Chapter 8
Fundamentals of Decision
Making
Hellriegel, Jackson, and Slocum
MANAGEMENT: A Competency-Based Approach
South-Western College Publishing
Copyright © 2002
8.1
Learning Objectives
After reading this chapter, you should be able to:
 Explain the role of decision making for managers and
employees
 State the conditions under which individuals make decisions
 Describe the characteristics of routine, adaptive, and
innovative decisions
 Explain the features of three basic models of decision
making
Hellriegel, Jackson, and Slocum
MANAGEMENT: A Competency-Based Approach
South-Western College Publishing
Copyright © 2002
8.2
Conditions Under Which Decisions Are Made
Certainty
Risk
Objective probabilities
Hellriegel, Jackson, and Slocum
MANAGEMENT: A Competency-Based Approach
South-Western College Publishing
Copyright © 2002
Uncertainty
Subjective probabilities
Adapted from Figure 8.1
8.3
Framework for Decision Making
Types of Problems
Unusual
and
ambiguous
Innovative decisions
Uncertainty
Adaptive
decisions
Risk
Routine
decisions
Certainty
Known and
well defined
Hellriegel, Jackson, and Slocum
MANAGEMENT: A Competency-Based Approach
South-Western College Publishing
Copyright © 2002
Types of
Solutions
Untried and
ambiguous
Adapted from Figure 8.2
8.4
Benefits of Continuous Improvement
1) Enhanced customer value through new
and improved products and services
2) Reduction in errors, defects, and waste
3) Increased responsiveness changes in
customer expectations
4) Increased productivity and effectiveness
in the use of resources
Hellriegel, Jackson, and Slocum
MANAGEMENT: A Competency-Based Approach
South-Western College Publishing
Copyright © 2002
8.5
Rational Decision Making Model
Phase 1: Define
and diagnose
the problem
Phase 2:
Set goals
Phase 3:
Search for
alternative
solutions
Phase 4:
Compare
and evaluate
alternative
solutions
External and internal
environmental factors
and stakeholders
Phase 7:
Follow up and
control
Hellriegel, Jackson, and Slocum
MANAGEMENT: A Competency-Based Approach
South-Western College Publishing
Copyright © 2002
Phase 6:
Implement
the solution
selected
Phase 5:
Choose among
alternative
solutions
Adapted from Figure 8.3
8.6
Factors Influencing a Satisficing Decision
Information Processing
Biases
Limited
search
Perceived problem
Leads to
Triggers
Satisficing
decision
Limited
information
Hellriegel, Jackson, and Slocum
MANAGEMENT: A Competency-Based Approach
South-Western College Publishing
Copyright © 2002
Adapted from Figure 8.4
8.7
Political Model of Decision Making
Divergence In Problem
Definition
Multiple
Stakeholders with
Power
Divergence
in goals
Leads to
Triggers
Political Decision
Making
Divergence
in Solutions
Hellriegel, Jackson, and Slocum
MANAGEMENT: A Competency-Based Approach
South-Western College Publishing
Copyright © 2002
Adapted from Figure 8.5