Chapter 3 UiTM MGT

8/13/2019 Chapter 3 UiTM MGT

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Is the process through which manageers andleaders identify and resolve prolems andcaptilize on opportunities.Good decision makingis the important at all levels in organization.

Some experts believe that decision making is themost basic and fundamental of all managerialactivities.Decision making is most closely linked with thePlanningfunction.However, it is also part of Organizing, Leadingand Controlling.


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Decision makingis the act

of choosing onealternative from among a

set of alternatives.

We have to first decidethat a decision has to bemade and then secondly

identify a set of feasiblealternatives before weselect one.


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Decision-Making Processincludes:

recognizing and defining the nature of a decision

situation

identifying alternatives

choosing the best[most effective] alternative and

putting it into practice.


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Sometimes effective decisions must be

made to:

Optimize some set of factors such as profits, sales,

employee welfare and market share or

Minimizeloss, expenses or employee turnover or

Select best method for going out of business, laying off

employees, or terminating a strategic alliance.


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Managers make decisions about both

problems (undesirable situations) and

opportunities(desirable situations).Cutting costs by 10%

Learning that the company has earned higher-than-

projected profits

It may take a long time before a manager

can know for sure if the right decision was

made.


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Programmed decision is

one that is fairly

structured or recurs with

some frequency (or both). Nonprogrammed decision

is one that is unstructured

and occurs much less

often than a programmeddecision.


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Many decisions regarding basic operating

systems and procedures and standard

organizational transactions fall into this

category.ex : McDonalds employees are trained to make the

Big Mac according to specific procedures.

ex : Starbucks, and many other organizations, use

programmed decisions to purchase new supplies

[coffee beans, cups and napkins].


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Most of the decisions made by top managersinvolving strategy and organization design arenonprogrammed.

Decisions about mergers, acquisitions and takeovers, new

facilities, new products, labor contracts and legal issues arenonprogrammed decisions.

Managers faced with nonprogrammed decisionsmust treat each one as unique, investing greatamounts of time, energy and resources into

exploring the situation from all views.Intuition and experience are major factors inthese decisions.


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Decision Making Under

Certainty


Risk


Uncertainty


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A state of certaintyexists when a decision maker

knows, with reasonable certainty, what the

alternatives are and what conditions are

associated with each alternative.Very few organizational decisions, however, are

made under these conditions.

The complex and turbulent environment in which

businesses exist rarely allows for such decisions.


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A state of risk exists when a decision maker makes

decisions under a condition in which the availability of

each alternative and its potential payoffs and costs are all

associated with probability estimate.

Decisions such as these are based on past experiences,

relevant information, the advice of others and onesown

judgment.

Decision is calculatedon the basis of which alternative

has the highest probability of working effectively. [unionnegotiations, PorschesSUV focus vs high-performance sports cars]


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A state of uncertainty exists when a decision maker doesnot know all of the alternatives, the risks associated witheach, or the consequences each alternative is likely tohave.Most of the major decision making in todays

organizations is done under these conditions.To make effective decisions under these conditions,managers must secure as much relevant information aspossible and approach the situation from a logical andrational view.

Intuition, judgment and experience always play majorroles in the decision-making process under theseconditions.

See Figure 9.1, page 279.


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Certainty Risk Uncertainty

Level of ambiguity and chances of making a bad decision

Lower Moderate Higher

The decision

maker faces

conditions of:


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Keys to Decision Making

Classical

DecisionModel

Rational

DecisionMaking


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An approach to decision making that tells

managers how they should make decisions.

Approach assumes that managers are logical

and rational.Approach assumes that managersdecisions will

be in the best interests of the organization.

Conditions suggested in this approach rarely, if

ever, exist.See Figure 9.2, page 281.


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Obtain complete and

perfect information.

Eliminate uncertainty.

Evaluate everything

rationally and logically

When faced with adecision situation,

managers

should

and end up with a

decision that best

serves the interests

of the organization.


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Consists of six (6) steps that keep thedecision maker focused on facts and logic

and help guard against inappropriate

assumptions and pitfalls.

Designed to help the manager approach a

decision rationally and logically.


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1) Identifying opportunities and diagnosing

problems.a) Need to defineprecisely what the problem is.

b) Manager must develop a complete understandingof the problem.

c) Manager must carefully analyze and consider the

situation.


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2) Identifying objectivesa) Managers must realize that their alternatives may

be limited by legal, moral and ethical norms,

authority constraints, available technology,economic considerations and unofficial social

norms.


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3) Generating alternatives

a) Managers develop varioous ways to solve the

problem and achieve objectives. Managers may rely on

their training, personal experience, education, andknowledge of the situation to generate alternatives.


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4) Evaluating alternatives

a) Each alternative must pass successfully through threestages before it may be worthy of consideration as asolution.

1. Feasibility Is it financially possible? Is it legallypossible? Are there limited human, material and/orinformational resources available?

2. Satisfactory Does the alternative satisfy the conditionsof the decision situation? [50% increase in sales]

3. Affordability How will this alternative affect other partsof the organization? What financial and non-financialcosts are associated?

b) The manager must put pricetagson the consequences ofeach alternative.c) Even an alternative that is both feasible and satisfactory

must be rejected if the consequences are too expensive forthe total system.


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5) Reaching Decisionsa) Choosing the best alternative is the real test of

decision making.

b) Optimization is the goal because a decision is likelyto affect several individuals or departments.

c) Finding multiple acceptable alternatives may be

possible; selecting one and rejecting the others

may not be necessary.


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6) Implementing the chosen alternativea) Managers must consider peoples resistance to

change when implementing decisions.

b) For some decisions, implementation is easy; forothers, very difficult or time consuming.

c) Operational plans are very useful in implementing

alternatives.

d) Managers must also recognize that even when all

of the alternatives and their consequences have

been evaluated as precisely as possible,

unanticipated consequences are still likely.


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7) Following up and evaluating the resultsa) Managers must evaluate the effectiveness of their

decisions did the chosen alternative serve its original

purpose?

b) If the implemented alternative appears not to beworking, the manager has several choices:

1. Another previously identified alternative might be

adopted or

2. Recognize that the situation was not correctly

defined and start the process all over again or3. Decide that the alternative has not been given

enough time to work or should be implemented in a

different way.[See Figure 9.3 and Table 9.1 ]


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Sometimes decision making must reflect

subjective considerations (tastes, etc.)

Other behavioral aspects include: political

forces, intuition, escalation of commitment,

risk propensity and ethics.


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TheAdministrative Modelof Decision Making

Herbert A Simon, a Nobel Prize winner in Economics,

developed the model to describe how decisions are often

made rather than to prescribe how they should be made.

Argues that decision makers have incomplete and

imperfect information, are constrained by bounded

rationalityand tend to satisficewhen making decisions.

Bounded rationality suggests that decision makers are

limited by their values and unconscious reflexes, skillsand habits. [American vs foreign automakers]


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Satisficing is the tendency to search foralternatives only until one is found that meetssome minimum standard of sufficiency.

Rather than conducting an exhaustivesearch forthe best possible alternative, decision makerstend to search only until they identify an

alternative that meets some minimum standard ofsufficiency.


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...and end up with a

decision that may or

may not serve the

interests of the

organization.

Use incomplete and

imperfect Information.

Are constrained by

bounded rationality.

Tend to satisficeWhen faced with a

decision situation

managers

actually


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perfect information

Attempt to accomplish

objectives

Rational and systematic

Work in the best !


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A decisionmaking technique in which group member present

spontaneous suggestion for problem solution, regardless of their

likehood of implementation in order to promote their freer and creative

in the group :

RULES !

1. FREEWHEELING.

2. Not criticize ideas.

3. Quality4. Wilder

5. Piggyback

No ideas are evaluated after all alternatives are generated.


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Uses experts to make predictions and forecast about future events buy

survey instruments or questionnaires without meeting face to face


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Chapter 3 UiTM MGT

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