal experience or secondary information
• Some information is available, but it is not enough to answer all
questions about the outcomes

• Te goals to be achieved or problem to be solved is unclear, alternatives

Ambiguity are difficult to define and information about outcomes is not available
 ◦ Investigate the situation
• Define problem
• Diagnose causes
• Identify decision objectives

THE ◦ Develop alternatives

RATIONALE • Seek creative alternatives
• Do not evaluate yet

OF
◦ Evaluate alternative and select the best one
DECISION • Evaluate alternative: Time required, costs involved, risk
involved, benefits or advantages & limitation

MAKING • Select the best alternative

◦ Implement and monitor

• Plan implementation- review the plan periodically
• Monitor implementation & make necessary adjustment
 DECISION MAKING PROCESS
(The 7 Steps)

Identifying Monitoring
Evaluating Reaching Choosing
opportunities Identifying Generating
implementation and evaluating
and diagnosing objectives alternatives alternatives decisions strategies feedback
problems
 Three (3) major types of group decision
making
◦ Brainstorming
◦ A technique used to enhance creativity that encourages group
members to generate as many novel ideas as possible on a

GROUP
given topic without evaluating them

DECISION ◦ Nominal Group Technique (NGT)

• Individual members list their ideas on the specific problem
and present the ideas at one time, without discussion
MAKING • 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

◦ Delphi Technique
◦ An approach that uses the experts to make predictions and
forecasts about future events without meeting face-to-face
 ADVANTAGES DISADVANTAGES
GROUP 1. More information and
knowledge are available.
1. The process takes longer than
individual decision making,

DECISION 2. More alternatives are likely to

be generated.
so it is costlier.
2. Compromise decisions

MAKING:
3. More acceptance of the final resulting from indecisiveness
decision is likely. may emerge.
4. Enhanced communication of 3. One person may dominate the

Advantages & the decision may result.

5. Better decisions generally
group.
4. Groupthink* may occur.

Disadvantages
emerge.