DECISION makingprocess and guidlines.ppt

how to make decision

1. Chapter 6
DECISION
MAKING:
THE ESSENCE OF
THE MANAGER’S
JOB
6.1© 2003 Pearson Education Canada Inc.

2. © 2003 Pearson Education Canada Inc.
LEARNING OBJECTIVES
•You should be able to:
–Outline the steps in the decision-making process
–Explain why decision-making ability is so
important for a manager
–Describe the rational decision maker
–Contrast the perfectly rational and bounded
rationality approaches to decision making
–Explain the role that intuition plays in the decision-
making process
6.2

3. © 2003 Pearson Education Canada Inc.
LEARNING OBJECTIVES
(continued)
•You should be able to: (continued)
–Identify the two types of decision problems
and the two types of decisions that are used
to solve them
–Differentiate the decision conditions of
certainty, risk, and uncertainty
–Describe the different decision-making styles
6.3

4. © 2003 Pearson Education Canada Inc.
DECISION MAKING
•Decisions
–Choices from two or more alternatives
–All organizational members make decisions
•Decision-Making Process
–Step 1 -Identifying a Problem
•problem-discrepancy between an existing
and a desired state of affairs
6.4

5. © 2003 Pearson Education Canada Inc.
DECISION MAKING (continued)
•Decision-Making Process (continued)
–Step 2 -Identifying Decision Criteria
•decision criteria-what’s relevant in making a
decision
–Step 3 -Allocating Weights to the
Criteria
•must weight the criteria to give them
appropriate priority in the decision
–Step 4 -Developing Alternatives
•list the viable alternatives that could resolve the
problem without evaluating them
6.5

6. © 2003 Pearson Education Canada Inc.
DECISION MAKING (continued)
•Decision-Making Process(continued)
–Step 5 -Analyzing Alternatives
•each alternative is evaluated against the
criteria
–Step 6 -Selecting an Alternative
•choosing the best alternative from among
those considered
–Step 7 -Implementing the Decision
•implementation-conveying the decision to
those affected by it and getting their
commitment to it
–Step 8 -Evaluating Decision
Effectiveness
•determine whether the problem is resolved
6.6

7. © 2003 Pearson Education Canada Inc.
THE DECISION-MAKING PROCESS
Identifying a
Problem
Identifying
the Decision
Criteria
Allocating
Weights
To Criteria
•Price
•Manufacturer and model
•Warranties
•Support
•Reliability
•Repair Record
•Reliability
•Service
•Warranty Period
•On-site Service
•Price
•Case Style
10
8
5
5
4
3
My sales
representatives
need new
computers.
6.3
6.7
Exhibit 6.1

8. © 2003 Pearson Education Canada Inc.
Developing
Alternatives Fujitsu AST
Sharp IBM HP TI
NEC
Analyzing
Alternatives NEC
AST
HP
Fujitsu
IBM
Sharp
TI
Selecting an
Alternative
Implementing
Decision
Evaluation of
Decision Effectiveness
•Reliability
•Service
•Warranty Period
•On-site Service
•Price
•Case Style
The Fujitsu
is the best.
Compaq
Compaq
6.8
Exhibit 6.1
(continued)

9. ASSESSED VALUES OF NOTEBOOK COMPUTER
ALTERNATIVES AGAINST DECISION CRITERIA
(Exhibit 6.3)
6.9 © 2003 Pearson Education Canada Inc.

10. EVALUATION OF LAPTOP COMPUTER
ALTERNATIVES AGAINST CRITERIA AND
WEIGHTS (Exhibit 6.4)
6.10 © 2003 Pearson Education Canada Inc.

11. DECISIONS IN THE MANAGEMENT
FUNCTIONS (Exhibit 6.5)
6.11 © 2003 Pearson Education Canada Inc.

12. © 2003 Pearson Education Canada Inc.
THE MANAGER AS DECISION
MAKER
•Rational Decision Making
–Decisions are consistent, value-maximizing choices
within specified constraints
–Managers assumed to make rational decisions
–Assumptions of Rationality-decision maker would:
–be objective and logical
–carefully define a problem
–have a clear and specific goal
–select the alternative that maximizes the likelihood of
achieving the goal
–make decision in the firm’s best economicinterests
•Managerial decision making seldom meets all the tests
6.12© 2003 Pearson Education Canada Inc.

13. © 2003 Pearson Education Canada Inc.
“Good Enough”
versus
Optimizing
Lacks
Complete
Information
Cannot
Assess All
Alternatives
Cannot
Weigh
All Criteria
Bounded
Rationality
6.13

14. THE MANAGER AS
DECISION MAKER (continued)
•Bounded Rationality
–Behave rationally within the parameters of a
simplified decision-making process that is limited
by an individual’s ability to process information
–Accept solutions that are “good enough”
–Escalation of commitment-increased commitment
to a previous decision despite evidence that it may
have been wrong
6.14© 2003 Pearson Education Canada Inc.

15. THE MANAGER AS
DECISION MAKER (continued)
•Role of Intuition
–Intuitive decision making-subconscious
process of making decisions on the basis
of experience and accumulated judgment
•does not rely on a systematic or thorough
analysis of the problem
•generally complements a rational analysis
6.15© 2003 Pearson Education Canada Inc.

16. WHAT IS INTUITION?
Managers make
decisions based
on experience
Managers make
decisions based
on feelings and
emotions
Managers make
Decisions based
on ethical values
or culture
Managers make
decisions based
on
subconscious
data
Manager make
decisions based
on skills,
knowledge,
or training
Intuition
Affect-
initiated
decisions
Experienced-
based decisions
Values or
ethics-based
decisions
Subconscious
mental
processing
Cognitive-
based
decisions
6.16© 2003 Pearson Education Canada Inc.

17. THE MANAGER AS A
DECISION MAKER (continued)
•Types of Problems and Decisions
–Well-Structured Problems-straightforward, familiar,
and easily defined
–Programmed Decisions-used to address structured
problems
•procedure-series of interrelated sequential steps used to
respond to a structured problem
•rule-explicit statement of what to do or not to do
•policy-guidelines or parameters for decision making
6.17© 2003 Pearson Education Canada Inc.

18. THE MANAGER AS A
DECISION MAKER (continued)
•Types of Problems and Decisions
(continued)
–Poorly-Structured Problems-new, unusual
problems for which information is ambiguous
or incomplete
–Non-programmed Decisions-used to address
poorly-structured problems
–few decisions in the real world are either fully
programmed or non-programmed
6.18© 2003 Pearson Education Canada Inc.

19. TYPES OF PROBLEMS, TYPES OF
DECISIONS, AND LEVEL IN THE
ORGANIZATION (Exhibit 6.8)
Programmed
Decisions
Non-programmed
Decisions
Level in
Organization
Top
Lower
Well structured
Poorly structured
Type of
Problem
6.19© 2003 Pearson Education Canada Inc.

20. THE MANAGER AS A
DECISION MAKER (continued)
•Decision-Making Conditions
–Certainty-outcome of every alternative
is known
–Risk-able to estimate the probability of
outcomes stemming from each alternative
–Uncertainty-not certain about outcomes
and unable to estimate probabilities
6.20© 2003 Pearson Education Canada Inc.

21. THE MANAGER AS A
DECISION MAKER (continued)
•Decision-Making Styles
–Two dimensions define the approach to decision making
•way of thinking-differs from rational to intuitive
•tolerance for ambiguity-differs from a need for consistency
and order to the ability to process many thoughts
simultaneously
–Define four decision-making styles
•Directive-fast, efficient, and logical
•Analytic-careful and able to adapt or cope with new situations
•Conceptual-able to find creative solutions
•Behavioural-seek acceptance of decisions
6.21© 2003 Pearson Education Canada Inc.

22. DECISION-MAKING STYLES
(Exhibit 6.12)
Analytic
DirectiveBehavioural
Rational
Intuitive
Way of Thinking
Conceptual
High
Low
Tolerance for Ambiguity
6.22© 2003 Pearson Education Canada Inc.

23. MANAGING WORKFORCE
DIVERSITY
•Diversity in Decision Making
–Advantages -diverse employees:
•provide fresh perspectives
•offer differing interpretations of problem definition
•increase the likelihood of creative and unique solutions
–Disadvantages -diverse employees:
•require more time to reach a decision
•may have problems of communication
•may create a more complex, confusing, and ambiguous
decision-making process
•may have difficulty in reaching agreement
6.23© 2003 Pearson Education Canada Inc.

24. OVERVIEW OF MANAGERIAL
DECISION MAKING (Exhibit 6.13)
Decision-Making
Process
Types of Problems and Decisions
•Well-structured
-programmed
•Poorly structured
-non-programmed
Decision-Making Conditions
•Certainty
•Risk
•Uncertainty
Decision Maker Style
•Directive
•Analytic
•Conceptual
•Behavioural
Decision-Making Approach
•Rationality
•Bounded Rationality
•Intuition
Decision
•Choose best
alternative
-maximizing
-good enough
•Implementing
•Evaluating
6.24© 2003 Pearson Education Canada Inc.