CHAPTER 4: DECISION MAKING

4.1 Introduction
 Decision making is the process of identifying problems

and opportunities, develop alternative solution, select

best alternatives and implement it.
 It is defined as a rational choice among alternatives.

And also it is a process, not a lightning bolt

occurrence.
 In making decision, a manger is making a judgment-

reaching a conclusion from a list of known

alternatives.
 Managers starting from supervisory up to the ultimate

authority are always called upon to make decisions on

matters related to themselves and their organizations.
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 It is part of all managers’ job and common core to

other functions. For instance:
top level management makes decision on dealing with
mission of organization and its strategies.
Middle level management, focus on implementing strategies,
budgets and resource allocation.
First level management deals with repetitive day to day
operations.
Objectives
After completing this chapter, you should be able to:
 Explain the concepts and process of decision making
 Describe the types of decision making.
 Identify the different decision making conditions.
 4.2 Rational Decision making process
It is believed that major decision making situations should be an explicit
rational process in which managers (decision makers) chose the best
alternatives that can maximize the desired objectives. Accordingly, this
process embodies seven steps. These are:
A. Define the problems
A problem is the difference between the current and desired performance
and situation. Opportunity is a chance, event or occasions that requires a
decision to be made.
The criteria mangers use to locate problems:
• Deviations from past performance
• Deviation from the plan
• Outside criticism
B. Identify the limiting or critical factors
Once the problem is defined, the manager needs to develop the limiting or
critical factors of the problem. Limiting factors are those constraints that rule
out certain alternative solutions. These are: Time, resource/ personnel,
money, facilities and equipment. These are most common limiting or critical
factors that narrow down the range of possible alternatives.
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C. Develop potential alternatives or solutions to the

problem
This is the stage in which potential solutions that might
resolve the problem or lead to objective attainment are
generated. That means develop and list many possible
alternative solutions to the problems. Doing nothing about a
problem is the proper alternative. Sources of alternatives
are: experience, personal opinions and judgments, group
opinions, committees and the use of outside sources
including mangers in other organizations.
D. Analyze the alternatives: The purpose of this step is to
decide the relative merits of each of alternatives. This
means advantages and disadvantages, comparing the
potential pay off and possible consequences of each
alternative solution.
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E. Select the best alternatives
It is the real point of decision making a manger selects a strategy to solve
a problem and to achieve predetermined objectives. It is to find a solution
that appears to offer the fewest serious disadvantages and most
advantages.
F. Implement the solution
The alternatives solution should put in to effect and implemented so as to
achieve objectives for which it is made. Any decision must be effectively
implemented because good decision may be harmed by poor
implementation.
G. Evaluate and control
The final step in decision-making process is to create a control and
evaluate system. Ongoing action need to be monitored. This system
should provide feedback on how decision was implemented what the
result are positive and negatives and what adjustments are necessary to
get the results that were wanted when the solution was chosen. Manger
should have to continue periodic measurement. That means compare the
results with the established standards .When there is deviation we have to
take correction.
 4.3 Types of Decisions
The mostcommon types of decisions are:
 programmed and
 non-programmed decision making is.
 Programmed decision are the decision managers make in response to routine
and repetition situation and are labeled as programmed because they are
amendable to organizational established policies ,procedures and rules. If a
particular situation occurs often managers will develop a routine procedure for
handling it.
 The management of most organization faces great number of programmed
decisions in their daily operation. Such decision should be made without
expending unnecessary time and effort.
 Non programmed decision are those made by manager in a novel, complex
or/ and extremely important problems situations. They are non programmed
because established policies, rules and procedures can’t be employed and it is
decision maker insight, judgment and creativity which have paramount
importance. Making such decisions is clearly a creative process. Reaching non-
programmer decision is more complicated and requires the expenditure of lots
of money worth of resources every year. Government organizations make non-
programmer decisions that influence the lives of every citizen.
 4.3.1The decision making condition
 There are three basic decision making conditions. These are:
certainty, risk and uncertainty.
A. Decision under certainty
 Manger has perfect knowledge; external conditions are identified

and predictable. Alternatives are known with their consequences.

Also a manager can rely on a policy or standing plan. The decision
will be made routinely.
B. Decision Under Risk
 In which probability can be assigned to the expected outcomes of

each alternatives. Manager knows alternatives but do not know how

will work so he/she faced with dilemma of choosing best
alternatives.
C. Decisions under uncertainty
In a situation to manger is not able to determine the exact odds or
probabilities of potential alternatives available and deal with two many
unknown facts. Probabilities cannot be assigned to surrounding
conditions.
 4.4 Summary

 Decisions may be classified as programmed or non

programmed, depending on the type of problem.
Each type requires different kinds of procedures and
applies to very different types of situations.
 The three basic decision making conditions are:
certainty, risk, and uncertainty.
 Managers (decision makers) can maximize their
decision making by having many alternatives to chose
and select the best among the given alternatives.
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