MANAGERIAL

DECISION MAKING
Decision:
It is a choice made from available alternatives.
Managerial Decision Making:
A multi step process through which
problems are recognized, diagnosed and defined.
Managerial Decision Making Flowchart
DECISION
MAKING
MODELS
Three Decision Making Models

Classical Administrative Political

Model Model Model
CLASSICAL MODEL
• Prescriptive Model- How the
decision should be made.
• Does not describe how managers
actually make decision.
• Rational economic assumptions.
• Time consuming
• Often unattainable by real people in
real organizations.
The Administrative Model

• Difficult to know all the alternatives.

• Based on work of Herbert A. Simon.
• Two Concepts
1. Bounded Rationality;
• Practical and real
2. Satisficing
• Intuition
• Quasi-rationality
Political Model
• Decision maker is neither rational nor biased.
• Close to the real environment in which most managers operates.
• Decision making through consensus (coalition)
• Information is limited and conflicting goals.
MAKING IMPORTANT
DECISIONS
HOW DO YOU THINK?
 INNER
LOGIC 1 2 KNOWING

DATA 3 4 FELT SENSE

HOW DO YOU
MAKE
FACTS 5 IMPORTANT
6 INSTINCTS

DECISIONS?
CONCEPTS 7 8 HUNCH

1
REASON 9 FEELINGS
0
EVALUATING
EVALUATING YOUR YOUR DECISION
DECISION APPROACH:
APPROACH:
1.
1. All
All Five
Five Either
Either Linear
Linear or
or Non-linear
Non-linear –– DOMINANT
DOMINANT
2.
2. 4/5
4/5 Either
Either Linear
Linear or
or Non-linear
Non-linear –– PREFERENCE
PREFERENCE
3.
3. Mixed
Mixed i.e.
i.e. 3/5
3/5 ++ 2/5
2/5 LL OR
OR NL
NL –– QUASI-RATIONAL
QUASI-RATIONAL

1 2

3 4

5 LINEAR QUASI-RATIONAL NON-LINEAR 6

7 8

1
9
0
Six Step
Decision-Making
Process
Recognition of Decision
Requirement
A decision requirement can be based
on a problem or an opportunity.
Managers scan the environment
regularly, to identify whether there
are internal or external factors that
require decision action.
Selection of Desired
Alternative
Choose best alternative which is the
solution that best fits the overall
goals and values of the organization
and achieves the desired results
using the fewest resources.
Diagnosis and Analysis
of Causes
You will refine your understanding
of the actual situation and identify
the root causes.
Implementation of
Chosen Alternative
This stage involves the use of
managerial, communication,
administrative, and persuasive
abilities to ensure the choice is
carried out.
The success of a decision is based on
how it is implemented.
Development of
Alternatives
Next step is to generate alternatives
solutions that will respond to the
needs of the situation and correct the
underlying causes.
Evaluation And
Feedback:
Gather information that tells you
whether it was effective in achieving
its goals and how well the decision
was implemented.
Feedback is the part of monitoring
that assesses whether a new decision
needs to be made, and if so it will
help them get back on track.
Different Aspects
of Decision
Making
 • Being
influenced
by initial
impressions
Impulsive Justifying
Decision past
Making decisions

Why Do
Managers
Make Bad
Decisions Seeing what
Overconfide
nce ? you want to
see

Being Perpetuating
influenced the status
by emotions quo
Being influenced
Justifying past Seeing what you
by initial
decisions want to see
impressions

Managers may stick to

First Information
received causes a bias.
This is due to the
justifying or continuing
contribution of
past decisions that turn
confirmation bias.
out to be wrong.

Confirmation bias, the

A study tells that
managers who start a
Can also be past records. project tend to fund it
even if there is evidence
of its failure.
tendency to process
information by looking
for, or interpreting,
information that is
consistent with one’s
existing beliefs.

Relying only on past

records can lead to a poor
forecast.
Perpetuating the Being influenced Impulsive
status quo by emotions Overconfidence decision making

Managers Making decisions

Managers deciding to
Includes Impulsive overestimating their without considering
make the same
decisions. abilities to judge the any dynamics of the
decisions as the past.
situations at hand. situation.

When managers let

“What brings you to Making decisions
their emotions
the top may not keep solely on the basis of
influence their
you on the top”. gut feeling.
decisions.
 • Start with
Brainstorming

Do a Use Hard
Postmortem Evidence

Innovativ
e
Decision
Making
Engage in
Know When
Rigorous
to Bail
Debate

Avoid
Groupthink
 Engage in
Start with Use Hard
Rigorous
Brainstorming Evidence
Debate
It is a face-to-face team
interaction where the Decision making with
Brings clarity to the
members suggest as the use of dependable
situation.
many ideas as possible data.
for solving a problem.

Drawbacks:
• Some people may shy away
from speaking. Helps objective Brings diverse points of
• Majority may suppress decision making. view into light.
minority’s ideas.

Helps making
intelligent and
systematic decision
making.
 Know Do a
Avoid
When to Postmorte
Groupthink
Bail m
Group thinking is where Knowing when to make a
Reflecting upon the
majority’s idea is followed U-turn from a past
decisions made.
blindly. decision.

A good manager knows

Minority’s idea may be that there is no good in
Reviewing the results of
suppressed or not be flogging a dead horse or
the decisions.
spoken in the first place. maybe investing time and
resources in a flop project.
New approach to make Decision
Ethical Dilemma

It is a process in which something goes against

your personal ethics moral and values

You have to make a decision between two things

Thankyou