Chapter 9
Decision Making
Types of Decisions
and Problems
Decision making is
the process of
identifying
opportunities
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A decision is a
choice made
from available
alternatives
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Programmed and
Nonprogrammed Decisions
Programmed Decisions
– Recurring problems
– Apply rule
e.g.reorder inventory, employee
selection
Nonprogrammed Decisions
–
–
–
–
Unique situations
Poorly defined
Unstructured
Important consequences
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Facing Certainty
and Uncertainty
• Difference between programmed and
unprogrammed decisions
• Uncertainty depends on the amount and
value of information available
• Certainty – situation in which all information
is fully available
• Risk – the future outcomes associated with
an alternative are subject to chance
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9.1 Conditions That Affect the
Possibility of Decision Failure
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Ambiguity and Conflict
• Ambiguity makes decisions difficult
– The goals and the problem are unclear
• Wicked Decisions involve conflict over goals and
have changing circumstances, fuzzy information,
and unclear links
– There is often no “right” answer
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6
The Ideal, Rational/Classical
Model : How Managers Should
Make Decisions
Rational economic assumptions drive decisions
 Operates to accomplish established goals, problem
is defined
 Decision maker strives for information and
certainty, alternatives evaluated
 Criteria for evaluating alternatives is known, select
alternative with maximum benefit
 Decision maker is rationale and uses logic e.g.
airlines automated system, programming, break
even analysis etc
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How Managers Actually
Make Decisions
• Administrative/descriptive approach
– How managers really make decisions
– Recognize human and environmental limitations
• Bounded rationality – people have limits or
boundaries
• Satisficing – decision makers choose the first
solution that satisfies minimal decision criteria
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Steps in the Administrative
Model
•
•
•
•
Goals are often vague
Rational procedures are not always used
Managers’ searches for alternatives are limited
Most managers settle for satisficing
Intuition – quick apprehension of situation based
on practice and experience
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Decision-Making Model:
Political
• Decisions involve managers with diverse interests
• Managers must engage in coalition building
– Informal alliance to support specific goal
• Without a coalition, powerful groups can derail
the decision-making process
• Political model resembles the real environment
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Political Model
•
•
•
•
Useful for nonprogrammed decisions
Uncertainty
Limited information
Potential for manager conflicts
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9.2 Comparing the Models
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Decision-Making Steps
1. Recognition of Decision Requirement – identify
problem or opportunity
2. Diagnosis and Analysis – analyze underlying causal
factors
3. Develop Alternatives – define feasible alternatives
4. Selection of Desired Alternative – alternative with most
desirable outcome
5. Implementation of Chosen Alternative – use of
management persuasive abilities to execute
6. Evaluation and Feedback – gather information about
effectiveness
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9.3 Six Steps in the Managerial
Decision-Making Process
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Personal Decision
Framework
• Directive style – people who prefer simple, clearcut solutions to problems
• Analytic style – managers prefer complex
solutions based on a lot of data
• Conceptual style – managers like a broad amount
of information
• Behavioral style – managers with a deep concern
for others
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Why Do Managers Make
Bad Decisions?






Being influenced by initial impressions
Justifying past decisions
Seeing what you want to see
Perpetuating the status quo
Being influenced by problem framing
Overconfidence
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Innovative Group
Decision Making
• Start with brainstorming – spontaneous
suggestions in a group
• Engage in rigorous debate – use divergent points
of view to focus problems
• Avoid groupthink – acknowledge disagreement as
value instead of blind agreement
• Act with speed – some decisions have to be made
incredibly quickly
• Don’t ignore crisis – managers should expect and
plan for crises (with speed)
• Know when to bail – good managers must know
when to pull the plug!
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