Managers as Decision

Makers
 Decision making
• Decision making is the essence of management
• Managers would like to make good decisions because they’re judged on
the outcomes of those decisions.
• Managers at all levels and in all areas of organizations make decisions
• Top-level managers make decisions about their organization’s goals, where to locate
manufacturing facilities, or what new markets to move into.
• Middle and lower-level managers make decisions about production schedules,
product quality problems, pay raises, and employee discipline.
 Decision making
• Making choice from two or more alternatives
• It is a process of recognizing , generating and weighing alternatives ,
coming to a decision , taking action and assessing the result
• Thee are two types of decisions
• Programmed and non programmed decision
• Problem: An obstacle that makes it difficult to achieve a desired goal or purpose
 Step 1 Identifying a problem
• Every decision starts with a problem, a discrepancy between an existing and a desired
condition.
• Managers also have to be cautious not to confuse problems with symptoms of the problem.
• Characteristics of problems
• A problem becomes a problem when a manager becomes aware of it
• There is pressure to solve problem
• The manager must have the authority, information or resources needed to solve the
problem
 Step 2: Identifying the decision criteria
Every decision maker has criteria guiding his or her decisions even if they’re
not explicitly stated
• Decision criteria are the factors that are important and relevant in
resolving the problem such as
• Costs that will be incurred ( investment required)
• Risks likely to be encountered ( chance of failure
• Out comes that are desired ( growth of the firm)
Step 3: Allocating Weights to the Criteria
• If the relevant criteria aren’t equally important, the decision maker must
weight the items in order to give them the correct priority in the decision.
• A simple way is to give the most important criterion a weight of 10 and
then assign weights to the rest using that standard.
 Step 4 :Developing alternatives
• Identifying viable alternatives
• Alternatives are listed without evaluations that can resolve the problem
 Step 5:Analyzing alternatives
• Appraising each alternatives strength and weaknesses
• An alternative appraisal is bases on its ability to resolve the issues related
to the criteria and criteria weight
• If one alternative scores highest on every criterion, you wouldn’t need to
consider the weights because that alternative would already be the top
choice
 Step 6: Selecting an Alternative
• The sixth step in the decision-making process is choosing the best
alternative or the one that generated the highest total in Step 5
• Example : Choose the Dell Inspiron because it scored higher than all other
alternatives (249 total).
 Step 7: Implementing the Alternative
• put the decision into action by conveying it to those affected and getting
their commitment to it
• People who must implement a decision participate in the process, they’re
more likely to support it than if you just tell them what to do.
• Also Reassess the environment for any changes, especially if it’s a long-
term decision.
Step 8: Evaluating Decision Effectiveness
• The last step in the decision-making process involves evaluating the
outcome or result of the decision to see whether the problem was resolved.
• If the evaluation shows that the problem still exists the
• the manager needs to assess what went wrong.
• Was the problem incorrectly defined?
• Were errors made when evaluating alternatives?
• Was the right alternative selected but poorly implemented?
 Rational Decision Making
• Managers make logical and consistent choices to maximize value
• Describes choices that are logical and consistent and maximize value
• The rational decision-making process involves careful, methodical steps.
• The more carefully and strictly these steps are followed, the more rational
the process is.
 Assumptions of rationality
• A rational decision maker would be fully objective and logical.
• The problem faced would be clear and unambiguous, and the decision
maker would have a clear and specific goal and know all possible
alternatives and consequences
• Finally, making decisions rationally would consistently lead to selecting
the alternative that maximizes the likelihood of achieving that goal
 Assumptions
• Problem clarity
• The problem is clear and unambiguous
• Known Options
•The decision maker can identify all the relevant criteria and viable options
• Clear preferences
•The criteria and alternatives can be ranked and weighted
• Constant preferences
•Specific decision criteria are constant and that the weights assigned t to the are stable over time

• No time or cost constraints

Full information is available because there are no time or cost constraints

• Maximum pay off

• The choice alternative will yield t to the highest perceived value
 Example
• When Hewlett-Packard (HP) acquired Compaq, the company did no
research on how customers viewed Compaq products until “months after
then-CEO Carly Fiorina publicly announced the deal and privately warned
her top management team that she didn’t want to hear any dissent
pertaining to the acquisition.”8 By the time they discovered that
customers perceived Compaq products as inferior—just the opposite of
what customers felt about HP products—it was too late. HP’s performance
suffered and Fiorina lost her job.