The

Manager as a
Decision Maker
Decision
Making
Decision Making
• Decision
 Making a choice from two or more alternatives.
• The Decision-Making Process
 Identifying a problem and decision criteria and allocating weights to the
criteria.
 Developing, analyzing, and selecting an alternative that can resolve the
problem.
 Implementing the selected alternative.
 Evaluating the decision’s effectiveness.
 Managerial Decision Making

 Decisions are judgments which directly affect a course of

action.

 Decision making is the process of identifying a set of feasible

alternatives and, from these, choosing a course of action.

 Managerial Decision making: the process by which managers

respond to opportunities and threats by analyzing options,
and making decisions about goals and courses of action.
 Decision Making Steps
Recognize need for
De a decision
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Generate alternatives
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Evaluate alternatives
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Choose among

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Implement chosen
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Monitor & maintain
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 Decision Making Steps

1. Recognize need for a decision: Managers must first realize that

a decision must be made.
 A tardy employee, slipping sales.
 Sparked by an event such as environment changes.
2. Generate alternatives: managers must develop feasible
alternative courses of action.
 Existing Solutions
 Custom solutions
3. Evaluate alternatives: what are the advantages and
disadvantages of each alternative?
 Managers should specify criteria, then evaluate.
Evaluating Alternatives
Is the possible course of action:

Legal?
Ethical?
Economical?

Practical?
 Types of Decisions

 Means Decisions concerns procedures or actions

undertaken to achieve particular goal (how a goal is to be
reached?)

 Ends Decisions are oriented more specifically towards

achieving a goal.

 Ends Decisions are more likely to be successful when they are

combined with means decisions.
 Types of Decisions

 Decisions Levels

 Linked with Zones of Responsibility Institutional

 Institutional Zone Zone

 Managerial Zone
 Technical Core Managerial Zone

Technical Core
 Types of Decisions

 Programmed Decisions: routine, almost automatic process.

 Managers have made decision many times before.
 There are rules or guidelines to follow.
 Example: Deciding to reorder office supplies.

 Non-programmed Decisions: unusual situations that have

not been often addressed.
 No rules to follow since the decision is new.
 These decisions are made based on information, and a
manger’s intuition, and judgment.
 Example: Should the firm invest in a new technology?
Assessed Values of Laptop Computers Using
Decision Criteria
Assessed Values of Laptop Computers Using Decision Criteria
 Types of Problems and Decisions

• Structured Problems
 Involve goals that clear.
 Are familiar (have occurred before).
 Are easily and completely defined—information about the problem
is available and complete.
• Programmed Decision
 A repetitive decision that can be handled by a routine approach.
 Problems and Decisions (cont’d)

• Unstructured Problems
 Problems that are new or unusual and for which information is
ambiguous or incomplete.
 Problems that will require custom-made solutions.
• Non programmed Decisions
 Decisions that are unique and nonrecurring.
 Decisions that generate unique responses.
Programmed versus Non programmed Decisions
 Decision-Making Styles

• Dimensions of Decision-Making Styles

 Ways of thinking
 Rational, orderly, and consistent
 Intuitive, creative, and unique
 Tolerance for ambiguity
 Low tolerance: require consistency and order
 High tolerance: multiple thoughts simultaneously
 Decision-Making Styles

• Types of Decision Makers

 Directive
 Use minimal information and consider few alternatives.
 Analytic
 Make careful decisions in unique situations.
 Conceptual
 Maintain a broad outlook and consider many alternatives in making
decisions.
 Behavioral
 Avoid conflict by working well with others and being receptive to suggestions.
Decision-Making Matrix
Decision Making Biases and Errors
Overconfidence
Immediate Gratification
Anchoring Effect
Selective Perception
Confirmation
Framing
Availability
Representation
Randomness
Sunk Costs
Self-serving
Hindsight
 Decision-Making Biases and Errors

• Heuristics
 Using “rules of thumb” to simplify decision making. mental shortcuts that allows
people to solve problems and make judgments quickly and efficiently. Hand
away from fire
• Overconfidence Bias
 Holding unrealistically positive views of one’s self and one’s performance.
• Immediate Gratification Bias
 Choosing alternatives that offer immediate rewards and that to avoid immediate
costs.
 alarm
 Decision-Making Biases and Errors (cont’d)
• Anchoring Effect
 Fixating on initial information and ignoring subsequent information. if you first see a T-
shirt that costs $1,200 – then see a second one that costs $100 – you're prone to see
the second shirt as cheap.
• Selective Perception Bias
 Selecting organizing and interpreting events based on the decision maker’s biased
perceptions. if an HR manager in charge of hiring has negative beliefs and stereotypes
of a certain gender or race, they likely aren't going to hire them.
• Confirmation Bias
 Seeking out information that reaffirms past choices and discounting contradictory
information. A confirmation bias is a type of cognitive bias that involves favoring
information that confirms previously existing beliefs or biases. For example, imagine
that a person holds a belief that left-handed people are more creative than right-
handed people.
Decision-Making Biases and Errors (cont’d)
• Framing Bias
 Selecting and highlighting certain aspects of a situation while ignoring other
aspects. The way data presented can affect decision. Yogurt stats policies
• Availability Bias
 Losing decision-making objectivity by focusing on the most recent events. The
things coming to mind are real. Plane crash –fear of flying
• Representation Bias
 Drawing analogies and seeing identical situations when none existpolice who
are looking for a suspect in a crime might focus disproportionately on Black
people in their search,.
• Randomness Bias
 Creating unfounded meaning out of random events.
 Tie giving luvk
Decision-Making Biases and Errors (cont’d)
• Sunk Costs Errors
 Forgetting that current actions cannot influence past events and
relate only to future consequences. You keep clothes bcz you paid
for it.
• Self-Serving Bias
 Taking quick credit for successes and blaming outside factors for
failures. Student good grades hardwork bad grade teacher bad
• Hindsight Bias
 Mistakenly believing that an event could have been predicted once
the actual outcome is known (after-the-fact).
 Project success and you say I knew it
Overview of Managerial Decision Making
 Decision Making for Today’s World

• Guidelines for making effective decisions:

 Understand cultural differences.
 Know when it’s time to call it quits.
 Use an effective decision-making process.
• Habits of highly reliable organizations (HROs)
 Are not tricked by their success.
 Defer to the experts on the front line.
 Let unexpected circumstances provide the solution.
 Embrace complexity.
 Anticipate, but also anticipate their limits.