Decision making –
The process of making a choice
between alternatives
Problem solving
- the process of producing
alternative solutions to
a recognized problem
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Types of decisions

Programmed decisions
Decisions are programmed to the extent that they are
repetitive and routine and a definite procedure has
been developed for handling them

Nonprogrammer decisions
Decisions are nonprogrammed when they are novel
and unstructured. There is no established procedure
for handling the problem
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Types of decisions
Programmed
Decisions
Nonprogrammed
Decisions
Type
Frequent,routine, much
Of problem certainty regarding causeand-effect relationships
Novel,unstructured,much
procedure
Dependence on
policies,rules,&definite
procedures
Necessity for creativity
intuition,tolerance for ambiguity
examples
Periodic reorder of
inventory
Merit system for promotion
of state employees
Necessary grade-point
average for good academic
standing
Diversification into new
products & markets
Reorganization of state
government agencies
Construction on new classroom
facilities
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uncertainty regarding causeand-effect relationships
Best vs. Satisfactory decision

Best decision - a chosen
solution produced with
full information and in
adequate time to resolve
a well-defined problem

Satisfactory decision a partially or temporary
chosen solution with
partial information
taken in limited time to
resolve an ill-defined
problem
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Rational Decision Making
Rational Model of
Decision Making
also called the classical
model explains how
managers should make
decisions; it assumes
managers will make
logical decisions that will
be optimum in furthering
the organization’s best
interests
The Rational Model is
based on unrealistic
assumptions:



Complete information, no
uncertainty
Logical, unemotional
analysis,
Best Decision for the
organization
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Nonrational Decision Making
Five Nonrational
Models are:
Nonrational models of
decision making
explain how managers do
make decisions; they
assume the decision making
is nearly always uncertain
and risky, making it difficult
for managers to make the
optimum decisions


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
Satisficing
Incremental
Coalitional
Garbage can
Intuitional
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Nonrational Models
1.
2.
3.
4.
5.
Satisficing Model managers seek alternatives until
they find one that is satisfactory, not optimal
Incremental Model managers take small, short-term
steps to alleviate a problem
Coalitional Model managers band together in groups
favoring different alternatives, and the groups bargain,
negotiate, and compromise on a particular problem
Garbage Can Model managers virtually make random
decisions
Intuitive Model consists of a manager’s quickly sizing
up a situation and making a decision based on his or
her experience or practice
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Some Hindrances to Perfectly
Rational Decision Making
Panel 7.2
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Complexity
Time and money constraints
Different cognitive capacity, values, skills,
habits, and unconscious reflexes
Imperfect information
Information overload
Different priorities
Conflicting goals
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The Decision Making Process
Establishing specific goals and objectives and
measuring results
Problem identification and definition
Consideration of causes
Development of alternative solutions
Evaluation of alternative solutions
Solution selection
Implementation
Follow-up
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Evaluation
What should you do if the solution is not
working?
 Give it more time
 Change it slightly
 Try another alternative
 Start over
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Factors influencing problem
identification
Perceptual problems
 Defining the problem in terms of solutions
 Identifying symptoms as
problems

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Establishing Priorities
Prioritizing depends on :
 Urgency
Relate to time. How critical is time pressure?

Impact
Describes the seriousness of the
problem’s effects.

Growth tendency
Addresses future considerations.
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Evaluation of Alternative Solutions
The alternative-outcome relationship is based on 3
possible conditions:
 Certainty the decision maker has complete
knowledge of the probability of the outcome of each
alternative
 Uncertainty the decision maker has no knowledge of
the probability of the outcome of each alternative
 Risk the decision maker has some probabilistic
estimate of of the outcome of each alternative
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Behavioural Influenced on Decision
Making

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Values
Propensity for risk
Potential for dissonance
Escalation of commitment
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Values are guidelines in making a choice
•In establishing objectives
•In developing alternatives
•In choosing and alternative
•In implementing a decision
•In evaluating and control phase (when corrective
action is taken)
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Potential for Dissonance


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There is often lack of consistency among
individual’s various attitudes, beliefs after a
decision has been made
The decision is an important one psychologically or
financially
There are a number of foregone alternatives
The forgone alternative have many favorable
features
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Methods,used to reduce dissonance:

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Seek information that supports the wisdom of the
decision
Selectively perceive information in a way that
supports the decision
Adopt a less favorable view of the foregone
alternatives
Minimize the importance of the negative aspects of
the decision and exaggerate the importance of the
positive aspects
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Escalation of Commitment
is the tendency to persist in an
ineffective course of action when
evidence reveals that the project
cannot succeed
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Individual/Group Decisions

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In establishing goals grouper are probably superior to
individuals
In identifying causes and developing alternatives efforts of
group members are necessary
In evaluating alternative solutions judgment if the group
seems superior to that of an individual
In solution selection group tends to take more risky
decisions
Implementation and follow-up is usually accomplished by
individual managers
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Group Decisions
Advantages
 More information and
knowledge are available
 More alternatives are
likely to be generates
 More acceptance of the
final decision is likely
 Better decisions generally
emerge
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Disadvantages
The process takes longer
that individual decision
making, so it is costlier
Social pressures to those
who disagree
One person may dominate
the group
Groupthink may occur
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When to use groups
in decision making

When it can increase quality

When it can increase acceptance

When it can increase development
Panel
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Techniques for Stimulating
Creativity

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Brainstorming
The Delphi Technique
The Nominal Group Technique
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Summary

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Decisions can be classified as programmed or
nonprogrammed depending on the type of the
problem
there are several types of decision making process
The decision-making process entails a number of
steps
Problems are of different importance and it’s
necessary to prioritize them ( urgency, impact and
growth tendency)
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Summary

The relationship between alternatives and
outcomes is based on three possible conditions:
certainty, uncertainty & risk

The decision-making process is influenced by
behavioral factors: values, propensity for risk,
potential for dissonance, and escalation of
commitment

Research suggests that decisions made by group
are superior to those made individual. However
there are aspects of group decision making that
have negative effects.
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