DECISION-MAKING

LEARNING OUTCOMES
• Explain the nature of decision-making and its types
• Describe the factors influencing decision-making
• Explain the decision-making process
• Differentiate between individual decision-making
and group decision-making
• Discuss the ways in which groups make decisions
• Explain group decision-making techniques
• Explain ethics in decision-making
 INTRODUCTION
• Main activities for managers
• From the simplest and most
routines to complicated and
unique
• Higher rank managers, make
more important and wide-ranging
decisions
• Good decision-making skills are
critical to organizational
effectiveness
 Nature of Decision-making
• A process of selecting the best alternative from
among a set of alternatives
• Must weigh all positives and negatives of each
alternatives, when trying to make a good decision
• Decisions are choices; straightforward or need
critical requirement
• Decision-making is a response to a problem
• Happens when individuals or groups make choices
among one or more alternatives to solve a problem,
with intention to obtain the best outcome
 Classification of Decision-making
Programmed decision

• Routine and repetitive, outlined by rules, policies and

procedures
• Highly structured (goals are clear and well-known,
sources of information are clearly defined)
• Normally are automatic decisions that do not require
much thought and evaluation
• Commonly made by lower level managers, where
time taken to decide is relatively short
 Example:
• An organization is facing high demand from its
customers for its product
• But employees number is not sufficient to fulfill
demand of production
• To solve this problem, the manager might decides to
hire more employees to meet customer’s demand
• Managers make decision in a short time, where the
existing policy has already outlined the solution for
such situation
Non-programmed

• Require considerable thought and critical evaluation

of alternatives because guidelines or procedures are
not available
• Non-automatic decisions – cannot be made
instantaneously without much thought
• Rely heavily on judgment, intuition and creativity
• Unique decision occur under unexpected situations,
thus needing serious evaluations of available
alternatives by higher level managers
• Poorly structured and take longer time to make
 Example:
• An organization’s decision to export its product to
international markets requires careful deliberation as
the organization needs to consider the positive and
negative impacts of the decision
Characteristics Programmed Non-programmed
Type of decision Automatic and well Non-automatic and poorly
structured structured
Frequency Routine and repetitive Unique and unusual
Goals Clear and specific Unclear
Information Readily available Not available
Consequences to Minor Major
organization
Organizational level Lower level managers Higher level managers
Time needed for solution shorter Relatively long
Basis of solution Organizational rules, Managers’ judgment,
policies and procedures intuition, creativity
 Factors Influencing Decisions
1. Individual differences

a. Personality
• An enduring, organized and distinctive pattern of
behaviour that describes an individual’s adaptation
to a situation (Goodman et al., 2007)
• Influence work behaviour, performance and the
way people make decisions
b. Attitudes

• Values, thoughts and behavioural tendencies held by

a person (Goodman et al., 2007)
• A way of thinking or feeling about someone or
something, which is reflected in a person’s behaviour

• Types of attitude:
i. Explicit – slow, controlled, relatively effortful,
conscious and intentional; have impact on
decision-making
ii. Implicit – quick, intuitive, automatic, relatively
effortless, unintentional and can operate outside
of conscious awareness
2. Organizational constraint

a. Performance evaluation
• Managers base their decisions on criteria they are
evaluated by top managers
b. Reward systems
• Decisions being made for rewards as
expected from the organization
• In favor of personal gains

c. Rules and regulations

• Created to guide managers in
decision-making and prevent them
from making mistakes
• Decision has been fixed for such
incident, thus limit managers
creativity and freedom in making
decisions or to use different
approaches
 Decision-making Process
1. Identifying opportunities and diagnosing problems

• Identify problems that need to solve

• Decision-making also happens when there are
opportunities for organizational development and
advancement
• Assessment of problems are based on the
information at hand
• Accurate assessment determines the quality of
decision
 Decision-making Process
Identify opportunities and
diagnosing problems

Generating alternatives

Evaluating alternatives

Making decisions

Implementing decisions

Evaluating and
monitoring results
2. Generating alternatives
• Come up with creative solutions, so
that objective of solving problem can
be achieved
• Alternatives must be in line with the
problem
3. Evaluating alternatives
• Determine the value of adequacy of
each alternatives
• Advantages and disadvantages of each
alternative must be correctly assessed
• Find ranking of alternatives(make the
most accurate decision)
4. Making decisions
• Commonly, alternatives chosen
have more advantages
5. Implement the decisions
• Need to consider:
i. The individuals and their sensitivity
ii. The ability and availability of the
resources to carry out the
implementation task
6. Evaluating and monitoring
results
• Evaluate how well the
decision is working
• To find loopholes in the
decision for future
improvement in decision-
making
• If decision is not effective,
the process starts again
 Individual Decision-making
• Managers make decisions, non-
managerial employees are also
empowered to make decision
• Major influence – perception
• Perception is influence by background,
attitudes, experience, time, etc.
• Evaluation of alternatives is also
influenced by perception – the way
individual assess the benefits and costs
of each alternative, bringing different
solutions to a problem in the end
 Group Decision-making
• A situation where two or more
people are involved in making
decisions within organizations
• A common practice, produces
better solutions to a problem since
group members exchange ideas
and opinions
• Edgar Schein describe 6 groups of
decision-making ways:
1. Decision by lack of response

• Group members suggesting ideas, yet no one

responds
• Unsuitable and eliminated as lack of responses,
support and discussion in group
• Once the group members accepted the ideas, other
ideas will be discarded
• a.k.a ‘plop’, suitable during deciding materials for
new products
2. Decision by formal authority

• Decisions was made by a group’s chairperson, leader,

manager, head or other authority figure
• With or without prior discussion
• Seems autocratic, due to the goal of the group is to
provide the authority figure with the complete
information needed to make an informed decision
• Suitable for military, teams of junior and senior
scientists, teams of junior and senior lawyers
3. Decision by majority rule

• Voting or polling as basis of deciding

• Practiced by legislative groups
• A formal voting session may take place to determine
majority viewpoint
• Divides group to ‘winner’ and ‘loser’ (minority
category uncommitted to final decision)
4. Decision by minority

• Involves two or more people, who dominate and

control the group, making decisions for the group
• Railroad or influence other members to accept
decisions that they prefer
• Done by providing a suggestion, forcing members to
give quick responses
5. Decision by consensus

• Full discussion and most members favors the

decision, while other support it
• Most effective decision-making method- builds
commitment in implementing decisions
• Minority feels heard and support the ultimate
decision
• A process where communication is sufficiently open
and supportive to make everyone feel that they have
opportunity to influence decision
6. Decision by unanimous decision

• All members agree to the decision

• a perfect decision-making method but almost
impossible to be achieved practically as members
sometimes turn to majority or authority rule
decision, or any other ways of decision-making
• Every person has different ideas, thoughts and
perceptions
Groups Decision-making Techniques
1. Brainstorming
• A group of people, sit around table and generate
ideas in the form of free association
• Encourage group members to generate as many
ideas as possible on a specific matter
• Focus on generation of ideas rather than evaluation
of ideas
• Effective in reducing interference that is caused by
critical and negative reactions to a person’s ideas
from group members
• Does not restrict the group members on the type of
ideas
• Allowed to express any ideas, even wild and
ridiculous
• Criticism and evaluation of ideas are not allowed
until discussed
• Ideas are recorded electronically to prevent
production blockage
• Group members become distracted by their own
ideas while listening to other voice
Rules of brainstorming
i. Free to express ideas or opinion to group leader
or facilitator
ii. More ideas are better
iii. Wild and ridiculous idea are encourage
iv. Criticism of ideas are not allowed
v. Combining ideas or building ideas of others are
encouraged
vi. One conversation at a time; interruptions are
not allowed
2. Nominal Group Technique (NGT)
• More structured than brainstorming
• Integrates both individual and group creativity in
making decisions
• Members operate independently, generate ideas and
solve problems on own, in silence and writing
• Members do not interact to each other, avoid strong
personality domination
• Not allowed to throw ideas freely, limits interaction
between them
• Ideas are written individually, presented in a round-
robin manner, later to be discussed and evaluated
Steps:
i. Facilitator/ leader will ask every group member
to write down ideas silently
ii. All ideas are listed on a chart
iii. Discussion is allowed only to clarify, not criticize
iv. Voting is needed to choose the best idea

• More effective than brainstorming-reduce

roadblocks to group decision-making (promotes a
balanced participation of group members)
• Decision using mathematical votes
• Rigid and lack of cohesiveness – frustrated members
3. Delphi technique
• Developed by rand corporation (Goodman et al.,
2007)
• A modification of nominal group technique, except
that it involves obtaining opinions of experts who are
physically separated and unknown to each other
• Group members do not have a face-to-face meeting
• Using email to sent questionnaire
• Prevent disagreements or conflicts among group
members, not meeting the person
Steps:
i. Identification of issues/problems
ii. Development of a survey of questionnaire, sent to
participants to elicit feedback in solving the issues
iii. Collect and summarize the solutions and opinions,
before evaluating them until the best solution is
found
4. Electronic meeting
• Current and modern method
• Using intranet, internet, video conferencing, social
networking sites
• Electronic boardroom that displays ideas of members
on a large screen, voting process, results
• Chat forum – lead to low satisfaction among group
members
 Advantages of Group
Decision-making
1. Greater total knowledge
• Generates more ideas, gain more knowledge and
information, assess more alternatives for a specific
problem

2. Different perspectives
• Individuals are different in their characteristics and
perceptions – different views on the same problem
3. Higher member satisfaction
• Ideas are discussed in group
• Fair chance to criticize, evaluate and agree on final
decision

4. Better understanding on the decision

• Group members will have a better understanding of
the rationale of decision-making

5. Commitment growth for teams

• Willing to commit when they are a part of a larger
group, develop a sense of pride and accomplishment
 Disadvantages of Group
Decision-making
1. Takes more or longer time
• So many ideas or alternatives to be discussed and
evaluated

2. Dominated by a few people

• Control the group and provide major input
• Take over discussion, let the rest unproductive
3. Diminish team spirit
• Ideas are not being heard, feel left out and not
important

4. Opinions can be swayed

• Easy to be influence and manipulated by other
members
• Tendency of biased opinions from group members

5. Groupthink
• Focus more on cohesiveness of group members
rather than deciding the best possible solution
 Ethics in decision-making
• Ethics – a person’s belief about right and wrong,
pertaining to behaviour
• Ethical behaviour – behaviour that is accepted by
society as good
• Unethical behaviour – behaviour that is regarded as
bad and unacceptable by society
• Ethical decision-making – the process of evaluating
and choosing among alternatives in a manner that is
consistent with ethical principles
Process of Making Ethical Decision
1. Commitment – The desire to do right things,
regardless of the cost

2. Consciousness – the awareness to act consistently

and apply moral conviction to daily behaviour

3. Competency – the ability to collect and evaluate

information, develop alternatives and foresee
potential consequences and risks
Decision-making scenarios:
• Hiring and firing of employees
• Dealing with customers and suppliers
• Setting of salary and bonuses
• Awarding of promotions

• Managers must make sure that the decision made

are the best for organization not for self interest

Should ponder these questions:

• Is it legal?
• Is it balanced?
• How will the decision make me feel about myself?