DECISION MAKING

Decision Making
— Decision making: the process by which managers
respond to opportunities and threats by analyzing
options, and making decisions about goals and
courses of action.
— Decisions in response to opportunities: managers
respond to ways to improve organizational
performance.
— Decisions in response to threats: occurs when
managers are impacted by adverse events to the
organization.
 Decision Making
— Decision Making as the “process of identifying
and choosing alternative courses of action in a
manner appropriate to the demands of the
situation”
— Decision are made at various management levels
and at various management functions ( planning,
organizing, directing and controlling).
— Decision making is the heart of all the
management functions.
Decision making is not easy

— It must be done amid

—ever-changing factors
—unclear information
—conflicting points of view
Categories of Decisions
— Programmed Decisions
— Situations occurred often enough to enable decision rules
to be developed and applied in the future
— Made in response to recurring organizational problems
— Non-programmed Decisions – in response to unique,
poorly defined and largely unstructured, and have important
consequences to the organization

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 Conditions that Affect the Possibility of
Decision Failure
Organizational
Problem

Low Possibility of Failure High

Certainty Risk Uncertainty Ambiguity

Programmed Nonprogrammed
Decisions Decisions

Problem
Solution
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 Conditions that Affect the Possibility of Decision
Failure

● Certainty
● all the information the decision maker needs is fully available
● Risk
● decision has clear-cut goals
● good information is available
● future outcomes associated with each alternative are subject to chance
● Uncertainty
● managers know which goals they wish to achieve
● information about alternatives and future events is incomplete
● managers may have to come up with creative approaches to alternatives
● 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

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Problem Solving and Decision Making
Problem solving can be defined as the process of identifying the
difference between the actual and the desired state of affairs
and then taking action to resolve the difference.
The problem solving process involves the following seven steps:
1. Diagnose the problem.
2. Analyze the environment.
3. Develop viable alternatives
4. Evaluate the alternatives.
5. Choose an alternative.
6. Implement the selected alternative (the decision).
7. Evaluate the results, and determine if a satisfactory solution
has been obtained.
Diagnose the Problem
What is a problem?
A problem exists when there is a difference between an actual
situation and a desired situation.
Problem solving can be defined as the process of identifying the
difference between the actual and the desired state of affairs
and then taking action to resolve the difference

“Identification of the problem is tantamount to having the

problem half-solved”.
Analyze the Environment
— The objective of environment analysis is the identification of
constraints, which maybe spelled out as either internal or
external limitations.
— Internal environment refers to organizational activities
within a firm that surrounds decision-making.
— Organizational, Marketing, Personnel, Production, Financial
Aspects
Example of internal limitations:
1. Limited funds available
2. Limited training of employees.
3. Ill-designed facilities
Analyze the Environment
— The external environment refers to variables that are
outside the organization and not typically within the shot-
run control of top management.
— Government, Labor Unions, Suppliers, Banks, Public,
Competitors, Clients
Example of external limitations are as follows:
1. Patents are controlled by other organizations.
2. Limited market
3. Strict enforcement of local zoning regulations
Develop Viable Alternatives
— Choosing the best alternatives:
1. Prepare a list of alternative solutions.
2. Determine the viability of each solutions
3. Revise the list by striking out those which are not viable.
Evaluate Alternatives
— Proper evaluation makes choosing the right solution less
difficult
— Each alternative must be analyzed and evaluated in terms of
its value, cost and risk characteristics.
Make a Choice
— It refers to the process of selecting among alternatives
representing potential solutions to a problem.
— Particular effort should be made to indentify all significant
consequences of each choice.
— To make the selection process easier, the alternatives can be
ranked from best to worst on the basis of some factors like
benefit, cost or risk.
Implement Decision
— It refers to carrying out the decision so that the objectives
sought will be achieved.
— To make implementation effective, a plan must be devised

Evaluate the results, and

determine if a satisfactory solution
has been obtained.
An Engineering firm needs to increase its output by 30% as a
result of a new agreement between the firm and one of its
clients. As an engineer-manager, propose two solutions to
address this problem. And explain your answer.
— Tom was a young programmer. He’d been with an IT company for about
three years. He was sharp, confident, personable, and a good
programmer. He was the chief engineer in charge of the development of
the user interface for a large database being developed for a very
important customer. The contract called for rapid prototyping of the
user interface, allowing the company to receive customer feedback on
the human-machine interaction as early in the development cycle as
possible; at least that was the plan. Tom had agreed to a three-month
prototype development schedule. But five weeks had passed and Tom
was a week behind schedule on the delivery of the first iteration of the
prototype interface. The project manager asked Tom when the prototype
would be delivered to the customer for interface input and Tom said;
“Just a few more days.” A few more days passed and again Tom indicated
that the interface was not ready. He needed “a few more days”. This went
on for another week until six and a half weeks had passed since the
beginning of the contract. Tom was close to being three weeks behind
schedule and the customer was getting worried, as was the project
manager. Tom seemed reluctant to release the prototype interface to the
customer. The project manager asked for YOUR help. What
would you do in this situation? EXPLAIN FULLY YOUR
DECISION.