Ibrahim Sameer
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Learning Objectives
 Define decision making
 Apply the model of decision making
 Distinguish between well structured problems an ill-
structured problems
 Contrast between procedures, policies and rules
 Appreciate the importance of group decision making
vs. individual decision making
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Decision Making
Definition
 According to George F Terry, “Decision Making is the selection
based on certain criteria from two or more alternatives.”
 According to Heinz Weihrich and Harold Koontz, “Decision
making is defined as the selection of a course of action among
alternatives; it is the care of planning.”
 In simple term decision making is a choice made from available
alternative.
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Types of Decision & Problems
 Structured problems & programmed decisions: these
are problems which are straightforward, familiar & easily
defined.
 Programmed decisions fall into 3 types:
 Procedures: series of steps take to solve problems.
 Rules: clear statement what to do or what not to do.
 Policy: guideline for decision making.
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Types of Decision & Problems
(cont…)
 Unstructured problems & non - programmed decisions:
non-programmed decisions are made in response to situations
that are unique and largely unstructured, and have important
consequences for the organization.
 When managers confront an unstructured problem, there is no
cut and dried solution. It requires a custom made response
through
non-programmed
decision
making.
Managers
experience can help in making rational decision.
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Integration
 Programmed vs. non-programmed decisions.
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Decision Making Conditions
 Managers make decisions under four conditions:
 Certainty: it means all the information that require is
readily available in the hand of managers.
 Risk: means that decision has clear cut goal and all the
information is readily available but the future outcomes is
subject to probabilities. Under risk historical data and
statistical technique might be helpful.
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Decision Making Conditions
(cont…)
 Uncertainty: it means that managers know which goals they
wish to achieve, but information about alternative and future
event is incomplete. Manager do not have enough information
about the alternative that he had. Eg: interest rates, price etc
 Ambiguity: means that goals to be achieved or the problem to
be solved is unclear, options are difficult to define, and
information about outcome is unavailable.
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Models of Decision Making
 The approaches managers use in decision making fall
under the following:
 Classical model: in this approach of decision making it
assumes that decision makers are logical and rational, and
will make decisions in the best interests of the
organizations. Basically classical model of decision making
is related to programmed decision making.
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Models of Decision Making (cont…)
 Administrative model: it relies on assumption different from
those of the classical model and focuses on organizational
factors
that
influence
individual
decision.
Basically
administrative model of decision making is related to non
programmed decision making. According to this model: decision
goals are vague, rational procedures are not always used,
managers search for alternative is limited.
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Models of Decision Making (cont…)
 Political model: this model of decision making is useful to
make non programmed decisions when conditions are uncertain,
information is limited, and there is disagreement among
managers about what goals to pursue. The basic assumption of
this model is that, organizations are made up of groups,
information is ambiguous and incomplete, managers do not
have time or resources and managers engage in the push and pull
debate to decide goals.
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Decision Making Process (DMP)
 Identification of a problem: the DMP begins with the
existence of
a problem. A problem occurs when
organizational accomplishments are less than established
goals.
 Identifying decision criteria: once the manger identified
the problem, the decision criteria important to resolving
the problem must be identified. (eg: price, quality)
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Decision Making Process (DMP)
(cont…)
 Allocating weights to the criteria: if the relevant criteria
aren’t equally important, the decision maker must weigh
the items to give them correct priority in the decision.
 Developing alternatives: in this stage the decision maker
just merely lists all the alternative he have, no attempt are
made to evaluate the alternatives.
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Decision Making Process (DMP)
(cont…)
 Analyzing alternatives: here the decision maker the just compare the
strength and weakness of each alternative so that he can get an idea
which alternative is the best solution to the problem.
 Selecting alternatives: in this stage the manager select the best
alternative.
 Implementing the alternatives:
is concerned with putting the
decision into action.
 Evaluating decision effectiveness: evaluating the outcome of the
decision to see if the problem has been resolved.
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Decision Making Process (DMP)
(cont…)
 Example of DMP
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Individual & Group Decision
Making
 Advantages and disadvantage of group decisions are as
follows:
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Q&A
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