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PRINCIPLES OF
MANAGEMENT

INSTRUCTOR:
DR. AMIR IKRAM
AMIRIKRAM12@HOTMAIL.COM
W W W. A M I R I K R A M 1 2 . B L O G S P O T . C O M
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Principles of
Management

Management; Decision-making
Learning Objectives
 Describe the eight steps in the decision- making process
 Explain the four ways managers make decisions
 Classify decisions and decision-making
conditions
 Classify decisions and decision-making
conditions
 Identify effective decision-making techniques

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 Decision Making
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Decision - making a choice from two or more

alternatives.
Problem - an obstacle that makes it difficult to
achieve a desired goal or purpose.

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 Decision-making; a Reality

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 Decision Making
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We all make decisions all the time.

It’s core to the job description.
Making decisions is what managers and leaders
are paid to do.

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 The Decision Making Process
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Following 8 Steps are included in the process:

Identification of Problem

Identification of Decision Criteria

Allocation of Weights to Criteria

Development of Alternatives

Analysis of Alternative

Selection of Alternative

Implementation of Alternative

Evaluation Of Decision Analysis

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 Decision-Making Process

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 Step 1: Identifying a Problem
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Characteristics of Problems
A problem becomes a problem when a
manager becomes aware of it.
 There is pressure to solve the problem.
 The manager must have the authority,
information, or resources needed to solve the
problem.

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 Step 2: Identifying Decision Criteria
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Decision criteria are factors that are important

(relevant) to resolving the problem, such as:
 Costs that will be incurred (investments required)
 Risks likely to be encountered (chance of failure)

 Outcomes that are desired (growth of the firm)

Prepared by: DR . AMIR IKRAM

 Important Decision Criteria

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 Step 3: Allocating Weights to the Criteria
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Decision criteria are not of equal importance:

 Assigning a weight to each item places the items in the correct
priority order of their importance in the decision-making
process.

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 Step 4: Developing Alternatives
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Identifying viable alternatives

 Alternatives are listed (without evaluation)
that can resolve the problem.

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 Possible Alternatives

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 Step 5: Analyzing Alternatives
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Appraising each alternative’s strengths and weaknesses

 An alternative’s appraisal is based on its ability
to resolve the issues related to the criteria and
criteria weight.

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 EVALUATION OF ALTERNATIVES

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 Step 6: Selecting an Alternative
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Choosing the best alternative

The alternative with the highest total
weight is chosen.

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 Step 7: Implementing the Alternative
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 Putting the chosen alternative into action

- Conveying the decision to and gaining
commitment from those who will carry out the
alternative

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Step 8: Evaluating Decision Effectiveness
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The soundness of the decision is judged by its

outcomes.

• How effectively was the

problem resolved by
outcomes resulting from
the chosen alternatives?
• If the problem was not
resolved, what went
wrong?

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 Decisions Managers May Make

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 Rational Decision-Making
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Rational Decision-Making - describes choices

that are logical and consistent while maximizing
value.
Bounded Rationality - decision making that’s
rational, but limited (bounded) by an
individual’s ability to process information.
Satisfice - accepting solutions that are “good
enough.”

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 Intuitive Decision-Making

Intuitive decision-
making
 Making decisions on the
basis of experience,
feelings, and accumulated
judgment.

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 Programmed vs. Non-Programmed Decisions

• Programmed Decision - a repetitive decision

that can be handled by a routine approach.
Non-programmed Decisions - unique and nonrecurring
decisions that require a custom-made solution.

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 Types of Programmed Decisions
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Procedure - a series of interrelated steps that

a manager can use to apply a policy in
response to a structured problem.
Rule - an explicit statement that limits what a
manager or employee can or cannot do.
Policy - a general guideline for making a
decision about a structured problem.

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 Programmed Versus
Non-programmed Decisions

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 Types of Problems
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Structured Problems - straightforward, familiar,

and easily defined problems.
Unstructured Problems - problems that are
new or unusual and for which information is
ambiguous or incomplete.

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 Summarizing
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 Decision-Making Situations
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Certainty
a situation in which a manager can make an accurate
decision because the outcome of every alternative
choice is known.
Risk
a situation in which the manager is able to estimate
the likelihood (probability) of outcomes that result
from the choice of particular alternatives.

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 Decisions Under Uncertainty
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Limited information prevents estimation of outcome

probabilities for alternatives .
Limited information forces managers to rely on
intuition, hunches, and “gut feelings.”

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 DECISION-MAKING STYLES
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a) The directive style is
characterized by low tolerance for
ambiguity and a rational way of
thinking.
b) The analytic style is one
characterized by a high tolerance
for ambiguity and a rational way
of thinking.
c) The conceptual style is
characterized by a high tolerance
for ambiguity and an intuitive way
of thinking.
d) The behavioral style is
characterized by a low tolerance
for ambiguity and an intuitive way
of thinking.
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 OVERVIEW OF MANAGERIAL DECISION MAKING

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