INTODUCTION TO MANAGEMENT CHAPTER FOUR (4)

INTRODUCTION TO MANAGEMENT CHAPTER FOUR

1. CHAPTER FOUR DECISION MAKING Chapter Objectives Define what decision making mean Understand different types of decisions and their relevance for different problems. Decision making process and Situations.

2. Definitions of Decision Making It is defined as the process of selecting or choosing, the best course of action from number of alternatives based on some criteria. It is a rational choice among alternatives. Because managers are continually confronted with opportunities and problems, they must constantly analyze the effect of different alternatives on their organizations and select the alternative that will move the firm toward its stated objectives.

3. Types of Decisions Programmed decisions- a repetitive decision that can be handled using a routine approach. The problems are straightforward, the decision maker goal is clear, the problem is familiar and the information is complete, such situations are called structured problems.

4. Once a standard procedure has been established, it can be used to treat all like situations. They usually involve an organization's every day operational and administrative activities They are primarily found at the middle and lower levels of management. Data used in making a programmed decision usually are complete and well defined. Participants know the details and agree on how to resolve the problem.

5. Cont'd... 2 . Non-programmed Decisions - are used to solve nonrecurring problems, when the problem has not arisen in exactly the same manner before, or it is complex or extremely important, it may require nonprogrammable decision. No well-established procedure exists for handling them, primarily because managers do not have experience to draw upon.

6. Cont'd... In contrast to programmed decisions, available data are usually incomplete. Non programmable decisions are commonly found at the middle and top levels of management and often are related to an organization's policy-making activities such as whether to add a product to the existing product line, to reorganize the company, or to acquire another firm, are examples.

7. The Decision making process Eight steps are involved in decision making process. 1. Ascertain the need for a decision/Identify the problem - The decision making process begins by determining a problem exists; that is, there is an unsatisfactory condition.

8. Cont'd... 2. Establish decision criteria - Once the need for a decision has been determined, there comes a need to establish decision criteria which requires identifying those characteristics that are important in making the decision. E.g. let’s use an example – a manager deciding what laptop computer to purchase to understand the steps in the process. Price Battery life Warranty Storage capacity

9. Cont'd... 3. Allocate weights to criteria - the identified criteria should be weighted based on their importance and arranged in priority. This is because some are obviously more important than others and we need to weight each criterion to reflect its importance in the decision. Price 4 Battery life - 7 Warranty - 6 Storage capacity – 10

10. 4. Develop Alternatives - This involves developing a list of the alternative that may be viable in dealing with the stated problem. Toshiba portage Hp pavilion Apple iBook Lenovo ThinkPad

11. 5. Evaluate Alternatives - Once the alternatives are listed then, decision maker must critically evaluate each one and identify the strong and weak points when compared against the criteria and the weights established.

12. Cont'd... Battery life Warranty Storage capacity price Toshiba portage 6 4 10 2 Hp pavilion 3 5 8 3 Apple iBook 4 6 9 1 Lenovo ThinkPad 5 3 6 1

13. 6. Select the Best Alternative - After we evaluate the alternatives, the next logical step is to select the best alternative that suits to solve the problem. 7. Putting Decision into Action/ implementing the alternative - After selecting the best alternative, we implement or put it into action.

14. 8. Following up Decisions / evaluating decision effectiveness - Having implemented the decision, the manager should compare the results of that course of action with the desired outcome, if necessary, take corrective action. Since decisions are made based on forecasts about the future, the best decision that we select may not suit absolutely to achieve our objectives. Therefore, managers should adjust, modify or take any other correctives if necessary.

15. Decision making situations 1. Decisions under certainty - decisions made in which the external conditions are identified and very predictable /whenever there is complete data & information. 2. Decisions under risk - those decisions in which probabilities can be assigned to the expected outcomes of each alternative.

16. Cont'd... 3. Decisions under uncertainty - it is a case where neither there is complete data nor probabilities can be assigned to the surrounding conditions. Some conditions that are uncontrollable by management include competition, government regulations, technological advances, the overall economy, and the social and cultural tendencies of society.