Ch08

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Decisions
• Decision is a choice made from available alternatives

• Decision making is a process of identifying problems
and opportunities and resolving them
• Is a choice made from available alternatives
• May be difficult to make
• Information may be unclear
• May have to deal with conflicting points of view
Developed by Cool Pictures & MultiMedia Presentations Copyright © 2003 by South-Western, a division of Thomson Learning. All rights reserved.
Types of Decisions
Decision making is the process of identifying problems and opportunities and then resolving them.
Programmed decisions:
• situations that occur often enough to enable decision
rules to be developed
Non-programmed decisions:
• are made in response to situations that are unique,
are poorly defined and largely unstructured
• may involve strategic planning
Difference Between Programmed and Non-
programmed Decisions
o Certainty
– all the information the decision maker needs is fully available
o Risk
– A decision has clear-cut goals
– good information is available
– future outcomes associated with each alternative are subject to
chance
o Uncertainty
– managers know which goals they wish to achieve
– information about alternatives and future events is incomplete
– managers may have to come up with creative approaches to
alternatives
o Ambiguity: by far the most difficult decision situation
– goals to be achieved or the problem to be solved is unclear

– alternatives are difficult to define
– information about outcomes is unavailable
Conditions that Affect the Possibility of
Decision Failure
Organizational
PepsiCo, Inc. serves
Problem consumers beverages and
snack foods.
Low Possibility of Failure High

Certainty Risk Uncertainty Ambiguity
Programmed Non-programmed
Decisions Decisions
Problem
Solution
Decision Making Model
• Depends on the manager’s personal preference

• Whether the decision is programmed or non-
programmed
• Extent to which the decision is characterized by
risk, uncertainty, or ambiguity
Three Decision Making Models
 Classical Model
 Administrative Model
 Political Model
Classical Model/ rational model
 Decision maker operates to accomplish goals that are

known and agreed upon
 The decision maker strives for condition of certainty
 Criteria for evaluating alternatives are known
 The decision maker is rational and uses logic
 The classical model of decision making is considered
to be normative, which means it defines how a decision
maker should make decisions and provides guidelines
for reaching an ideal outcome for the organization.
• The classical model represents an ideal model
of decision making that is often unattainable by
real people in real organizations.
• It is most valuable when applied to programmed
decisions and to decision characterized by
certainty because relevant information is
available and probabilities can be calculated.
• For example: new analytical software programs
automate many programmed decisions such as
freezing the account of a customer who has
failed to make payments.
Administrative Model
 Administrative Model of decision making describes how
managers actually make decisions in situations characterized by
non-programmed decisions, uncertainty, and ambiguity
 Managers are unable to make rational decisions even if they want
to
 Two concepts are instrumental in shaping the administrative
model
– bounded rationality: means that people have limits or
boundaries on how rational they can be
– satisfying: means that decision makers choose the first
solution alternative that satisfies minimal decision criteria
 Is considered to be descriptive, how managers actually make
decisions not how they should
 Another aspect is past experience
Political Model
 Closely resembles the real environment in which

most managers and decision makers operate
 Useful in making non-programmed decisions
 Decisions are complex
 Disagreement and conflict over problems and
solutions are normal
 Managers often engage in coalition building for
making complex organizational decisions. A
coalition is an informal alliance among managers
who support a specific goal.
Assumption of the political model
1. Organizations are made of groups with diverse

interests, goals, and values.
2. Information is ambiguous and incomplete
3. Managers do not have the time, resources, or mental
capacity to identify all dimensions of the problem and
process all relevant information.
4. Managers engage in the push and pull of debate goals
and discuss alternative. Decisions are the results of
bargaining and discussion among coalition members.
Elder Bush
Characteristics of Classical, Political, and
Administrative Decision Making Models
Classical Model Administrative Model Political Model
Clear-cut problem and goals Vague problem and goals Pluralistic; conflicting goals
Condition of certainty Condition of uncertainty Condition of uncertainty/ambiguity
Full information about Limited information about Inconsistent viewpoints; ambiguous
alternatives and their outcomes alternatives and their outcomes information
Rational choice by individual Satisfying choice for resolving Bargaining and discussion among
for maximizing outcomes problem using intuition coalition members
Six Steps in the Managerial
Decision Making Process
Evaluation Recognition of
and Decision
Feedback Requirement
Implementation Diagnosis
of Chosen Decision- and Analysis
Alternative Making of Causes
Process
Selection of Development of
Alternative Alternatives
1- Recognition of decision requirements
• Managers confront a decision requirement in the form

of either a problem or an opportunity
• A problem occurs when organizational
accomplishment is less than established goals.
• An opportunity exists when managers see potential
organizational accomplishments that exceed current
goals.
• Recognizing decision requirements is difficult,
because it often means integrating bits and pieces of
information in novel ways.
2- Diagnosis and analysis of causes
• Diagnosing is the step in the decision making process

in which managers analyze underlying causal factors
associated with the decision situation.
3- Developing of alternatives
• Generating possible alternative solutions that will

respond to the needs of the situation and correct the
underlying causes.
4- Selection of desired alternative
• The selection of the most promising of several

alternative course of action.
• The managers tries to select the choice with the least
amount of risk and uncertainty.
• Making choices depends on manager’s personality
factors and willingness to accept risk and uncertainty.
5- Implementation of chosen alternative
• Involves using of managerial, administrative, and

persuasive abilities to ensure that the chosen
alternative is carried out.
6- Evaluation and feedback
• Decision maker gather information that tells them

how well the decision was implemented and whether
it was effective in achieving its goals.
• Feedback is important because decision making is a
continuous process. Feedback provides decision
makers with information that can sudden a new
decision cycle.
Personal Decision Framework
Situation: Personal Decision Style:

· Programmed/non-programmed ·Directive Decision Choice:
· Classical, administrative, ·Analytical ·Best Solution to Problem
political ·Conceptual
· Decision steps ·Behavioral
Decision styles: Differences among people with respect
to how they perceive problems and make decisions
1- The directive style is used by people who prefer

simple, clear cut solutions to problems.
Managers who use this style often make decisions
quickly because they do not like to deal with a lot of
information and may consider only one or two
alternatives.
• 2- Managers with analytical style like to
consider complex solutions based on as much data as
they can gather
• 3- People with a conceptual style also like to
consider a broad amount of information. They like to
solve problem creatively
• 4- Behavioral style is often adopted by managers
having a deep concern for others as individuals and
may make decisions that help others achieve their
goals.
Participation in Decision Making
Vroom-Jago Model
 helps determine the appropriate amount of participation for
subordinates. The model consist of:…………………………..
Leader Participation Styles
 employs five levels of participation
 participation in decision making ranging from highly autocratic
decide alone) to highly democratic (delegate).
Diagnostic Questions
 decision participation depends on the responses to seven
diagnostic questions
 questions deal with the problem, the required level of decision
quality, and the importance of having subordinates commit to the
decision
Seven Leader Diagnostic Questions
 How significant is the decision?

 How important is subordinate commitment?
 What is the level of the leader’s expertise?
 If the leader were to make the decision alone, at what level would
subordinates be committed to the decision?
 What level is the subordinates support for organizations
objectives?
 What is the members level of knowledge or expertise relative to
the problem?
 How skilled or committed are group members to working
together?
• In many situations, several decision styles might be
equally acceptable.
• Smart managers are encouraging greater employee
participation in solving problems when ever possible.
• Broad participation often leads to better decisions.
• Involving others in DM contributes to individual and
organizational learning.
Lea
rn d
o n’
t pu
bai l
nt o
nis
w he
h
w
Kno
New Approaches
To Decision
flict Making Pra
c o n ct i c
str u ctive e th
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i ve
ga g
En Wa
Build collective intuition

ys
1- Start with brainstorming
1. Brainstorming uses a face to face interactive group to
spontaneously suggest a wide rang of alternatives for
decision making.
2. The people can build on one another idea. All ideas
are acceptable no matter how crazy they are. Criticism
and evaluation are not allowed.
3. Highly effective for generating a wide range of
alternative solutions to a problem.
4. Electronic brainstorming: Bringing people together in
an interactive group over a computer network to
suggest alternatives.
2- Learn do not punish
• Good managers know that every time a person makes

a decision, whether it turns out to have positive or
negative consequences, it
helps the
employee learn and be better decision
maker the next time around.
3- Know when to bail
• Organizations often continue to invest time and

money in a solution despite strong evidence that it is
not appropriate. This tendency is referred to as
escalating commitment.
• The key to successful creative decision making is to

fail early, fail often, and pull the plug early.
4- Practice the five whys
• For every problem, employees learn to ask Why? Not

just one but five times to go deeper into the causes
and potential solutions.
5- Engage in rigorous debate of the issue
at hand
• Good managers recognize that constructive conflict
based on divergent points of view can bring a
problem into focus, clarify people’s ideas, stimulate
creative thinking, create a brooder understanding of
issues and alternatives, and improve decision quality.

Ch08

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Ch08

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Developed

• Decision is a choice made from available alternatives

– goals to be achieved or the problem to be solved is unclear

Low Possibility of Failure High

• Depends on the manager’s personal preference

 Decision maker operates to accomplish goals that are

 Closely resembles the real environment in which

1. Organizations are made of groups with diverse

Classical Model Administrative Model Political Model

• Managers confront a decision requirement in the form

• Diagnosing is the step in the decision making process

• Generating possible alternative solutions that will

• The selection of the most promising of several

• Involves using of managerial, administrative, and

• Decision maker gather information that tells them

Situation: Personal Decision Style:

1- The directive style is used by people who prefer

 How significant is the decision?

Build collective intuition

• Good managers know that every time a person makes

• Organizations often continue to invest time and

• The key to successful creative decision making is to

• For every problem, employees learn to ask Why? Not

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