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Managers As Decision Makers

The document outlines the 8 step decision making process that managers follow: 1) Identify the problem 2) Identify decision criteria 3) Allocate weights to criteria 4) Develop alternatives 5) Analyze alternatives 6) Select an alternative 7) Implement the alternative 8) Evaluate the decision's effectiveness. It also discusses rational vs bounded rational decision making and different types of problems (structured vs unstructured) and decisions (programmed vs non-programmed).

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Adnan Walidad
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175 views20 pages

Managers As Decision Makers

The document outlines the 8 step decision making process that managers follow: 1) Identify the problem 2) Identify decision criteria 3) Allocate weights to criteria 4) Develop alternatives 5) Analyze alternatives 6) Select an alternative 7) Implement the alternative 8) Evaluate the decision's effectiveness. It also discusses rational vs bounded rational decision making and different types of problems (structured vs unstructured) and decisions (programmed vs non-programmed).

Uploaded by

Adnan Walidad
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Management

Managers as Decision Makers


Decision Making
• Decision
 Making a choice from two or more alternatives.
• The Decision-Making Process
 Identifying a problem and decision criteria and allocating weights
to the criteria.
 Developing, analyzing, and selecting an alternative that can resolve
the problem.
 Implementing the selected alternative.
 Evaluating the decision’s effectiveness.
Exhibit 6–1
The Decision-Making
Process
Step 1: Identifying the Problem
• Problem
 A discrepancy between an existing and desired state of affairs.

• Characteristics of Problems
 A problem becomes a problem when a manager becomes aware of it.
 There is pressure to solve the problem.
 The manager must have the authority, information, or resources needed to
solve the problem.
Step 2: Identifying Decision Criteria
• Decision criteria are factors that are important (relevant) to
resolving the problem such as:
 Costs that will be incurred (investments required)
 Risks likely to be encountered (chance of failure)
 Outcomes that are desired (growth of the firm)

Step 3: Allocating Weights to the Criteria


• Decision criteria are not of equal importance:
 Assigning a weight to each item places the items in the correct priority order
of their importance in the decision-making process.
Exhibit 6–2 Criteria and Weights for Computer Replacement Decision

Criterion Weight
Memory and Storage 10
Battery life 8
Carrying Weight 6
Warranty 4
Display Quality 3
Step 4: Developing Alternatives
• Identifying viable alternatives
 Alternatives are listed (without evaluation) that can resolve the problem.

Step 5: Analyzing Alternatives


• Appraising each alternative’s strengths and weaknesses
 An alternative’s appraisal is based on its ability to resolve the issues
identified in steps 2 and 3.
Exhibit 6–3 Assessed Values of Laptop
Computers Using Decision Criteria
Step 6: Selecting an Alternative
• Choosing the best alternative
 The alternative with the highest total weight is chosen.

Step 7: Implementing the Alternative


• Putting the chosen alternative into action.
 Conveying the decision to action and gaining commitment from those
who will carry out the decision.
Exhibit 6–4 Evaluation of LaptopAlternatives
Against Weighted Criteria
Step 8: Evaluating the Decision’s Effectiveness

• The soundness of the decision is judged by its outcomes.


 How effectively was the problem resolved by outcomes resulting from
the chosen alternatives?
 If the problem was not resolved, what went wrong?
Exhibit 6–5 Decisions in the Management Functions
Making Decisions

• Rationality
• Managers make logical, consistent and value-maximizing choices with specified
constraints.
• Assumptions are that decision makers:
 Are perfectly rational, fully objective, and logical.
 Have carefully defined the problem and identified all viable alternatives.
 Have a clear and specific goal
 Will select the alternative that maximizes outcomes in the organization’s interests rather than in their
personal interests.

 These assumptions apply to any decision—personal or managerial.


Making Decisions (cont’d)
• Bounded Rationality
• Managers make decisions rationally, but are limited (bounded) by their ability to process
information.
• Assumptions are that decision makers:
 Will not seek out or have knowledge of all alternatives
 Will satisfice—choose the first alternative encountered that satisfactorily solves the problem—rather
than maximize the outcome of their decision by considering all alternatives and choosing the best.
• Influence on decision making
 Escalation of commitment: an increased commitment to a previous decision despite evidence that it
may have been wrong
 Why would decision makers escalate commitment to a bad decision?
Types of Problems and Decisions

• Structured Problems
 Involve goals that are clear.
 Are familiar (have occurred before).
 Are easily and completely defined—information about the problem is available and
complete.

• Programmed Decision
 A repetitive decision that can be handled by a routine approach.
Types of Programmed Decisions

• Procedure
 A series of interrelated steps that a manager can use to respond (applying a policy)
to a structured problem.
• Rule
 An explicit statement that limits what a manager or employee can or cannot do.
• Policy
 A general guideline for making a decision about a structured problem.
Policy, Procedure, and Rule Examples

• Policy
 Accept all customer-returned merchandise.

• Procedure
 Follow all steps for completing merchandise return documentation.

• Rules
 Managers must approve all refunds over $50.00.
Problems and Decisions (cont’d)

• Unstructured Problems
 Problems that are new or unusual and for which information is ambiguous or incomplete.
 Problems that will require custom-made solutions.

• Nonprogrammed Decisions
 Decisions that are unique and nonrecurring.
 Decisions that generate unique responses.
Exhibit 6–7 Programmed Versus Nonprogrammed Decisions
Decision-Making Conditions

• Certainty
 A situation in which a manager can make an accurate decision because the outcome of
every alternative choice is known.
• Risk
 A situation in which the manager is able to estimate the likelihood (probability) of
outcomes that result from the choice of particular alternatives.

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