ODABULTUM University

College of Business and Economics

Department of Management

MOHAMMED JEMAL ( MBA)

IntroduBction to Management
 Chapter Four

Decision Making
Chapter Objectives Contents

At the end of this course you will be able to: • Meaning of decision making
• Define decision making and its basic concepts • Types of decisions
• Describe the different types of decisions • Decision making circumstances
• Elaborate the possible conditions of managerial • The decision making process
decision making
• Apply the decision making process
Decision Making

⚫ Decision making and problem solving are critically important skill areas for
managers.
⚫ Much of what managers and supervisors do is solve problems and make
decisions.
⚫ As a manager your ability to identify current and potential problems and to
make sound, timely decisions can literally affect the well-being of many.
⚫ Problem-solving often involves decision-making, and decision-making is
especially important for management and leadership.

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Decision Making
Organizational decision making
is the process of responding to a
problem or opportunity by
searching for and selecting a
solution or course of action that
will create value for
organizational stakeholders.

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Types of Problems and Decisions

Structured problems
• Involved goals that are clear.
• Are familiar (have occurred before)
• Are easily and completely defined- information about the problem is
available and complete.
Programmed decision
• Recurring or routine situations in which the decision maker should use
decision rules or organizational policies and procedures to make the
decision.

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Types of Problems and Decisions
Unstructured problems
• Problems that are new or unusual and for which information is
ambiguous or incomplete.
• Problems that will require custom-made solutions.
Non-programmed decisions
• Decision that are unique and nonrecurring.
• Decision that generate unique responses.

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Your Reflection

What do you think is the

relationship between managerial
levels and types of decisions and
problems?
Decision-Making Conditions
Certainty
• Each alternative’s outcome is known in advance.
• all the information the decision maker needs is fully available.
Risk
• Probabilities can be assigned to each outcome.
• good information is available.
Uncertainty
• Lack of information or knowledge makes the outcome of each
alternative unpredictable such that no probabilities can be determined.
• managers may have to come up with creative approaches to alternatives.

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Conditions that Affect the Possibility of Decision
Failure
Organizational
Problem

Low Possibility of Failure High

Certainty Risk Uncertainty

Programmed Nonprogrammed
Decisions Decisions

Problem
Solution

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Your Reflection

Whom do you think should

make decisions?
• Individual?
• Group? Who else?
Who Decides? Individual Decision Making

There are four styles Decision Making through Consultation

of decision making
based on who makes
the decision. Group Decision Making

Delegating the Decision

Your Reflection

What possible advantages and

limitations could be there with
group Decision Making/
Problem Solving?
Participative Decision Making/Problem Solving
Argument for Group Decision Making:
• You get more info. and expertise relevant to the decision.
• You get more good ideas and can generate more and better
alternatives.
• People thinking together can arrive at better decisions because of
the stimulation and interplay of different points of view.
• Participants are more committed to carrying out.
• Coordination and communication are simpler and better because
everyone understands.

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Participative Decision Making/Problem Solving
Criticism of group decision making:
• It takes longer in a group.
• There is usually a dominator in a group.
• Group participants get involved in winning arguments and showing
off.
• If consensus is required people may conform to get the meeting
over.
• Consensus leads to mediocre decisions.

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Group Decision Making Works Best When:
• Members are accustom to
working together as a team and
having differing expertise and
point of view but common
goals
• The leader is skillful at keeping
the meeting on target
• The group is rewarded for
making good decisions

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The Decision Making Process
1 Identify the Problem

2 Explore Alternatives

3 Evaluate Alternatives

4 Select an Alternative

5 Implement the Solution

6 Monitor Implementation of the Plan

7 Verify if the problem has been resolved or not

 The Decision Making Process
1 Identify the Problem
• Problem identification is undoubtedly the most important and the most
difficult step in the process.
• All subsequent steps will be based on how you define and assess the
problem at hand.

Problem or Solution?
• In carrying out Step 1, you must distinguish between a problem and its
solution.
• The most common error in problem solving is defining problems in terms of
their solutions.

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The Decision Making Process
1 Identify the Problem
• Here’s an example: Someone might say, “The problem is that
we don’t have adequate roads.” The problem, however, is not
that there are no adequate roads.
• The problem is really that vehicles are fully stopped for
periods of time in the roads of Addis.
• Constructing roads is a solution.

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The Decision Making Process
1 Identify the Problem
In defining the problem ask yourself and others, the following questions:
• What can you see that causes you to think there's a problem?
• Where is it happening?
• How is it happening?
• When is it happening?
• With whom is it happening? (HINT: Don't jump to "Who is causing the
problem?" When we're stressed, blaming is often one of our first
reactions. To be an effective manager, you need to address issues more
than people.)
• Why is it happening?

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Your Reflection

Consider a problem that

needs your attention/decision
and answer the above
questions related to the
problem
 The Decision Making Process

2 Explore Alternatives

The second step in the

decision-making process is to
explore alternative solutions
to the problem identified in
Step 1.

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The Decision Making Process

2 Explore Alternatives

Techniques for Generating Alternatives

At this point, it's useful to keep others involved (unless you are
facing a personal and/or employee performance problem).
✓ Brainstorming
✓ Surveys
✓ Discussion groups

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The Decision Making Process
3 Evaluate Alternatives

Criteria for Evaluating Alternatives

• After you have generated alternative solutions, you must have
some means of evaluating them.
• Basically solutions should be evaluated in terms of their
sufficiency, feasibility and realistic nature.
• Another part of evaluation is identifying contingencies—what
could go wrong.

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The Decision Making Process

4 Select an Alternative

• The fourth step in the problem-solving /decision making model

is to select one of the alternatives explored in Step 2 for
implementation.
• After you have evaluated each alternative, one should stand out
as coming closest to solving the problem with the most
advantages and fewest disadvantages.

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 The Decision Making Process
5 Implement the Solution
Carefully consider:
• What will the situation look like when the problem is solved?
• What steps should be taken to implement the best alternative to solving the
problem?
• What systems or processes should be changed in your organization, for
example, a new policy or procedure?
• How will you know if the steps are being followed or not? (these are your
indicators of the success of your plan)
• What resources will you need in terms of people, money and facilities?

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 The Decision Making Process
5 Implement the Solution
⚫ How much time will you need to implement the solution? Write a
schedule that includes the start and stop times, and when you expect to
see certain indicators of success.
⚫ Who will primarily be responsible for ensuring implementation of the
plan?
⚫ Write down the answers to the above questions and consider this as your
action plan.
⚫ Communicate the plan to those who will involved in implementing it and,
at least, to your immediate supervisor. (An important aspect of this step
in the problem-solving process is continually observation and feedback.)

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The Decision Making Process
6 Monitor Implementation of the Plan
Monitor the following indicators of success:
• Are you seeing what you would expect from the indicators?
• Will the plan be done according to schedule?
• If the plan is not being followed as expected, then consider: Was
the plan realistic? Are there sufficient resources to accomplish the
plan on schedule? Should more priority be placed on various
aspects of the plan? Should the plan be changed?

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The Decision Making Process
7 Verify if the problem has been resolved or not

• One of the best ways to verify if a problem has been solved or not is to
resume normal operations in the organization. Still, you should consider
the following very important points:
• What changes should be made to avoid this type of problem in the future?
Consider changes to policies and procedures, training, etc.
• Lastly, consider "What did you learn from this problem solving?"
Consider new knowledge, understanding and/or skills.
• Consider writing a brief memo that highlights the success of the problem
solving effort, and what you learned as a result. Share it with your
supervisor, peers and subordinates.

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Intuition in Decision Making
Intuition plays an important role
in decision making process.
However, it is believed that
personal intuition is normally
formed in terms of knowledge
and experience rather than
instinct or speculation.

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Attributes of an Effective Decision Maker
Effective decision makers tend to have the following attributes:
Knowledge
Initiative
Advice-seeking
Selectivity
Comprehensiveness
Currency
Flexibility
Good judgment
Calculated risk-taking
Self-knowledge

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