Chapter 9

Managerial Decision Making

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 Types of Decisions
and Problems

Decision making Decision is a

is the process of choice made
identifying
from available
opportunities
alternatives

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 Programmed and Nonprogrammed
Decisions
 Programmed Decisions
Recurring problems
Apply rule
 Nonprogrammed Decisions
Unique situations
Poorly defined
Unstructured
Important consequences

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 Facing Certainty
and Uncertainty
 Difference between programmed and unprogrammed
decisions
 Certainty – Situation in which all information is
fully available
 Risk – Future outcomes associated with an
alternative are subject to chance
 Uncertainty - Depends on the amount and value of
information available

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 9.1 - Conditions that Affect the
Possibility of Decision Failure

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 Ambiguity and Conflict
 Ambiguity - Making decisions in difficult situations
The goals and the problem are unclear
 Wicked decisions involve conflict over goals and
have changing circumstances, fuzzy information, and
unclear links
There is often no “right” answer

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 The Ideal, Rational Model
 Rational economic assumptions drive decisions
Operates to accomplish established goals, problem is
defined
Decision maker strives for information and certainty,
alternatives evaluated
Criteria for evaluating alternatives is known; select
alternative with maximum benefit
Decision maker is rationale and uses logic

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 How Managers Actually
Make Decisions
 Administrative/descriptive approach
How managers really make decisions
Recognize human and environmental limitations
 Bounded rationality – People have limits or
boundaries on how rational they can be
 Satisficing – Decision makers choose the first
solution that satisfies minimal decision criteria

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 Steps in the Administrative Model
 Goals are often vague
 Rational procedures are not always used
 Managers’ searches for alternatives are limited
 Most managers settle for satisficing
 Intuition – Quick apprehension of situation based on
practice and experience

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 Decision-Making Model: Political
 Decisions involve managers with diverse interests
 Managers must engage in coalition building
Informal alliance to support specific goal
 Without a coalition, powerful groups can derail the
decision-making process
 Political model resembles the real environment

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 Decision-Making Model: Political
 Assumptions of the political model
Organizations are made up of groups with diverse
interests, goals, and values
Information is ambiguous and incomplete
Lack of time, resources, or mental capacity to process
all information regarding a problem
Decisions are the result of bargaining and discussion
among coalition members

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 9.2 – Characteristics of Classical, Administrative,
and Political Decision-Making Models

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 Decision-Making Steps
 Recognition of Decision Requirement – Identify problem
or opportunity
 Diagnosis and Analysis – Analyze underlying causal factors
 Develop Alternatives – Define feasible alternatives
 Selection of Desired Alternative – Alternative with most
desirable outcome
 Implementation of Chosen Alternative – Use of
managerial, administrative, and persuasive abilities to
execute chosen alternative
 Evaluation and Feedback – Gather information about
effectiveness
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 9.3 - Six Steps in the Managerial
Decision-Making Process

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 9.4 - Decision Alternatives
with Different Levels of Risk

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 9.5 - Personal Decision
Framework

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 Personal Decision Framework
 Directive style – People who prefer simple, clear-cut
solutions to problems
 Analytic style – Managers prefer complex solutions
based on a lot of data
 Conceptual style – Managers like a broad amount of
information
 Behavioral style – Managers with a deep concern for
others

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 Why Do Managers Make
Bad Decisions?
 Being influenced by initial impressions
 Justifying past decisions
 Seeing what you want to see
 Perpetuating the status quo
 Being influenced by problem framing
 Overconfidence

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 Innovative Decision Making
 Mechanisms to help reduce bias-related decision
errors:
 Start with brainstorming
 Use hard evidence
 Engage in rigorous debate
 Avoid groupthink
 Know when to bail
 Do a postmortem

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