“WEEK 05

MANAGERS AS DECISION-
MAKERS ”

Management Studies Department, BUKC 1

MANAGERS AS DECISION CHAPTE
MAKERS R 7

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 LEARNING
OBJECTIVES
 To describe the eight steps in the decision-
making process.
 To explain the four ways managers make
decisions.
 To classify decisions and decision-making
conditions.
 To describe different decision-making styles
and discuss how biases affect decision
making.
 To identify effective decision-making
techniques.

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  Decisions can be
made
without planning,
but planning cannot
be done
without making
decisions.
 Planning can be
defined as the process
of selecting a future
course of action.
 Decision-making is
DECISION- defined as the process
MAKING & of selecting a course
of action from the
PLANNING alternatives.
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5
 Decision -
making a choice
from two or more
alternatives.
Problem - an
obstacle that
makes it difficult
to achieve a
DECISION- desired goal or
MAKING purpose.
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 DECISION MAKING STEPS
Recognize need for
a decision

Frame the problem

Generate & assess alternatives

Choose among alternatives

Implement chosen
alternative

Learn from feedback

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 1. Recognize need for a decision:
Managers must first realize that a
decision must be made.
 Sparked by an event such as
environment changes.
2. Frame the problem: managers
must develop feasible alternative
courses of action.
 If good alternatives are
missed, the resulting
decision is poor.
 It is hard to develop creative
alternatives, so managers
need to look for new ideas.
3. Generate & assess
alternatives: what are the
DECISION advantages and disadvantages of
each alternative?

MAKING STEPS  Managers should specify

criteria, then evaluate.

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 4. Choose among alternatives:
managers rank alternatives and decide.
 When ranking, all information
needs to be considered.

5. Implement chosen alternative:

managers must now carry out the
alternative.
 Often a decision is made and not
implemented.

6. Learn from feedback: managers

should consider what went right and
wrong with the decision and learn for
the future.
 Without feedback, managers
DECISION never learn from experience and
make the same mistake over.
MAKING STEPS
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 EVALUATING ALTERNATIVES
Is the possible course of action:
Legal?

Ethical

Economical?

Practical?

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  Is it legal? Managers
must first be sure that an
alternative is legal both in
this country and abroad
for exports.
 Is it ethical? The
alternative must be
ethical and not hurt
stakeholders
unnecessarily.
 Is it economically
feasible? Can our
organization’s
performance goals
sustain this alternative?

EVALUATING  Is it practical? Does the

management have the
ALTERNATIVES capabilities and resources
to do it?

Management Studies Department, BUKC 11

 Step 1: Identify a
problem
 Characteristics
of Problems
 A problem becomes
a problem when a
manager becomes
aware of it.
 There is pressure to
solve the problem.

THE DECISION-  The manager must

have the authority,
MAKING information, or
resources needed to
PROCESS solve the problem.
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 Step 2: Identify
decision criteria
 Decision criteria
are factors that
are important
(relevant) to
resolving the
problem, such as:
 Costs that will be
incurred (investments
required);
 Risks likely to be
THE DECISION- encountered (chance of
failure);
MAKING  Outcomes that are
desired (growth of the
PROCESS firm).

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 Step 3: Allocating
Weights to the
Criteria
Decision criteria
are not of equal
importance:
 Assigning a weight to
each item places the
THE DECISION- items in the correct
MAKING priority order of their
importance in the
PROCESS decision-making process.
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 Step 4:
Developing
Alternatives
Identifying
viable
alternatives:
 Alternatives are
listed (without
THE DECISION- evaluation) that
can resolve the
MAKING problem.
PROCESS
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 Step 5:
Analyzing
Alternatives
 Appraising each
alternative’s
strengths and
weaknesses:
 An alternative’s
appraisal is based on
its ability to resolve
THE DECISION- the issues related to
MAKING the criteria and
criteria weight.
PROCESS
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 Step 6:
Selecting an
Alternative
Choosing
the best
alternative:
 The alternative
THE DECISION- with the highest
total weight is
MAKING chosen.
PROCESS
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 THE DECISION-MAKING PROCESS

Step 7: Implementing the Alternative

 Putting the chosen alternative into action:
 Conveying the decision to and gaining commitment from
those who will carry out the alternative.
Step 8: Evaluating Decision Effectiveness
 The soundness of the decision is judged by its
outcomes:
 How effectively was the problem resolved by outcomes
resulting from the chosen alternatives?
 If the problem was not resolved, what went wrong?
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 MANAGERS MAKING DECISIONS

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  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.
MANAGERIAL  Decisions in response to
DECISION- threats occurs when managers
MAKING are impacted by adverse
events to the organization.
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 APPROACHES TO MANAGERIAL DECISION-MAKING

There are four perspectives on how managers

make decisions:
1) Rationality;
2) Bounded rationality;
3) The role of intuition;
4) The role of evidence-based management.

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  Rational Decision-
Making - describes
choices that are logical
and consistent while
maximizing value.
 Bounded Rationality -
decision making that’s
rational but limited
(bounded) by an
individual’s ability to
process information.
 Satisfice - accepting
solutions that are “good
enough.”
 Intuitive Decision-
MANAGERS making - making
MAKING DECISIONS decisions based on
experience, feelings, and
– KEY APPROACHES accumulated judgment.

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 WHAT IS INTUITION?

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  Evidence-based management
(EBMgt) – the systematic use of
the best available evidence to
improve management practice.
 The four essential elements of
EBMgt:
1) Decision maker’s expertise
and judgment;
2) External evidence that’s
been evaluated by the
decision maker;
3) Opinions, preferences, and
values of those who have a
stake in the decision; and
MANAGERS MAKING 4) Relevant organizational
DECISIONS – ROLE (internal) factors such as
OF EVIDENCE-BASED context, circumstances,
MANAGEMENT and organizational
members.
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  Structured
Problems -
straightforward,
familiar, and easily
defined problems.
 Unstructured
Problems -
problems that are
new or unusual
and for which
information is
TYPES OF ambiguous or
incomplete.
PROBLEMS
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  Programmed
Decision - a
repetitive decision
that can be handled
by a routine
approach.
 Non-programmed
Decisions - unique
and nonrecurring
decisions that require
TYPES OF a custom-made
DECISION- solution.
MAKING
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 PROGRAMMED VS. NON-PROGRAMMED
DECISIONS

Programmed Decisions Non-programmed Decisions

 Programmed Decisions:  Non-programmed Decisions:
routine, almost automatic unusual situations that have
process. not been often addressed.
 Managers have made  No rules to follow since the
decision many times decision is new.
before.  These decisions are made
 There are rules or based on information, and a
guidelines to follow. manger’s intuition, and
judgment.
 Example: Deciding to
reorder office supplies.  Example: Should the firm
invest in a new technology?
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 PROGRAMMED VERSUS NON-PROGRAMMED DECISIONS

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  Certainty - A
situation in which a
manager can make an
accurate decision
because the outcome
of every alternative is
known.
 Risk - A situation in
which the manager
can estimate the
likelihood
(probability) of
outcomes that result
DECISION-MAKING from the choice of
SITUATIONS/CONDI particular
alternatives.
TIONS
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 DECISION-
MAKING
STYLES
 Linear Thinking Style - A
person’s tendency to use
external data/facts; the
habit of processing
information through
rational, logical thinking.
 Nonlinear Thinking Style
- A person’s preference for
internal sources of
information; a method of
processing this information
with internal insights,
feelings, and hunches.
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 COMMON DECISION-MAKING BIASES

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  Understanding and
acknowledging
cultural differences;
 Know when it’s time to
call it quits;
 Use an effective
decision-making
process;
 Build an organization
EFFECTIVE that can spot the
DECISION- unexpected and quickly
MAKING adapt to the changed
TECHNIQUES environment;
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 EFFECTIVE
DECISION-
MAKING PROCESS
 An effective decision-making
process:
1) focuses on what’s important;
2) Is logical and consistent;
3) acknowledges both subjective and
objective thinking and blends both
analytical and intuitive approaches;
4) requires only “enough” information
as is necessary to resolve a problem;
5) encourages and guides gathering
relevant information and informed
opinions; and
6) is straightforward, reliable, easy to
use, and flexible.
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 THANK YOU

Management Studies Department, BUKC