MAKING

DECISIONS

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 L E A R N I N G OBJECTIVES

1. Describe the eight steps in the decision-making

process.
2. Explain the four ways managers make decisions.
3. Classify decisions and decision-making
conditions.
4. Describe different decision-making styles and
discuss how biases affect decision-making.
5. Identify effective decision-making techniques.

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 THE DECISION-MAKING PROCESS

A key to success in management and in your

career is
knowing how to be an effective decision-
maker.

Decision
– making a choice
from two or more
alternatives.

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 Decision Making

• Decision-making is the process of choosing between

two or more alternatives.

• Every manager must make strategic, tactical, and

operational decisions to achieve organizational goals.

• Importance of Decision-Making in Management:

• Managers constantly make decisions in various areas,

such as hiring employees, setting goals, and
allocating resources.

• Effective decision-making improves business

performance and helps solve problems efficiently.
 THE DECISION-MAKING PROCESS
(CONT.)
Step 1 - Identify a Problem
– Problem – an obstacle that makes it difficult to
achieve
a desired goal or purpose.
– Objective + Obstacle = Problem
– If a problem is not correctly identified,
managers may make poor decisions.

Step 2 - Identify Decision Criteria

– Decision criteria are factors that are important
(relevant) to resolving the problem.
– Without clear criteria, decision-making can be
random and ineffective.
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 THE DECISION-MAKING PROCESS
(CONT.)
Step 3 - Allocate Weights to the Criteria
– If the relevant criteria aren’t equally
important, the decision maker must weight
the items in order to give them the correct
priority in the decision
• Not all decision criteria have the same
level of importance.
• A company is hiring a marketing manager and
has the following criteria:Experience
(40%)Creativity (30%)Communication skills
(20%)Salary expectation (10%)The company
prioritizes experience and creativity over salary.
Step 4 - Develop Alternatives
– List viable alternatives that could resolve the
problem
• managers must list possible solutions
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 THE DECISION-MAKING PROCESS
(CONT.)
Step 5 - Analyze Alternatives
– Appraising each alternative’s strengths and
weaknesses.
– An alternative’s appraisal is based on its ability to
solve the issues related to the criteria and
criteria weight.
– Choosing the right solution requires
understanding how well each alternative
meets the criteria set in previous steps.
– Ex: Choosing a supplier

Step 6 - Select or Choose the Best Alternative

– The alternative with the highest total weight is
chosen.
–
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 THE DECISION-MAKING PROCESS
(CONT.)
Step 7 - Implement the Alternative
– Putting the chosen alternative into action
– Conveying the decision to and gaining
commitment from
those who will carry out the alternative
• Why it matters: A well-thought-out
decision is useless if not properly
executed.
• Key Focus Areas:
• Communicating the decision to relevant
stakeholders.
• Ensuring commitment from those
responsible for implementation.
• Managing resources, training, and support
to execute effectively.
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 Decision Making Process

Step 8 - Evaluate Decision Effectiveness

– The soundness of the decision is judged by its
outcomes.
– How effectively was the problem resolved?
– If the problem was not resolved, what went wrong?
Why it matters:
• Ensures that the problem was actually solved.
• Identifies what worked and what didn’t.
• Helps improve future decision-making processes.
 EXHIBIT 2-1
DECISIONS MANAGERS MAY
MAKE

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 DECISIONS MANAGERS MAY MAKE
Planning Decisions
• Planning involves setting objectives, defining
strategies, and outlining actions to achieve
goals.

• Without planning, organizations lack direction and

may fail to adapt to change.

• Organizing:
• Involves structuring roles, assigning tasks, and
determining authority levels.
• Effective organization ensures efficient workflow and
resource management.
• Real-Life Examples:✅ How many employees should I
have report directly to me?
• Example: A restaurant manager supervises 5
 EXHIBIT 2-1
DECISIONS MANAGERS MAY MAKE
(CONT.)

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 DECISIONS MANAGERS MAY MAKE
• (CONT.)
Leading Decisions:

• Managers must decide how to motivate, influence,

and direct employees to achieve organizational goals.
• Why it matters: Leadership decisions affect employee
engagement, performance, and job satisfaction.
• Real-Life Examples:✅ How do I handle unmotivated
employees? Example: A sales team is
underperforming.
• A crisis may require autocratic leadership, while a
creative team may thrive with democratic
 DECISIONS MANAGERS MAY MAKE
(CONT.)
• Controlling involves monitoring performance,
enforcing policies, and ensuring goals are met.
• Why it matters: Effective control prevents errors,
inefficiency, and financial loss.
• Real-Life Examples:
✅ What activities in the organization need to be
controlled?
• Example: A restaurant needs quality control in
food preparation to maintain customer satisfaction.
• Discussion Question: How can managers balance
control without micromanaging?
 MAKING DECISIONS:
• RATIONALITY
Rational Decision-Making
– describes choices that are logical/consistent while
maximizing value.
– This model assumes that decision-makers analyze all
available options objectively before choosing the
best one.
• Assumptions of Rationality
– The decision maker would be fully objective and logical
– The problem faced would be clear and unambiguous
– The decision maker would have a clear and specific goal
and know all possible alternatives and consequences
• Limitations of Rational Decision-Making
❌ Assumes perfect knowledge (which is unrealistic).
❌ Ignores human emotions and biases.
❌ Time-consuming—analyzing every alternative is not 2 - 15
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 MAKING DECISIONS
Bounded Rationality
– decision-making that’s rational, but limited (bounded) by
an
individual’s ability to process information.
• Decision-making that is rational but limited by the
amount of information available, time constraints,
and human cognitive limitations.
• Why it matters: Managers often cannot analyze
every possible alternative, so they make reasonably
good decisions with the information they have.
• Satisfice – accepting solutions that are “good
enough.”
Intuitive Decision- Making
– Making decisions on the basis of experience, gut
feelings, and accumulated judgment.
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 STRUCTURED PROBLEMS A N D
PROGRAMMED DECISIONS
Structured Problems
– straightforward, familiar, and easily defined problems.
– These are clear, familiar, and easily defined
problems that occur frequently in an organization.
– Since structured problems are predictable,
managers can use standardized solutions to
resolve them quickly.
– Business Example – Handling Employee
AbsencesWhen an employee calls in sick, the HR
department follows a standard process to approve
leave and find a replacement

.
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 STRUCTURED PROBLEMS A N D
PROGRAMMED DECISIONS

Programmed decisions
– repetitive decisions that can be handled by a routine
approach
• Programmed decisions save time and improve
efficiency by automating responses to common
problems.
• Types of Programmed Decisions:
• 🔹 Policy-Based: Company-wide rules for handling
common issues.
• 🔹 Procedure-Based: Step-by-step instructions for
resolving recurring problems.
• 🔹 Rule-Based: Specific conditions that determine the
next action.
 UNSTRUCTURED PROBLEMS
A N D NONPROGRAMMED
DECISIONS
Unstructured Problems
–problems that are new or unusual and for which
information is ambiguous or incomplete.
–There is no clear procedure for solving
unstructured problems, so managers must
analyze, adapt, and think critically.
–Ex: Pandemic

Non-programmed decisions
– unique and nonrecurring and involve custom made
solutions.
– Unlike programmed decisions, these require
critical thinking, creativity, and strategic
analysis.
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 DECISION-MAKING CONDITIONS
Certainty – a situation in which a manager can make
accurate
decisions because all outcomes are know in certainty,
decisions are predictable and involve low risk.
‘’Booking a flight, Investing in fixed deposits’’
Risk – a situation in which the decision maker is
able to estimate the likelihood of certain
outcomes, but cannot guarantee which one will
occur. Managers must calculate probabilities
and potential impacts before making a choice.
‘’Stock Market, Choosing a university major’’
Uncertainty – a situation in which a decision maker has
neither certainty nor reasonable probability estimates
available. Decisions under uncertainty require intuition, 2 - 20
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 MANAGING RISK
⯈ Managers can use historical data from past
experiences or secondary information that lets them
assign probabilities to different alternatives.
• Risk management involves using data and
probability to make more informed decisions.
⯈ Managers use this information to help make decisions
by
calculating the expected value.
Managers analyze past trends to estimate risks
and make strategic decisions.
Sources of risk data:
• Sales trends
• Industry reports
• Market research
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 DECISION-MAKING STYLES
Linear Thinking Style
–a person’s tendency to use external data/facts;
the habit of processing information through rational,
logical thinking.
–People with a linear thinking style prefer
structured decision-making and avoid
relying on emotions. ‘’financial analysts’’

Nonlinear Thinking Style

–a person’s preference for internal sources of
information; a method of processing this information
with internal insights, feelings, and hunches.
–Nonlinear thinkers trust their instincts and
can make quick decisions based on experience.
‘’ Creative Marketing Decisions’’
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 Linear and Nonlinear Thinking

Feature Linear Thinking Nonlinear Thinking

Intuition, emotions,
Decision Basis Data, facts, analysis
experience
Scientists, accountants, Artists, entrepreneurs,
Example Professions
engineers designers
Speed of Decision-Making Slower, methodical Faster, instinctive
Innovative and creative
Best for… Logical problem-solving
challenges
 DECISION-MAKING BIASES A N D
ERRORS
• Biases and errors in decision-making occur when
personal perceptions, emotions, or
environment distort rational thinking.

1.Perceptual e.g. seeing only what you want

to see, not recognizing real problems, ignoring
contradictory evidence.
2. Emotional e.g. being impatient, afraid of
mistakes, or taking risks, or avoidance of
risk rather than logic. ‘’ Fear of
Innovation’’
3. Intellectual e.g. lacking the knowledge, not
being methodical or creative. Making poor
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1.Environmental e.g. being distracted, careless or
irresponsible.’’ Peer Pressure in University’’

2.Cultural e.g. disliking change, competing with others,

unawareness, making decisions based on personal beliefs,
traditions, or resistance to change. ‘’Global Expansion
Challenges’’.
 GUIDELINES FOR
MAKING EFFECTIVE
DECISIONS
• Understand cultural differences ‘’ McDonald's in India’’
• Create standards for good decision-making, that are
clear in order to reduce mistakes and improve
consistency. ‘’Airline safety protocols’’
• Know when it’s time to call it quits, when to cut losses
and change course is key to smart decision-making.
• Use an effective decision-making process to help
managers make rational choices
• Build an organization that can spot the unexpected and
quickly adapt to the changed environment.

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