Chapter 9

Managerial Decision Making

For use with Management 2e, by Daft, Benson & Henry, 9781473770799 © Cengage EMEA 2020
 Types of Decisions and Problems

Decision making Decision is a

is the process of choice made
identifying from available
opportunities alternatives

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For use with Management 2e, by Daft, Benson & Henry, 9781473770799 © Cengage EMEA 2020
 Programmed and Non-programmed
Decisions
 Programmed Decisions
 Recurring problems
 Apply rule
 Non-programmed Decisions
 Unique situations
 Poorly defined
 Unstructured
 Important consequences

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For use with Management 2e, by Daft, Benson & Henry, 9781473770799 © Cengage EMEA 2020
 Facing Certainty and Uncertainty

 Difference between programmed and non-

programmed decisions
 Certainty – Situation in which all information is
fully available
 Risk – Future outcomes associated with an
alternative are subject to chance
 Uncertainty - Depends on the amount and value of
information available

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For use with Management 2e, by Daft, Benson & Henry, 9781473770799 © Cengage EMEA 2020
 9.1 - Conditions that Affect the Possibility of
Decision Failure

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For use with Management 2e, by Daft, Benson & Henry, 9781473770799 © Cengage EMEA 2020
 Ambiguity and Conflict

 Ambiguity - Making decisions in difficult situations

 The goals and the problem are unclear
 Wicked decisions involve conflict over goals and
have changing circumstances, fuzzy information and
unclear links
 There is often no “right” answer

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For use with Management 2e, by Daft, Benson & Henry, 9781473770799 © Cengage EMEA 2020
 The Ideal, Rational Model
 Rational economic assumptions drive decisions
 Operates to accomplish established goals, problem is
defined
 Decision maker strives for information and certainty,
alternatives evaluated
 Criteria for evaluating alternatives is known; select
alternative with maximum benefit
 Decision maker is rationale and uses logic

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For use with Management 2e, by Daft, Benson & Henry, 9781473770799 © Cengage EMEA 2020
 How Managers Actually Make Decisions

 Administrative/descriptive approach
 How managers really make decisions
 Recognize human and environmental limitations
 Bounded rationality – People have limits or
boundaries on how rational they can be
 Satisficing – Decision makers choose the first
solution that satisfies minimal decision criteria

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For use with Management 2e, by Daft, Benson & Henry, 9781473770799 © Cengage EMEA 2020
 Steps in the Administrative Model
 Goals are often vague
 Rational procedures are not always used
 Managers’ searches for alternatives are limited
 Most managers settle for satisficing
 Intuition – Quick apprehension of situation based on
practice and experience

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For use with Management 2e, by Daft, Benson & Henry, 9781473770799 © Cengage EMEA 2020
 Decision-Making Model: Political
 Decisions involve managers with diverse interests
 Managers must engage in coalition building
 Informal alliance to support specific goal
 Without a coalition, powerful groups can derail the
decision-making process
 Political model resembles the real environment

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For use with Management 2e, by Daft, Benson & Henry, 9781473770799 © Cengage EMEA 2020
 Decision-Making Model: Political
 Assumptions of the political model
 Organizations are made up of groups with diverse
interests, goals and values
 Information is ambiguous and incomplete
 Lack of time, resources or mental capacity to process
all information regarding a problem
 Decisions are the result of bargaining and discussion
among coalition members

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For use with Management 2e, by Daft, Benson & Henry, 9781473770799 © Cengage EMEA 2020
 9.2 – Characteristics of Classical,
Administrative, and Political Decision-Making
Models

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For use with Management 2e, by Daft, Benson & Henry, 9781473770799 © Cengage EMEA 2020
 Decision-Making Steps
 Recognition of Decision Requirement – Identify problem or
opportunity
 Diagnosis and Analysis – Analyze underlying causal factors
 Develop Alternatives – Define feasible alternatives
 Selection of Desired Alternative – Alternative with most
desirable outcome
 Implementation of Chosen Alternative – Use of managerial,
administrative and persuasive abilities to execute chosen
alternative
 Evaluation and Feedback – Gather information about
effectiveness
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For use with Management 2e, by Daft, Benson & Henry, 9781473770799 © Cengage EMEA 2020
 9.3 - Six Steps in the Managerial Decision-
Making Process

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For use with Management 2e, by Daft, Benson & Henry, 9781473770799 © Cengage EMEA 2020
 9.4 - Decision Alternatives
with Different Levels of Risk

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For use with Management 2e, by Daft, Benson & Henry, 9781473770799 © Cengage EMEA 2020
 9.5 - Personal Decision Framework

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For use with Management 2e, by Daft, Benson & Henry, 9781473770799 © Cengage EMEA 2020
 Personal Decision Framework

 Directive style – People who prefer simple, clear-cut

solutions to problems
 Analytic style – Managers prefer complex solutions
based on a lot of data
 Conceptual style – Managers like a broad amount of
information
 Behavioural style – Managers with a deep concern
for others

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For use with Management 2e, by Daft, Benson & Henry, 9781473770799 © Cengage EMEA 2020
 Why Do Managers Make
poor Decisions?

 Being influenced by initial impressions

 Justifying past decisions
 Seeing what you want to see
 Perpetuating the status quo
 Being influenced by problem framing
 Overconfidence

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For use with Management 2e, by Daft, Benson & Henry, 9781473770799 © Cengage EMEA 2020
 Innovative Decision Making

 Mechanisms to help reduce bias-related decision

errors:
Start with brainstorming
Use hard evidence
Engage in rigorous debate
Avoid groupthink
Know when to bail
Do a postmortem

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For use with Management 2e, by Daft, Benson & Henry, 9781473770799 © Cengage EMEA 2020