The Role of Decision Making in Management

Chapter 1

INTRODUCTION

• Decision Making is a key element in the process of management

• To manage a complex job , it has to be broken down in small pieces and study them in isolation.

• Managers must do planning and control they managerial functions are most important of all

• Further breaking down those tasks into their pieces , we find they both include stages of decision making and problem solving

Decisions are inevitable

• All of us make decisions• Some decisions are simple some are complex• But most of the problem solving or decision

making are convoluted with much fuzziness and backtracking

• Decision making is basic foundation of the process of management

WHAT IS DECISION MAKING PROCESS

Step #1:Define the Problem

• What? • Where?• How?• When?• With whom?• Why?

Step #2:Gather Additional Data

• Broad• Objective• Verifiable• Relevant

Step #3:Lay It All Out

Step #4:Identify Your Options

• What options do we have?

• What has been done in the same situation by others?

• In other disciplines?• How about

something new?

Step #5:Evaluate Your Options

Step #6:Make Your Decision

Step #7:Move Forward

• Communicate the decision/solution• Plan the implementation• Monitor results• Learn as you go

Situation:Something’s Gone Wrong

Find and correct the changes that account for the fall-off in results.

Situation:Increased – or Changing – Expectations

Find new ways of operating.

Situation:The Double Whammy

Find ways to reengineer the system – correct and invent.

Situation:It Never Did Work Right

Find ways to overhaul – or completely rebuild.

Things That Can Limit Your Thinking

• Searching for THE ONE RIGHT ANSWER• Not involving front line people• Looking inside the library only • Waiting for 100% agreement• Fear of embarrassment or failure

Types of Decisions

Programmed decisions:• situations that occur often enough to enable

decision rules to be developed.Nonprogrammed decisions:• are made in response to situations that are unique,

are poorly defined and largely unstructured.• many involve strategic planning.

Decision making the process of identifying problems and opportunities, then resolving them.

Programmed and Nonprogrammed Decision

Differences Certainty

– all the information the decision maker needs is fully available. Risk

– decision has clear-cut goals.– good information is available.– future outcomes associated with each alternative are subject to chance.

Uncertainty– managers know which goals they with to achieve.– information about alternatives and future events is incomplete.– managers may have to come up with creative approaches to

alternatives. Ambiguity

– by far the most difficult decision situation.– goals to be achieved or the problem to be solved is unclear.– alternatives are difficult to define.– information about outcomes is unavailable.

Conditions that Affect the Possibility of Decision Failure

OrganizationalProblem

ProblemSolution

Low HighPossibility of Failure

Certainty Risk Uncertainty Ambiguity

ProgrammedDecisions

NonprogrammedDecisions

Three Decision Making Models

Classical ModelClassical Model

Administrative ModelAdministrative Model

Political ModelPolitical Model

Classical Model

Based on economic conditions Is considered to be normative

Classical Model

Accomplishes goals that are known and agreed upon.Strives for certainty by gathering complete information.Criteria for evaluating alternatives are known.Decision maker is rational and uses logic.

Administrative Model

How managers actually make decisions in situations characterized by non-programmed decisions, uncertainty, and ambiguity.

Focuses on organizational, rather than economic. Two concepts are instrumental in shaping the administrative model.

– bounded rationality: means that people have limits or boundaries on how rational they can be.

– satisficing: means that decision makers choose the first solution alternative that satisfies minimal decision criteria.

Is considered to be descriptive. It is considered intuitive.

Political Model

Closely resembles the real environment in which most managers and decision makers operate.

Decisions are complex.Disagreement and conflict over problems and

solutions are normal.Coalition building is important.

Comparisons of: Classical, Political, & Administrative Models

Classical Model Administrative Model Political Model

Clear-cut problem and goals.

Condition of certainty.

Full information about alternatives and their outcomes.

Rational choice by individual for maximizing outcomes.

Vague problem and goals.

Condition of uncertainty.

Limited information about alternatives and their outcomes.

Satisfying choice for resolving problem using intuition.

Pluralistic; conflicting goals.

Condition of uncertainty/ambiguity.

Inconsistent viewpoints; ambiguous information.

Bargaining and discussion among coalition members.