Pretest

1.
Pretest
1. Decision making is a major part of planning. And planning is a function of management. Therefore,
decision making is necessary as it is the start of planning and the management.
Decision-making is the act of making a choice among available alternatives. There are innumerable
decisions that are taken by human beings in day-to-day life. In business undertakings, decisions are taken
at every step. It is also regarded as one of the important functions of management.
Managerial functions like planning, organizing, staffing, directing, coordinating and controlling are carried
through decisions. Decision making is possible when there are two or more alternatives to solve a single
problem or difficulty. If there is only one alternative then there is no question of decision making. It is
believed that management without a decision is a man without a backbone. Therefore, decision making is a
problem-solving approach by choosing a specific course of action among various alternatives.

"Decision-making is the selection, based on some criteria from two or more possible alternatives."- George
R.Terry

"A decision can be defined as a course of action consciously chosen from available alternatives for the
purpose of the desired result." - J.L. Massie

In conclusion, we can say that decision making is the process of choosing a specific course of action
from various alternatives to solve organizational problems or difficulties

Moreover, just to get wheels started and to keep them moving, decisions must be made.
Every aspect of management functions, such as planning, organizing, and control is
determined by decisions, the result of which is the performance in the organization.
Decision making is vital to all management activities. It helps set definite objectives,
prepare plans of action, determine organizational structure, motivate personnel and
introduce innovations

Decision making is considered as the backbone for the business management because without
taking the right decision at the right time, nothing can be performed. The further importance of
decision making can be discussed under the following points:

1. Achievement of Goal/Objectives:
Decision making is important to achieve the organizational goals/objectives within given time
and budget. It searches the best alternative, utilizes the resources properly and satisfies the
employees at the workplace. As a result, organizational goals or objectives can be achieved as
 per the desired result.

2. Employees Motivation:
Decision making is important to motivate the employees within an organization. It provides an
overall framework of operation and guidelines to the operating level of staff. It also provides
different types of facilities and benefits on time. As a result, employees are motivated to their
job or work as per the organizational requirement.

3. Proper Utilization of Resources:

An organization has various resources like man, money, method, material, machine, market and
information. All these resources are properly utilized without any leakage and wastage with the
help of the right decision at the right time. As a result, an organization can operate at a
minimum cost.

4. Selecting the Best Alternative:

As we know that the problem has multiple solutions. Decision making is important to select the
best alternative among various alternatives by analyzing them one by one using various
financial, statistical, and accounting tools/techniques.

5. Evaluation of the Managerial Performance:

Decision making is not only important to select the best alternative but also essential for
evaluating the performance of a manager. The quality/success of the manager largely depends
upon the number of right decisions that he/she can take for organizational success. Therefore,
decision making is important to judge the performance of the top level of management.

6. Indispensable Element/ Component:

Decision making is an indispensable element/ component for organizational success because
without taking the right decision at the right time, nothing can be performed as per the plan.

7. Pervasive Function:
Decision-making is a pervasive function of managers aimed at achieving organizational goals.
Decisions are to be taken in all managerial functions such as planning, organizing, motivating,
directing and controlling and in all functional areas such as production, marketing, finance,
personnel, and research and development. It indicates that the decision-making is spread over
many areas of the organization.
Steps of Decision-Making Process
source:slideplayer.com

For the rationality, reliability, and enforceability of decisions, managers should follow a
sequential set of steps. It is said that a decision is rational if appropriate means are chosen to
reach desired ends. In this regard, various management authorities have recognized and
described different steps in the process of decision-making. Ricky W. Griffin has suggested six
steps in the process of decision making. Accordingly, the steps are:
1. Implementation of Decision:
After selecting the best alternative, the manager or superior should convert the decision into
action. For this purpose, he/she should communicate with their subordinates and manage the
various additional resources for the implementation of the organizational decision.
 2. Developing an Alternative Course of Action:
As we know that a problem has multiple solutions. Therefore, the decision-maker should
develop the various possible alternatives for a better decision. While developing the alternative
course of action he/she may use their own knowledge, skills, experiences and technical support
from the professional planner and experts as well.

3. Identification of Problem:
The initial stage of the decision-making process is to identify the exact problem. The problem
may occur due to the gap between thinking and do the process. The reason for problems may
be internal or external. Decision-makers should identify the correct problems before taking any
decision. It is not an easy job or task. Therefore, he/she may use his own knowledge, skills,
experience and collect information from internal and external sources. It is believed that the
identification of the correct problem is almost half part of the decision-making process.

4. Analysis of Problem:
After identification of the correct problem decision-maker should analyze the problem
systematically and scientifically in terms of cost, time, legality, organizational resources, and
short-term as well as the long-term impact of the problem. While analyzing the problem he/she
may use various financial, accounting and statistical tools or techniques.

5. Selecting the Best Alternative:

After analyzing the various alternatives, the decision-maker has to select the best alternative
among the various alternative by considering the short-term as well as long-term impact. For
this purpose, he/she may use his/her knowledge, skills, and experiences. He/she may also
concern with other stakeholders for a better decision.

6. Review of Decision:
The last step of the decision-making process is to get responses or feedback from other
stakeholders of the organization. If the response is positive then the decision-making process is
successfully completed. It the response is negative then he/she must go through the first step to
take a new organizational decision.

7. Evaluating Alternative Course of Action:

After developing various possible alternatives, the decision-maker should evaluate all
alternatives one by one for a better decision. In this step, he/she should try to search the
answers to the following questions.

- Whether the alternative is feasible in terms of cost, time, legality and other organizational
resources or not?
- Whether the alternative is satisfactory to solve the organizational problems or not?
- Whether the features of alternatives are matched with the objectives of the business or not

Another:

A decision is an act of selection or choice of one action from several alternatives.

Decision-making can be defined as the process of selecting a right and effective course of
action from two or more alternatives for the purpose of achieving a desired result.
Decision-making is the essence of management.

According to P. F. Drucker – “Whatever a manager does he does through

making decisions.” All matters relating to planning, organising, direction, co-
ordination and control are settled by the managers through decisions which are
executed into practice by the operators of the enterprise. Objectives, goals, strategies,
policies and organisational designs are all to be decided upon in order to regulate the
performance of the business.
The entire managerial process is based on decisions. Decisions are needed both for
tackling the problems as well as for taking maximum advantages of the opportunities
available. Correct decisions reduce complexities, uncertainties and diversities of the
organisational environments.

experience to evaluate several alternatives and select the best one.

3. When taking a decision, the managers have a purpose. They propose and analyse the
alternative courses of action and finally make a choice that is likely to move the
organisation in the direction of its goals.

Importance of Decision-Making:
Management is essentially a bundle of decision-making process. The managers of an
enterprise are responsible for making decisions and ascertaining that the decisions
made are carried out in accordance with defined objectives or goals.

ADVERTISEMENTS:

Decision-making plays a vital role in management. Decision-making is perhaps the most

important component of a manager’s activities. It plays the most important role in the
planning process. When the managers plan, they decide on many matters as what goals
their organisation will pursue, what resources they will use, and who will perform each
required task.

When plans go wrong or out of track, the managers have to decide what to do to correct
the deviation.
In fact, the whole planning process involves the managers constantly in a series of
decision-making situations. The quality of managerial decisions largely affects the
effectiveness of the plans made by them. In organising process, the manager is to decide
upon the structure, division of work, nature of responsibility and relationships, the
procedure of establishing such responsibility and relationship and so on.

ADVERTISEMENTS:

In co-ordination, decision-making is essential for providing unity of action. In control, it

will have to decide how the standard is to be laid down, how the deviations from the
standard are to be rectified, how the principles are to be established how instructions
are to be issued, and so on.

The ability to make good decisions is the key to successful managerial performance. The
managers of most profit-seeking firms are always required to take a wide range of
important decision in the areas of pricing, product choice, cost control, advertising,
capital investments, dividend policy, personnel matters, etc. Similarly, the managers of
non-profit seeking concerns and public enterprises also face the challenge of taking vital
decisions on many important matters.

Decision-making is also a criterion to determine whether a person is in management or

not. If he participates in decision-making, he is regarded as belonging to management
staff. In the words of George Terry: “If there is one universal mark of a manager, it is
decision-making.”

According to P. F. Drucker:
ADVERTISEMENTS:

“Whatever a manager does, he does through making decisions.”

In any business, whether large or small, the conditions are never static, they are
perceptively dynamic. The old order is always yielding place to new either in personnel
or in unforeseen contingencies. Changes in conditions are the usual rule. Such a
situation calls for actions that involve decision-making.

So, decision-making is deeply related with management functions and both are bound
up together inseparably. When a manager plans or organises, orders or advises,
approves or disapproves anything, he will have to move with the process of decision-
making. In all managerial functions, decision-making is an indispensable
accompaniment.

2. Relation between Planning and Decision-Making

Planning and decision-making are the most important managerial functions,
and there are many relations between them. Planning is thinking of doing.
Decision-making is a part of planning. Planning is the process of selecting a
future course of action, where Decision-making means selecting a course of
action.

Planning and decision-making, organizing, leading and controlling are all

interrelated. Planning and decision making is the most important step of all
managerial functions.

There are many relationships between decision-making and planning.

Definition of Planning

Planning managerial functions where managers are required to establish

goals and state the ways and means by which these goals are to be attained.

Therefore planning is taken as the foundation for future activities.

Or in simple terms; planning is deciding in advance what is to be done.

Planning is thinking of doing.

Management every time has to look for planning long-range and short-range
future direction by estimating and evaluating the future behavior of the
relevant environment and by determining the enterprise’s own desired role.
Plans have two basic components: goals and action statements. Goals
represent an end state the targets and results that managers hope to
achieve.

Action statements represent how an organization goes ahead to attain its

goals. Planning is a deliberate and conscious work using which managers
determine a future course of action for attaining a specific goal.

To a manager means planning is thinking about what is to be done, who is

going to do it, and how and when he will do it.

Planning also required thinking about past events and future opportunities
and impending threats. The planning process finds organizational strengths
and weaknesses.

Related:  Managerial Skills: 5 Skills Managers Need (Explained)

Definition of Decision-making

Decision-making is the process of identifying a set of feasible alternatives and

choosing a course of action from them. Decision-making is a part of planning.

Decision-making is an intermediate-sized set of activities that begins with an

identifying problem and ends with choice making or decision giving.

Management is constantly influencing the organization’s activities and

the decision-making process is central to doing it.

In the decision-making process, a manager identifies a specific situation and

finds the threats and opportunities that it offers.

Read: 4 Purpose Organizational Goals Should Serve for Enterprise

Then the manager must find the available alternatives to tackle the situation.

This is where planning comes in.

By planning; manager finds these alternatives by testing and measuring their

effectiveness. They identify the pros and cons of each alternative.

After that, the managers must use their decision-making skills for selecting
one path of action. Decision making is the core of planning. Unless a decision
has been made, a plan cannot be implemented in the field.

So we can say that planning and decision-making, both are interrelated.

Decisions can be made without planning but planning cannot be done without
making decisions. Planning can be defined as the process of selecting a future
course of action.

Decision-making defined as the process of selecting a course of action from

the alternatives. They need to be accurate for the welfare of the organization.

Another:
Characteristics of planning functions

1) Planning is anticipatory. Decisions are made on how and what to do before it is done.

2) It is goal directed.

3) Planning focuses on desired future results

4) Planning is future oriented. It involves making decisions that will be achieved in future.

Another;

Decision making is required during planning but planning is forming a plan before doing.
Decision making is required while doing because unplanned things happen.
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Lee nanah
Answered January 31, 2021 7:40PM

Planning come first then decision-making follow as a way to implement what has been
planned before. As before deciding what to do there are previous study that are actually
conducted to know about present situation, and determine what we need in the future.

Post test

Post test

1. Give some examples of each of the three “occasions for decision” cited by Chester Barnard. Explain in
your own words why Barnard thought the third category was most important.

Step-by-step solution:

Step 1 of 5

The first occasion for decision is when an individual is given an assignment to complete by a superior.

Examples:

• A manager assigning stress analysis calculation to an engineer.

• A military officer ordering enlisted men to carry out an order.

Another:

The three occasions for decisions are:

*From authoritative communications from superior.

Example:

“an increase in the annual target if sales force, passed on from the director to the sales manager.”

This type of decision making is usually the application of an instruction.

*from cases refers for decisions by subordinate

*from cases originating in the initiative of the executive command.

Another:

. 1) Required by superior authority 2) Requested by subordinates 3) Self-initiated

The third category is the most important because it gives the executive the opportunity
to demonstrate his or her initiative and self motivation. They have the ability to make a
difference through decisions that were not required...

1) Required by superior authority

2) Requested by subordinates
3) Self-initiated

The third category is the most important because it gives the

executive the opportunity to demonstrate his or her initiative and self
motivation. They have the ability to make a difference through
decisions that were not required. The disadvantage to self-initiated
decisions is that the executive has full responsibility if the decision
does not produce a desired outcome.

3.
 Use a concrete example showing the five-step process by
which management science uses a simulation model to
solve real-world problems.

Tap card to see definition 👆

- An example showing five-step management science simulation model to solve a problem is as
mentioned below:
- Checking whether a phone camera is reliable and sturdy enough to operate inside a phone or not.
1. The first step would be to specifically define tests and metrics that a phone camera must pass,
more specifically what kind of stress-induced shock that camera should survive.
2. The second step would be to create a CAD model of the camera along with finite element analysis
model using specialized engineering software.
3. The third step would be to create a similar model of a camera and determine whether the finite
element analysis model gives adequate stresses that would collaborate the camera bring able to
pass reliability testing.
4. The fourth step would be to run the model and analyze the stresses predicted by the model. If the
results are satisfactory, a prototype of the camera can be created. If not, the CAD model should be
modified until the camera passes the simulation.
5. The final step would be to create a prototype camera based on CAD model and proceed to actual
test the camera. The results can be evaluated, and engineer can devaluate the efficiency.

Go to pdf.

4.

Go to pdf and word

5.

6.

was going to go into the Air Force since I was very bored with schooling and was seeking an
exciting alternative.

But I could not join without first taking a placement test.

Th recruiter looked over my scores and said I was a good candidate for college.
Then he told me the Air Force would be pleased to have me join if I first chose to earn a
college degree.

I didn’t tell him but I was not happy (at all) to hear that since my mother was saying
something similar and I didn’t come to him to hear that same thing. He was supposed to be
“my alternative”.

And I never liked “being told what to do” (and I still don’t)….but I had a friend who was
going to attend an engineering school so I took that path and never returned to go into the
military.

So it seems my friend did all the research about colleges and I just followed him.

Actually, he commuted and I stayed in the dormitory since I very much disliked my
authoritarian father at the time and (like considering going into the military) I wanted an
escape route….not a “remain at home” option.

It turned out my friend and his parents did a good job identifying this private engineering
school (an hour’s drive from my home) and I’m a sr tech contributor at Apple today.

I hope this helps.

Another:

I attended High School at St. Joseph’s in Alameda, CA.One day a professor from nearby St.
Mary’s College visited. He talked to the students about attending college at St. Mary’s.

His argument was quite simple. Those who wanted to be doctors, lawyers, or any other
professional, in other curricula would be “educated” much like plumbers or carpenters,
learning the ART but not the REASONING involved.

Learning by way of the Liberal Arts would teach you how to REASON, and you would not
gain just the ART of doing!

After his talk I was certain I wanted to do what he had described, and the next Sunday I
asked my parents to drive over to St. Mary’s College. We drove around the campus a bit,
determining that it actually existed, and by the vend of our tour, I was convinced.

Was that a rational decision? I think it was. Sure, I could have gathered more information,
and in the enrollment if any “red flags” occurred, I could still have demurred. However, I was
already convinced by the argument, but I just had to verify that the place actually existed!

Another:
wanted to go to Reed College in Portland.

My Mother wanted me to go to Stanford.

My Father wanted me to go to Berkeley

I got into Reed but my mother tore up the Admission Letter saying

I was not going to that “Commie College”.

I got into Stanford but my father took the letter of admission

tore it up into little pieces and started marching around the house

singing the Cal Fight Song - Goooooooooo Bears !

Another:

Yes, I chose on the basis of location. size, and special programs. I did research on six
excellent schools, and was accepted by all of them, then took my top choice based on the
criteria above. You should do the same, and above all avoid the silly and irrelevant rankings.
They are meaningless for all students. Choose the “best fit” for you.

Another:

Just so you know, reasoning does not work this way. Reasoning is largely a post-hoc thing
we do to rationalize choices previously made on more emotional grounds. See Kahneman’s
THINKING, FAST AND SLOW. This, BTW, is why every edition of my book on legal reasoning
(REASON IN LAW, now 9th ed with U. Chicago Press) carefully explains that it is NOT about
how judges actually reason their way to decisions. Nobody really knows how this process
works, including smart judges themselves like Judge later Justice Cardozo. Legal reasoning,
like all reasoning, can be evaluated on whether it is coherent and makes sense and does not
(unlike, say, Trump) depend on falsehoods and outright lies

8.

Most managerial decisions are made under conditions of risk. Risks exist when the individual
has some information regarding the outcome of the decision but does not know everything when
making decisions under conditions of risk, the manager may find it helpful to use probabilities.
To the degree that the probability assignment is accurate; he or she can make a good decision.

Let us consider the case of a company that has four contract proposals it is interested in bidding
on. If the firm obtains any one of these contracts, it will make a profit on the undertaking.

However,

because only a limited number of personnel can devote their time to putting bids together, the
firm has decided to bid on one proposal only—one that offers the best combination of profit and
probability that the bid will be successful. This combination is known as the expected value.

The profit associated with each of these four contract proposals, as presented in Table 1, varies
from $100,000 to $400,000. Notice that the contract offering $400,000 is the least likely to be
awarded to the company, but it offers the smallest profit of the four.

On which of the proposals should the firm bid?

As the table shows, the answer is number three. It offers the greatest expected value.

Computation of Expected Values

Contract Profit ($) The probability of Getting the Expected Value ($)
Proposal Contract

1 100,000 6 60,000

2 200,000 5 100,000

3 300,000 4 120,000

4 400,000 2 80,000

This example illustrates the importance of probability assignment when decisions are made at a
risk.

If we reversed the probabilities so that proposal no.1 had a 20 percent success factor and
proposal no. 4 had a 60 percent success factor, the manager would opt for the latter proposal.

The effective manager must investigate each alternative to be as accurate as possible in making
probability assignments.

In a situation with risks, most managerial decisions are made under conditions of risk. Under a
state of risk, the availability of each alternative and its potential payoffs and costs are all
associated with probability estimates.
Risks exist when the individual has some information regarding the outcome of the decision but
does not know everything when making decisions. Under conditions of risk, the manager may
find it helpful to use probabilities.

Factual information may exist, but it may be incomplete.

To improve decision making, one may estimate the objective probability of an outcome by using
different models. On the other hand, subjective probability, based on judgment and experience,
may be used.

3. Uncertainty

Uncertainty exists when the probabilities of the various results are not known. The manager feels
unable to assign estimates to any of the alternatives.

While the situation may seem hopeless, mathematical techniques have been developed to help
decision-makers deal with uncertainty.

Some of these are heavily quantitative and are outside the scope of our present consideration.

Some non-mathematical approaches have been developed to supplement these techniques,

however, and they do warrant brief discussion.

One is simply to avoid situations of uncertainty. A second is to assume that the future will be like
the past and assign probabilities based on previous experiences.

A third is to gather as much information as possible on each of the alternatives, assuming the fact
that the decision-making condition is one of risk, and assign probabilities accordingly.

Using these approaches requires side-stepping the uncertainty factor. It is assumed not to exist,
and this can be a wise philosophy. After all, by definition, uncertainty throws a monkey wrench
into decision-making.

The manager’s best approach is to withdraw from this condition either by gathering data on the
alternatives or by making assumptions that allow the decision to be made under the condition of
risk.

Although many managers are perfectly comfortable in making decisions under conditions of risk
or uncertainty, they should always try to reduce the uncertainty surrounding their decisions.

They can do so by conducting comprehensive and systematic research.

The research can tell them more about their alternatives, give them a firmer basis for estimating
possible outcomes arid help them look at the best and worst alternatives.
Think of manager Mr. Vin Diesel who is considering whether to finance a new building by
taking a fixed interest rate loan of 10 percent or a variable rate of the loan that begins at 9 percent
but could increase by 4 percent.

Mr. Vin Diesel might consider that for the variable rate loan the best case rate is 9 percent. The
worst-case rate is 13 percent.

By taking this approach, he can at least reduce some uncertainty and get firmer support for his
decision.

In this condition, the decision-maker does not know all the alternatives, the risk associated with
each, or the consequence of each alternative is likely to have.

In this case, the decision-maker does not know all the alternatives, the risks associated with each,
or the likely consequences of each alternative.

Here, people have an insufficient database, they do not know whether or not the data are reliable,
and they are very unconfident about whether or not the situation may change. Moreover, they
cannot evaluate the interactions of the different variables.

Conclusion

In 3 situations, managers have to take different decisions.

To make decisions in these circumstances, managers must acquire as much relevant information
as possible and approach the situation from a logical and rational perspective.

Another:

Decision making is a process of identifying problems and opportunities and choosing the best
option among alternative courses of action for resolving them successfully. Usually, there are
three different conditions under which decisions are made; these conditions are explained as
follow:

Conditions under certainty are which the decision maker has full and needed information to
make a decision. Decision is made under the condition of certainty.  The manager knows
exactly what the outcome will be, as he/she has enough clarity about the situation and knows
the resources, time available for decision-making, the nature of the problem itself, possible
alternatives to resolve the problem, and undoubtedly clarify or certain with the result of
alternatives. In most situations, the solutions are already available from the past experiences or
incidents and are appropriate for the problem at hand. The decision to restock food supply, for
example, when the goods in stock fall below a determined level is a decision-making under
circumstance of certainty.

Conditions under risk provide probabilities regarding expected results for decision-making

alternatives, it is due to the nature of the future conditions that are not always know in advance
and the managers face this condition more often in reality compared to conditions under
certainty. Although some good information may be available, it is not enough to answer all
questions about the outcomes. The manager could define the nature of the problem, possible
alternatives and the probability of each alternative leading to the desired results, but could not
guarantee how each alternative may work. Decision has clear-cut goals, but future outcomes
associated with each alternative are subject to chance. Testing of nuclear leakage in Japan
after the Tsunami hit in Year 2011 is a risky decision made by Japanese Government, as the
government do not know how wide the range of effecting area and the nuclear substance itself
is a life threatening factor.

Conditions under uncertainty provide no or incomplete information, many unknowns and

possibilities to predict expected results for decision-making alternatives. The manager cannot
even assign subjective probabilities to the likely outcomes of alternatives. Each of the possible
states of nature of the problems causes the manager himself can not predict with confidence
what the outcomes of his action to be. An assumption is often made; the manager has no
information or intuitive judgment to use as a basis for assigning the probabilities to each state of
nature. Managers may have to come up with creative approaches and alternatives to solve the
problem. Flood, for example, may causes panic and environment of uncertainty among the
victims, which leads to uncertain decision making of the victims, some may flee from home and
take only important documents with them, some who live at higher ground, may wait and
observe if the flood worsen then decide the next approach.