Decision-Making

Definition

 The heart of all the management functions.

 The process of identifying and choosing alternative
courses of action in a manner appropriate to the
demands of the situation.
Decision Process
 Effective decisions are made through a systematic process
defining clearly the elements in a distinct sequence of steps.
 Most successful decision making follows a process that
consist of the following steps:
1. Identify the problem
2. Specify objectives and the decision criteria
3. Develop alternatives
4. Select the best alternative
5. Implement the chosen alternative
6. Monitor results to ensure the desired results are achieved
Identify the Problem
 Identifying the problem is the focal point of the process.
 Solution must address the basic problem not the symptoms.
 The decision maker must identify the criteria by which proposed
solutions will be judged. Common criteria often relate to:
1. Capital
2. Time
3. Profits
4. Maintenance
5. Return of investment
6. Increase in costs
7. Risks
Analyzing and Comparing
Alternatives
 Often benefits from the use of mathematical or
statistical techniques.
Selection of the Best
Alternative
 Depend on the objectives of the decision maker and
the criteria that are being used to evaluate
alternatives.
Implementing The Chosen
Solution
 Carrying out the actions indicated by the chosen
alternative.
 If the alternative selected is to do nothing, no action
will be required to implement.
Reasons For Poor Decision

 Sometimes despite the best efforts of the manager,

a decision turns out to be poor due to unforeseeable
circumstances.
 Although such occurrences are not very common, but
more often, failure can be traced on some
combination of the following reasons:
1. Errors made in the decision process
2. Bounded rationality
3. Sub-optimism
Reasons For Poor Decision . . .

 Bounded Rationality. A term which refers to the limit

as control on making decision because of costs, human
abilities, time, technology and the availability of
information.
 Sub-Optimization. Is the result from each different
department’s attempt to reaching a solution that is
optimum for their department.