MANAGERIAL DECISION MAKING

1.

Describe the kinds of decisions you will face

as a manager

2.

Steps in making rational decisions

3.

Recognize the pitfalls you should avoid when

making decisions

4.

Evaluate the pros and cons of using a group

to make decisions

5.

Identify procedures to use in leading a

decision-making group
Decisions

6.

Explain how to encourage creative decisions

7.

Processes by which decisions are made in

organizations

8.

How to make a decision in a crisis

I.

Characteristic of Managerial Decision

A. Lack of Structure
Lack of structure is the usual state of affairs
in managerial decision-making
Programmed decision are decisions
encountered and made before having
objectively correct answers and solvable by
using simple rules, policies, or numerical
computations.
Non-Programmed decisions are ne, novel,
complex decisions having no proven
answers.
B. Uncertainty and Risk
Certainty exists when decision makers
have
accurate
and
comprehensive
information
Uncertainty is the state that exist when the
decision
makers
have
insufficient

information
Risks exists when the probability of an
action being successful is less than 100 %
and losses may occur
C. Conflict
Conflict opposing pressures from
different sources, occurring on the level of
psychological conflict or of conflict
between individuals and groups
There are two levels of conflict:
- Psychological conflict occurs when several
options are attractive, or when none of the
options is attractive
- Conflict arises between individual and
groups

II.

Stages of Decision Making

A. Identifying and Diagnosing the problem
The first stage in the decision making
processes is to recognize that a problem
exist and must be solved

 Question to ask and answer in this stage;

- Is there a difference between what is actually
happening and what should be happening?
- How can you describe the deviation, as
specifically as possible?
- What is/are the causes of the deviation?
- What specific goals should be met?
- Which of these goals are absolutely critical to
the success of the decision?

B. Generating Alternative Solutions

The second stage, problem diagnosis is
linked to the development of alternative
courses of action aimed at solving the
problem
Ready made solutions
Custom-made solutions are new creative
solutions designed specifically for the
problem
C. Evaluating Alternatives
The third stage involves determining the
value or adequacy of the alternatives that
were generated. Which solution will be the

best?
Key questions to ask:
- Is our information about alternatives
complete and current? If not, can we get more
and better information?
- Does the alternative meet the primary
objectives?
- What problems could we have if we
implement the alternative?

Contingency plans are alternative courses

of action that can be implemented based on
how the future unfolds.

D. Making the Choice

Maximizing is a decision realizing the best
possible outcome.
Satisfying means choosing an option that is
acceptable, although not necessarily the
best or perfect.
Optimizing means that you achieve the
best possible balance among several goals.

E. Implementing the Decision

The decision-making process does not end
once a choice is made.
Decision-makers must understand the
choice and why it was made.
They must be committed to its successful
implementation.
They must plan implementation carefully;
- Determine how things will look when the
decision is fully operational
- Chronologically order, perhaps with a flow
chart, the steps necessary to achieve a fully
operational decision.
- List the resources and activities required
implementing each steps.
- Estimate the time needed for each step
- Assign responsibility for each step to specific
individuals

Decision-maker should assume that things

will
not
go
smoothly
during
implementation. Useful question to ask;
- What problems could this action cause?

- What can we do to prevent the problems?

- What unintended benefits or opportunities
could arise?
- How can we make sure they happen?
- How can we be ready to act when the
opportunities come?

F. Evaluating the Decision

The final stage in the decision - making
process is evaluating the decision
Collect information on how well the
decision is working
Decision evaluation is useful whether the
feedback is positive or negative
If the position appears inappropriate, its
back to the drawing board
III.

The Best Decision

Vigilance is a process in which the
decision-maker carefully executes all six
stages of decision making, including
making provisions for implementation and
evaluation.
Managers need to know that they did their

best to make the best possible decision

IV.

Barriers to Effective Decision Making

A. Psychological Biases
Illusion of control is a belief that one can
influence events, even when one has no
control over what will happen.
Framing effects refer to a decision bias
influenced by the way in which a problem
or decision alternative is phrased or
presented
Discounting the future is a bias weighing
short-term costs and benefits more heavily
than longer-term cost and benefits

B. Time Pressure
Instead of relying on long range planning
and futuristic forecasts, focus on real-time
information
Involve people more effectively and

efficiently
C. Social Realities
Interpersonal factors decrease decisionmaking effectiveness
Many decision are the result of intensive
social interactions, bargaining, and
politicking

V.

Decision Making in Groups

A. Potential Advantages of Using a Group
More information is available when several
people are making the decision
There are a great number of perspectives on
the issues, or different approaches to
solving the problem
An opportunity for intellectual stimulation
is achieved
People are more likely to understand why
the decision was made
Groups lead to higher level of commitment

to the decision
B. Potential Problems in using a Group
Sometimes one group member dominates
the discussion
Satisfying is more likely with groups
Pressure to avoid disagreement can lead to
a phenomenon called groupthink
- Groupthink is a phenomenon that occurs
in decision making when group members
avoid disagreement and they strive for
consensus
- Goal displacement is a condition that
occurs when a decision- making group
losses sight of its original goal and a new,
possibly less important goal emerges

VI.

Managing Group Decision Making

A. Leadership style
The leader of a decision-making body must
attempt to minimize process-related
problems
The leader should avoid dominating the
discussion
Dont lose sight of the problem
Make a decision
B. Constructive Conflict
The most constructive type of conflict is
cognitive
conflict,
or
issue-based
differences in perspectives or judgement
about issues.
Affective conflict is emotional and directed
at other people
A devils advocate has the job of criticizing
ideas to ensure that their downsides are
fully explored
The dialectic goes a step beyond devils
advocacy by requiring a structured debate

between two conflicting courses of action

C. Encouraging Creativity
You are being creative if you;
- Bring a new thing into being (creation)
- Join two previously unrelated thing
(synthesis)
- Improve something or give it a new
application (modification)

D. Brainstorming
Brainstorming is a process in which group
members generate as many ideas about a
problem as they can; criticism is withheld
until all ideas have been proposed.

VII.

Organizational Decision Making

A. Constrains on decision-maker;
- Financial, legal, market, human, or

Organizational.

B. Bounded Rationality;
Is a less-than-perfect form of rationality in
which decision makers cannot perfectly rational
because decisions are complex and complete
information is unavailable or cannot be fully
processed.

C. Model of organizational decision processes

Incremental model is a model of organizational
decision-making in which major solutions arise
through a series of smaller decision
Coalitional model is a model of organization
decision making in which groups with differing
preferences use power and negotiations to
influence decisions
Garbage can model is a model of
organizational decision making depicting a
chaotic process and seemingly random decisions

D. Decision Making in a Crisis

 Manager must make decisions under

a
crisis
An effective plan for crisis management
include;
- Strategic actions
- Technical and structural actions
- Communication actions
- Psychological and cultural actions

Ultimately management should be able to

answer the following;
- What kinds of crises could your company
face?
- Can your company detect a crisis in its
early stages?
- How will it manage a crisis if one occurs?
- How can it benefit from a crisis after it has
passed?