Principles of Management
Session. 3
Managers as Decision Makers
USMAN SADIQ (Ph.D. Scholar)
Our expectations?
 Hard work
 Honesty
 Responsible attitude
AFTER STUDYING THIS CHAPTER YOU
SHOULD BE ABLE TO:
 Understand decision making and its importance.
Describe the eight steps in the decision-making process and
how they can use it in daily life.
Explain the three ways through which managers make
decisions.
Classify decisions and decision-making conditions.
Describe different decision-making styles and discuss how
biases effect decision making.
Identify effective decision making techniques.
Recognize, analyze and use alternatives, while making
decisions
Decision
Making a choice from two or
more alternatives.
WHY DECISION-MAKING
Decision Making
Administrative process based on decision making ,
decision making is based on choice whereas choice is
based on alternatives.
Administrative
process
Decision Making
Choice
Best Alternatives
The Decision Making
Process
6–7
The Decision-Making
Process
– Identifying a problem.
– Identification of Decision Criteria.
– Allocating weights to the criteria.
– Developing alternatives.
– Analyzing the alternatives, that can resolve the problem.
– Selecting from alternatives.
– Implementing the selected alternative.
– Evaluating the decision’s effectiveness.
Step 1:
Identifying the Problem
Problem
A discrepancy between an existing and desired
state of affairs.
•
•
•
The decision making process begins by determining that a
problem exists: that is, there is an unsatisfactory condition.
This is frequently expressed as a disparity between what is
and what should be.
Whether a decision is necessary or not depends on the
administrator’s perception. What one person sees as a
“problem” another may see as perfectly acceptable state of
affairs. So, the decision process begins with administrator’s
recognition that there is a gap between what is desired and
what actually is.
e.g. Purchase a new Laptop
Step 2:
Identifying Decision Criteria
Decision Criteria
Criteria that define what's important or
relevant in resolving problem.
Costs that will be incurred (investments required)
Risks likely to be encountered (chance of failure)
Outcomes that are desired (growth of the firm)
Important Criteria
Criterion
Carrying Weight
Warranty
Battery life
Display Quality
Memory and Storage
Step 3:
Allocating Weights to the Criteria
Assigning a weight to each item
places the items in the correct
priority order of their importance
in the decision making process.(110)
Weights for Laptop (1-10)
Criterion
Weight
Memory and Storage
10
Battery life
8
Carrying Weight
6
Warranty
4
Display Quality
3
Step 4:
Developing Alternatives
 Identifying viable alternatives

Alternatives are listed (without evaluation) that can resolve the problem.
Toshiba protégé s100
Dell inspiron 700m
HP Pavilion zd8000
Apple iBook
Soney vaio VGN-FS790
Gateway NX850X
Toshiba QomioG15-AV501
Lenovo ThinkPad R52
Step 5:
Analyzing Alternatives
• Appraising each alternative’s strengths and
weaknesses
 An alternative’s appraisal is based on its ability to
resolve the issues identified in steps 2 and 3.
Assessed Values of Laptop Computers Using Decision
Criteria
Step 6:
Selecting an Alternative
Choosing the best alternative
– The alternative with the highest total weight is chosen.
The final step in decision making process takes place when
all the alternatives have been enumerated and evaluated
against the decision criteria. This final step is the selection of
the best alternative which has quantitatively been determined.
Evaluation of Laptop Alternatives Against
Weighted Criteria
Step 7:
Implementing the Alternative
• Putting the chosen alternative into action.
 Conveying the decision to and gaining commitment from
those who will carry out the decision.
Step 8:
Evaluating the Decision’s
Effectiveness
• The soundness of the decision is judged by its
outcomes.
– How effectively was the problem resolved by
outcomes resulting from the chosen alternatives?
– If the problem was not resolved, what went wrong?
Decision Making Models
Rationality
Bounded
Rationality
Intuition
Rational decision-making
model
– Managers make consistent, value-maximizing choices with
specified constraints.
Assumptions of Rationality
Bounded Rational decision-making model
– Managers make decisions rationally, but are limited (bounded) by their
ability to process information.
– Assumptions are that decision makers:
• Will not seek out or have knowledge of all alternatives
• Will satisfice—choose the first alternative encountered that satisfactorily
solves the problem—rather than maximize the outcome of their decision
by considering all alternatives and choosing the best.
– Influence on decision making
• Escalation of commitment: an increased commitment to a previous
decision despite evidence that it may have been wrong.
The Role of Intuition
• Intuitive decision making
– Making decisions on the basis of experience,
feelings, and accumulated judgment.
Decisions in the Management
Functions
Types of Problems and
Decisions
Structured Problems &
Programmed Decisions
Unstructured Problems &
non programmed Decision
Decision-Making
Conditions
Certainty
Risk
Un-Certainty
Decision-Making Styles
• Linear Thinking
• Non linear Thinking
Overview of Managerial Decision Making
THANK YOU