Chapter 6

Decision
Making

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 Slide 2

Learning Objectives
After reading this chapter, you should be able to:
• Recognize the nature of management decisions:
programmability, uncertainty, risk, conflict, decision
scope, and crisis situations.
• Utilize the six steps of decision making.
• Apply the criteria of quality and acceptance to a
decision.
• Reap the benefits and avoid the problems of group
decision making.
• Develop time management skills to generate adequate
time to make decisions.
• Know when to delegate, and how to do so wisely.

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 Slide 3

Introduction
• Making decisions under conditions of risk and
uncertainty is one of the most important activities
that managers engage in.
• Generally, there is a lack of information and a
limited amount of time available to make the
decision.
• Procrastinating and not making a decision
sometimes has greater risk than making it.

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 Slide 4

Decision Making
• The process of identifying
problems and opportunities and
resolving them.
• Management decisions can be
made by managers, teams, or
individual employees, depending
on:
 The scope of the decision, and
 The design and structure of the
organization.
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 Slide 5

Characteristics of Management
Decision Making
Programmability

Decision Scope Uncertainty

Conflict Risk

Crisis

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 Slide 6

Characteristics of Management
Decision Making (Cont)
Programmed Decisions

Programmability
Non-programmed Decisions

Certainty

Uncertainty
Uncertainty

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 Slide 7

Characteristics of Management
Decision Making (Cont)
• Risk – occurs when the outcome of management
decision is uncertain
Risk has both positive and negative aspects
Decision environment for risk vary depending
upon company culture and size
• Conflict – occurs when there are opposing goals,
scares resources, or differences in priorities
• Crisis – a situation that involves small amounts of
time to make a decision that can impact the
survival of the organization
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 Slide 8

Characteristics of Management
Decision Making (Cont)
• Decision Scope – the effect and time horizon of a
decision
– Strategic Decisions – long term perspective of 2-5
years and affect on the organization
– Tactical Decisions – short term perspective of 1
year or less and focus on subunits
– Operational Decisions – shortest time perspective,
generally less than a year, often measured on a daily
or weekly basis

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 Slide 9

Stages of Decision Making

Identifying Generating Selecting the

and alternative Evaluating best Implementing
diagnosing solutions alternatives alternative the decision
the problem

Evaluating the
decision

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 Slide 10

Typical problems
that require decisions
• A high level of employee turnover.
• A reduction in firm profits.
• Unacceptable levels of “shrinkage” in a store.
• Lower than planned quality of finished goods.
• An unexpected increase in workplace injuries.
• The invention of a new technology that can
increase the productivity of the workforce.
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 Slide 11

Evaluating Alternatives

• Decision criteria should be related to the

performance goals of the organization and
its subunits.
• Decision criteria can include:
 Costs
 Profits
 Timeliness
 Whether the decision will work
 Fairness
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 Slide 12

Evaluating Alternatives (cont)

• A practical way to apply decision criteria is to

consider:
Decision quality – aspect of decision making based on
such facts as costs, revenues, and product design
specifications.
Decision acceptance – aspect of decision making
based on people’s feelings.

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 Slide 13

Approaches to selecting
the best alternative
• Optimizing – selecting
the best alternative from
among multiple criteria.
• Satisficing – selecting
the first alternative
solution that meets a
minimum criterion.
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 Slide 14

Key factors for

successful implementation
• Providing resources (staff, budgets, office space) that
will be needed for the activities that are required for
successful implementation.
• Exercising leadership to persuade others to move the
implementation forward.
• Developing communication and information systems
that enable management to know if the decision
alternative is meeting its planned objectives.
• Recognition and rewards for individuals and teams
that are successful with implementation.

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 Slide 15

Assumptions of the Rational

Decision Making Process
• The problem is clear and unambiguous.
• There is a single, well-defined goal that all
parties agree to.
• Full information is available about criteria.
• All the alternatives and their consequences
are known.

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 Slide 16

Assumptions of the Rational

Decision Making Process (cont)

• The decision preferences are clear.

• The decision preferences are constant
and stable over time.
• There are no time and cost constraints
affecting the decision.
• The decision solution will maximize the
economic payoff.

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 Slide 17

Factors That Limit Rational

Decision Making

Organization Politics

Emotions and Personal

Preferences

Illusion of Control

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 Slide 18

Nonrational Decision
Making Models
Administrative Model
• Bounded rationality – the ability of a manager to be
perfectly rational is limited by factors such as
cognitive capacity and time constraints
• Therefore, decision makers apply heuristics , or
decision rules, that quickly eliminate alternatives
• By using the heuristic known as satisficing, a
manager seeks out the first decision alternative that
appears to be satisfactory
• Satisficing is an accurate model many management
decisions.
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 Slide 19

Nonrational Decision
Making Models (cont)
Garbage Can Model
• This model suggests that managers have a
set of preestablished solutions to problems
located in “garbage cans.”
• The garbage can model is likely to be used
when decision makers are undisciplined and
have no clear immediate goals.
• The decision making process lacks structure
• This can lead to serious difficulties
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 Slide 20

Advantages and Disadvantages of

Group Decision Making
Advantages
• Increased acceptance
• Greater pool of
knowledge
• Different perspectives
• Greater
comprehension
• Training ground
Disadvantages
• Social pressure
• Minority domination
• Logrolling
• Goal displacement
• “Groupthink”

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 Slide 21

Managing Group
Decision Making

Leadership Style

Devil’s Advocate Role

Stimulating Creativity

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 Slide 22

Leader Decision
Making Styles

• Decide and persuade

• Discover facts and decide
• Consult and decide
• Consult with group
and decide
• Group decision

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 Slide 23

Decision Making Techniques

to Stimulate Group Creativity

Brainstorming Storyboarding

Delphi Technique Nominal Group

Technique (NGT)

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 Slide 24

Skills for Decision

Making Process
• Time management skills
To make good decisions, managers
need time to understand the problem
and develop creative solutions.
• Delegation skills
Managers who know how to delegate
are able to accomplish more than
those who feel the need to be
involved in every decision, no matter
how trivial.
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 Slide 25

Effective Time
Management Practices
• Plan a list of things that need to be
done today.
• Plan weekly, monthly, and annual
schedules of activities.
• Schedule difficult and challenging
activities when you are at your highest
level of energy and alertness.
• Set deadlines.
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 Slide 26

Effective Time
Management Practices (cont)
• Answer phone messages
and e-mail in batches
during a lull in your work schedule.

• Have a place to work uninterrupted.

• Do something productive during non-productive

activities.

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 Slide 27

Effective Delegation
 Determine what you want
done.
 Match the desired task with
the most appropriate
employee.
 Communicate clearly when
assigning the task.
 Ask questions to make sure
the task is fully understood.
 Set clear guidelines.

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 Slide 28

Effective Delegation (cont)

 Keep communication channels open.
 Allow employees to do the task the way
they feel comfortable doing it.
 Trust employees’ capabilities.
 Check on the progress of the assignment.
 Hold the employee responsible for the work.
 Recognize what the employee has done,
and show appropriate appreciation.
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