Managerial

Managerial Decision-Making
Decision-Making

ABD RAHIM ROMLE

PhD (Management)
(Lincoln University, NZ & UUM)

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 Chapter 1

An Overview
of
Decision Making
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 Profile of a Decision
 The Decision-Making Process
 The Decision Maker
 The Decision

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 Decision Making and
Problem Solving
 Problem solving is concerned with
overcoming obstacles in the path
toward an objective.
 Problem solving may or may not
require action.
 A decision is an act requiring
judgment that is translated into
action.
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 Decision Making and
Problem Solving (cont’d)

 Decision making is much more

comprehensive than problem
solving.
 The terms are interrelated, but not
interchangeable.

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 The Significance of Decision Making
 Decision making is the one truly
distinctive characteristic of
managers.
 Decisions made by top managers
commit the total organization
toward particular courses of action.

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 The Significance of Decision Making
(cont’d)

 Decisions made by lower levels of

management implement the strategic
decisions of top managers in the
operating areas of the organization.
 Decisions invariably involve
organizational change and the
commitment of scarce resources.
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 A Typology of Decisions
 Decision-making strategies (Fig. 1.2)

 Computational
 Judgmental
 Compromise
 Inspirational

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 A Typology of Decisions (cont’d)
 Decision categories
 Category I - routine, recurring,
certainty with regard to the outcome
 Category II - nonroutine,
nonrecurring, uncertainty with regard
to the outcome

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 A Typology of Decisions (cont’d)

 Decision combinations

 Category I / Computational strategy

 Category II / Judgmental strategy

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 Table 1.1 A Categorization of Decision Characteristics
Category I Decisions
Classifications Programmable; routine;
generic; computational;
negotiated; compromise
Structure Procedural; predictable;
certainty regarding
cause/effect relationships;
recurring; within existing
technologies; well-defined
information channels;
definite decision criteria;
outcome preferences may
be certain or uncertain
Strategy Reliance upon rules and
principles; habitual
reactions; prefabricated
response; uniform
processing; computational
techniques; accepted
methods for handling
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Category II Decisions
Nonprogrammable; unique;
judgmental; creative;
adaptive; innovative; inspirational
Novel, unstructured,
consequential, elusive, and
complex; uncertain cause/
effect relationships; non-
recurring; information
channels undefined, incom-
plete information; decision
criteria may be unknown;
outcome preferences may
be certain or uncertain
Reliance on judgment,
intuition, and creativity;
individual processing;
heuristic problem-solving
techniques; rules of thumb;
general problem-solving
processes
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 Figure 1.2 The Concept of Decision-Making Strategies

Knowledge Preference for the Outcome

Regarding
the Outcome Strong Preference Weak Preference

Computational Compromise
High Level
Decision-Making Decision-Making
of Knowledge Strategy Strategy

Judgmental Inspirational
Low Level
Decision-Making Decision-Making
of Knowledge Strategy Strategy

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 The Locus of Choice
 Top management makes Category II
decisions.
 Operating management makes
Category I decisions.
 Middle management supervises the
making of Category I decisions and
supports the making of Category II
decisions.
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Characteristics of Managerial Decisions
(Category II)
 Long-range organizational objectives
 Best choice from among a set of
alternatives
 Decision involves organizational
change
 Decision requires a commitment of
resources
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Characteristics of Managerial Decisions
(Category II) (cont’d)

 Choice is a means to an end, not an

end to itself
 Decision maker tends to overestimate
success
 Success is measurable through
objectives attainment

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 Perspectives on Managerial
Decision Making

 The integrative perspective

 The interdisciplinary perspective
 The interlocking perspective
 The interrelational perspective

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 The Scope of Decision Making

 Individual decision making

 Group decision making
 Organizational decision making
 Metaorganizational decision making

(Note: Refer to Figure 1.1)

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 Figure 1.1 The Scope of Decision Making
Decisional Inputs Metaorganization
(Objectives,
information, Organization
resources,
energy) Interactional
Group Levels

Individual

Permeable Decisional
Boundaries Outputs
(Actions
transactions,
outcomes)

External Environment
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