4

Chapter

Foundations
of Decision
Making

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Learning Outcomes
Describe the decision-making process.
Explain the three approaches managers can use
to make decisions.
Describe the types of decisions and decisionmaking conditions managers face.

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Learning Outcomes (cont.)

Discuss group decision-making.
Discuss contemporary issues in managerial
decision making.

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4.1 Describe the

decision-making
process.

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How Do Managers Make Decisions?

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Identifying a Decision Problem

Problem:
a discrepancy between an existing and a desired
state of affairs.

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Identifying Decision Criteria

Relevant Factors:
Price
Model
Size
Manufacturer
Options
Repair record

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Weighting Criteria
1.

2.

Most important
criterion assigned a
weight of 10.
Other weights
assigned against
this standard.

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Developing Alternatives

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Analyzing Alternatives

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Selecting the Best Alternative

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Implementing the Decision

Decision implementation:
putting a decision into action.

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Evaluating the Decision

Appraising the outcome of the decision:
Was the problem resolved?

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Common Errors

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4.2 Explain the three

approaches
managers can use to
make decisions.

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Three Approaches Used to Make

Decisions: Types of Decisions

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Rational Model
Rational decision making:
choices that are consistent and value-maximizing
within specified constraints.

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Bounded Rationality
Satisfice
Escalation of
commitment

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Intuitive Decision Making

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4.3 Describe the types

of decisions and
decision-making
conditions that
managers face.

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Types of Problems
1.
2.

Structured problem
Unstructured problem

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Types of Decisions
Programmed:
Repetitive decisions that can be handled
using a routine approach.

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Types of Decisions (cont.)

Nonprogrammed:
Repetitive decisions that can be handled
using a routine approach

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Problems, Decision Types, and

Organizational Levels

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Decision-Making Conditions
Certainty
Risk
Uncertainty

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4.4
Discuss group
decision-making.

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How Do Groups Make Decisions?

Decisions are often made by groups representing
the people who will be most affected by those
decisions.
Committees
Task forces
Review panels
Work teams
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Advantages of Group Decision

Making

More complete information

Diversity of experiences/perspectives
More alternatives generated
Increased acceptance of solution
Increased legitimacy

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Disadvantages of Group Decision

Making

Time-consuming
Minority domination
Ambiguous responsibility
Pressures to conform

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Groupthink
When a group exerts extensive pressure on an
individual to withhold his or her different views in
order to appear to be in agreement.

What it does
How it occurs
How to minimize it

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When Are Groups Most Effective?

Individual
Faster decision making
More efficient use of
work hours

Group
More accurate
decisions
More creative
More heterogeneous
representation
Greater acceptance of
final solution

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Improving Group Decision Making

Make group decisions more creative by:
1. Brainstorming
2. The nominal group technique
3. Electronic meetings

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4.5 Discuss
contemporary
issues in
managerial decision
making.

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Contemporary Issues
National culture influences the way decisions are
made and the degree of risk involved.

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Contemporary Issues
Creativity lets the decision maker:
Understand a problem more fully
See problems others cant
Identify all viable alternatives

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Contemporary Issues
Design thinking:
approaching
management problems
as designers approach
design problems

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Contemporary Issues
Big data
The vast amounts of quantifiable information
that can be analyzed by highly sophisticated data
processing.

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