Daft managerial decision making final

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Developed by Cool Pictures & MultiMedia Presentations Copyright © 2003 by South-Western, a division of Thomson Learning. All rights reserved.

Decisions

• Process of identifying problems and opportunities and resolving them

• Is a choice made from available alternatives• May be difficult to make• Made amid changing factors• Information may be unclear• May have to deal with conflicting points of view


Types of Decisions

Programmed decisions:• situations that occur often enough to enable decision

rules to be developedNonprogrammed decisions:• are made in response to situations that are unique, are

poorly defined and largely unstructured• many involve strategic planning

Decision making is the process of identifying problems and opportunities and then resolving them.


Types of Managerial Decisions (cont’d)

• Proactive decision– A decision made in anticipation of an external

change or other conditions.– Rational, proactive approach can prevent problems

from developing.• Reactive decision

– An after-the-fact decision made in response to external changes.

– Suggests a lack of planning and strategy.


Types of Managerial Decisions (cont’d)

• Intuitive decisions– Involve the use of estimates, guesses, or hunches to

decide among alternative courses of action.• Systematic decisions

– Result from a logical, organized analytic process.– Systematic decision-making requires

• A clear set of objectives.• A relevant information base.• Rational and creative generation, implementation, and

assessment of alternatives.


Difference Between Programmed and Nonprogrammed Decisions

o Certainty– all the information the decision maker needs is fully available

o Risk– decision has clear-cut goals– good information is available– future outcomes associated with each alternative are subject to

chanceo Uncertainty

– managers know which goals they with to achieve– information about alternatives and future events is incomplete– managers may have to come up with creative approaches to

alternativeso 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

OrganizationalProblem

ProblemSolution

Low HighPossibility of Failure

Certainty Risk Uncertainty Ambiguity

ProgrammedDecisions

NonprogrammedDecisions

PepsiCo, Inc. serves consumers beverages and

snack foods.

http://www.pepsico.com/


Selecting aDecision 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


The Classical Model of Decision Making

When faced with a

decision situation,

managers should. . .

. . . and end up with

a decision that best

serves the interests

of the organization.

• obtain complete

and perfect information

• eliminate uncertainty

• evaluate everything

rationally and logically

Figure 9.2


Classical 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 Administrative Model of Decision Making

Figure 9.4

When faced with a

decision situation

managers actually…

. . . and end up with a

decision that may or may

not serve the interests

of the organization.

• use incomplete and

imperfect information

• are constrained by

bounded rationality

• tend to satisfice


Administrative Model

Managers actually make decisions in situations characterized by non-programmed decisions, uncertainty, and ambiguity

Managers are unable to make economically 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– satisficing: 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 intuition, looks to 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


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 Satisficing choice for resolving Bargaining and discussion among

for maximizing outcomes problem using intuition coalition members


The Decision-Making Process

Exhibit 3 . 3Exhibit 3 . 3

Steps in a Steps in a Typical Typical

Decision-Making Decision-Making ProcessProcess


The Decision-Making Process

• Step 1: Identify and define the problem– Problem: realization that a discrepancy exists

between a desired state and current reality.– Problem identification factors:

• Perceptual inaccuracies.• Defining problems in terms of solutions.• Identifying symptoms as problems.


The Decision-Making Process (cont’d)

• Step 2: Establish decision criteria– Determine significance of each problem according to:

• Urgency: amount of time available to solve a problem.• Impact: seriousness of a problem’s effect.• Growth tendency: future consequences of a problem.

• Step 3: Weight criteria– Weighting: process of ranking importance of decision

criteria.



• Step 4: Develop alternatives– Examine organization’s internal and external

environment for solutions to problem.• Step 5: Evaluate alternatives

– Select alternatives that will produce most favorable outcomes and least unfavorable outcomes.

• Step 6: Decide on a solution– Select a particular solution to achieve a

predetermined objective.



• Step 7: Implement the decision– Implementation may be more important than the

actual choice of alternative.• Step 8: Feedback and evaluation

– System of control and evaluation necessary to make sure actual results are consistent with original objectives.


Six Steps in the ManagerialDecision Making Process

Evaluationand

Feedback

Diagnosisand Analysis

of Causes

Recognition ofDecision

Requirement

Development ofAlternatives

Selection ofAlternative

Implementationof Chosen

AlternativeDecision-MakingProcess


Steps in the Rational Decision-Making Process

Step Detail Example

1. Recognizing and defining the decision situation

Some stimulus indicates that a decision must be made. The stimulus may be positive or negative.

A plant manager sees that employee turnover has in-creased by 5 percent.

2. Identifying alterna-tives

Both obvious and creative alternatives are desired. In general, the more important the decision, the more alterna-tives should be considered.

The plant manager can in-crease wages, increase bene-fits, or change hiring stan-dards.

3. Evaluating alterna-tives

Each alternative is evaluated to determine its feasibility, its satisfactoriness, and its consequences.

Increasing benefits may not be feasible. Increasing wages and changing hiring standards may satisfy all conditions.

Table 9.1a


Steps in the Rational Decision-Making Process (cont’d)

Step Detail Example

4. Selecting the best alternative

Consider all situational factors, and choose the alternative that best fits the manager’s situation.

Changing hiring standards will take an extended period of time to cut turnover, so increase wages.

5. Implementing the chosen alternative

The chosen alternative is implemented into the organizational system.

The plant manager may need permission from corporate headquarters. The human resource department establishes a new wage structure.

6. Following up and evaluating the results

At some time in the future, the manager should ascertain the extent to which the alternative chosen in step 4 and implemented in step 5 has worked.

The plant manager notes that, six months later, turnover has dropped to its previous level.

Table 9.1b


Personal Decision Framework

Situation:· Programmed/non-programmed· Classical, administrative,

political· Decision steps

Decision Choice:·Best Solution to Problem

Personal Decision Style:·Directive·Analytical·Conceptual·Behavioral


Personal Decision Framework

Directive Style: used by people who prefer simple, clear-cut solutions. Analytical Style: used by managers who like to consider complex solutions

based on as much data as they can gather. Conceptual Style: used by people who like to consider a broad amount of

information, more socially oriented. Behavioral Style:often the style adopted by managers having a deep

concern for others.

Situation:· Programmed/non-programmed· Classical, administrative,

political· Decision steps

Decision Choice:·Best Solution to Problem

Personal Decision Style:·Directive·Analytical·Conceptual·Behavioral


Evaluating Alternatives in theDecision-Making Process

Is the alternativefeasible?

Eliminate fromconsideration

Is the alternativesatisfactory?

Are the alternative’sconsequencesaffordable?

Retain for furtherconsideration

Yes Yes Yes



No No No

Figure 9.3

Daft managerial decision making final

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