Chapter 06
DECISION MAKING:
THE ESSENCE OF
THE MANAGER’S
JOB
6-1
Learning Objectives
You should learn to:
1,Outline the steps in the decision-making
process
2,Explain why decision making is so
pervasive in organizations
3,Describe the rational decision maker
4,Contrast the perfectly rational and
bounded rational approaches to decision
making
5,Explain the role that intuition plays in
the decision-making process
6-2
Learning Objectives (cont.)
You should learn to:
6,Identify the two types of decision problems
and the two types of decisions that are used
to solve them
7,Differentiate the decision conditions of
certainty, risk, and uncertainty
8,Describe the different decision-making
styles
6-3
1,Outline the steps in the decision-making process
Decisions
– choices from two or more alternatives
– all organizational members make decisions
Decision-Making Process
– a comprehensive, 8-step process
– Step 1 - Identifying a Problem
• problem - discrepancy between an existing and
a desired state of affairs
– must be such that it exerts pressure to act
– manager is unlikely to characterize a
situation as a problem unless s/he has
necessary resources to act管理者不太可能将某些事情作
为问题，如果他们不具有采取行动的必要资源
6-4
The Decision-Making Process
Problem
Identification
“My
salespeople
need new
computers”
Identification of
Decision Criteria
Price
Weight
Warranty
Screen type
Reliability
Screen size
Allocation of
Weights to
Criteria
Development of
Alternatives
Reliability 10
Screen size
8
Warranty
5
Weight
5
Price
4
Screen type 3
© Prentice Hall, 2002
Analysis of
Alternatives
Selection of an
Alternative
Acer
Compaq
Gateway
HP
Micromedia
NEC
Sony
Toshiba
Acer
Compaq
Gateway
HP
Micromedia
NEC
Sony
Toshiba
Acer
Compaq
Gateway
HP
Micromedia
NEC
Sony
Toshiba
Implementation
of an Alternative
Gateway
Evaluation
of Decision
Effectiveness
6-5
Decision Making (cont.)
Decision-Making Process (cont.)
– Step 2 - Identifying Decision Criteria
• decision criteria - what’s relevant in making a
decision
– Step 3 - Allocating Weights to the Criteria
• must weight the criteria to give them
appropriate priority in the decision
– Step 4 - Developing Alternatives
• list the viable 可行的alternatives that could resolve
the problem without evaluating them
– Step 5 - Analyzing Alternatives
• each alternative is evaluated against the criteria
6-6
Assessed Values of Notebook Computer Alternatives Against Decision Criteria
6-7
Evaluation of Laptop Computer Alternatives Against Criteria and Weights
6-8
Decision Making (cont.)
Decision-Making Process (cont.)
– Step 6 - Selecting an Alternative
• choosing the best alternative from among those
considered
– Step 7 - Implementing the Alternative
• implementation - conveying the decision to those
affected by it and getting their commitment to it
– participation in decision-making process
inclines people to support the decision
– decision may fail if it is not implemented
properly
– Step 8 - Evaluating Decision Effectiveness
• determine whether the problem is resolved
6-9
2,Explain why decision making is so pervasive in
organizations
6-10
3,Describe the rational decision making
l Rational Decision Making
– decisions are consistent前后一致的, value-maximizing choices
within specified constraints
– managers assumed to make rational decisions
– Assumptions of Rationality - decision maker would:
– be objective and logical
– carefully define a problem
– have a clear and specific goal
– select the alternative that maximizes the likelihood of
achieving the goal
– make decision in the firm’s best economic interests
• managerial decision making seldom meets all the tests
6-11
Assumptions Of Rationality
Single, welldefined goal
is to be achieved
All alternatives
and
consequences
are known
Preferences
are clear
Preferences偏好
are constant
and stable
Problem is
clear and
unambiguous
Rational
Decision
Making
Final choice
will maximize
payoff
No time or cost
constraints exist
6-12
4,Contrast the perfectly rational and boundedly
rational approaches to decision making
Bounded Rationality
– behave rationally within the parameters参数 of a
simplified decision-making process that is limited
by an individual’s ability to process information
– satisfice满意 - accept solutions that are “good
enough”
Is a common error committed in the DM process?
escalation of commitment - increased commitment
to a previous decision despite evidence that it may
have been wrong
• refusal to admit that the initial decision may
have been flawed
6-13
5,Explain the role that intuition plays in the decision-making
process
Role of Intuition
– intuitive decision making - subconscious
process of making decisions on the basis of
experience and accumulated judgment
• does not rely on a systematic or thorough
analysis of the problem
• generally complements a rational
analysis
6-14
What Is Intuition?
Decisions based
on ethical values
or culture
Values or
ethics-based
decisions
Subconscious
mental
processing
Decisions based
on subconscious
data
Decisions based
on experience
Experiencedbased decisions
Intuition
Decisions based
on feelings and
emotions
Affectinitiated
decisions
Cognitive认知的based
decisions
Decisions based
on skills,
knowledge,
or training
6-15
6,Identify the two types of decision problems and the two types of
decisions that are used to solve them
Types of Problems and Decisions
– Well-Structured Problems - straightforward,
familiar, and easily defined
– Programmed Decisions - used to address structured
problems
– minimize the need for managers to use
discretion
– facilitate organizational efficiency
• procedure - series of interrelated sequential steps顺
序的步骤used to respond to a structured problem
• rule - explicit 清楚的 statement of what to do or not
to do
• policy - guidelines or parameters for decision
6-16
making
6,Identify the two types of decision problems and the two types of
decisions that are used to solve them
Types of Problems and Decisions (cont.)
– Poorly-Structured Problems - new, unusual
problems for which information is ambiguous or
incomplete
– Nonprogrammed Decisions - used to address
poorly- structured problems
• produce a custom-made response
• more frequent among higher-level managers
– few decisions in the real world are either fully
programmed or nonprogrammed
6-17
Types Of Problems, Types Of Decisions, And
Level In The Organization
Ill-structured
Type of
Problem
Top
Nonprogrammed
Decisions
Level in
Organization
Programmed
Decisions
Well-structured
Lower
6-18
7,Differentiate the decision conditions of certainty, risk, and
uncertainty
Decision-Making Conditions
– Certainty - outcome of every alternative is known
• idealistic rather than realistic
– Risk - able to estimate the probability of outcomes
stemming from each alternative
• expected value - the conditional return from each
possible outcome
– multiply expected revenue from each outcome
by the probability of each outcome
6-19
Expected Value for Revenues from the Addition of One Ski Lift
6-20
Decision Trees
Value of
loss and profit
probability
Outcome
Branch of
point
solution
Decision
point
Expected Value= Value of loss and profit*
probability
© Prentice Hall, 2002
6 2
example
strong0·70
Rent 20,000sq.ft
weak0·30
$320,000
Expected value
320*0·70+50*0·3
$50,000
0=239
P125
Rent 12,000sq.ft
strong0·70
weak0·30
© Prentice Hall, 2002
$240,000
$130,000
Expected value
240*0·70+130
*0·30=207
6 2
例:某公司计划开发一种新产品,设计了豪华型和
普及型两个型号:个型号:
豪华型:
成功盈利800万元，成功的概率为60%,
失败亏损300万元. 失败的概率为40%;
普及型:
成功盈利600万元. 成功的概率为70%.
失败亏损 30万元. 失败的概率为30%。
© Prentice Hall, 2002
6 2
决策方案 自然状态及概率 支付值
成功0·60
豪华型
普及型
失败
0·40
成功
0·70
失败
0·30
© Prentice Hall, 2002
期望值
800
800*0·60+（-300）
*0·40=360
-300
600
600*0·70+（-30）
*0·30=411
-30
6 2
Decision-Making Conditions (cont.)
– Uncertainty - not certain about outcomes and
unable to estimate probabilities
• psychological orientation of decision maker
– maximax choice - optimistic
» maximizing the maximum possible payoff
最大最大选择
– maximin choice - pessimistic
» maximizing the minimum possible payoff
最大最小选择
– minimax - minimize the maximum “regret”
– 最小化其最大遗憾
6-25
Payoff Matrix收益矩阵
6-26
Regret Matrix(遗憾矩阵)
6-27
8,Describe the different decision-making styles
Decision-Making Styles决策风格
– two dimensions define the approach to decision
making
• way of thinking - differs from rational to
intuitive
• tolerance for ambiguity模糊承受力 - a high
need for consistency and order in making
decision so that ambiguity is minimized.
• define four decision-making styles
• Directive - fast, efficient, and logical
• Analytic - careful and able to adapt or cope with
new situations
• Conceptual - able to find creative solutions
6-28
• Behavioral - seek acceptance of decisions
Decision-Making Styles
Tolerance for Ambiguity
High
Analytic
Conceptual
Directive
Behavioral
Low
Rational
Way of Thinking
Intuitive
6-29
What are Advantages &Disadvantages in Group Decision Making?
– Advantages - diverse employees:
• provide fresh perspectives
• offer differing interpretations of problem
definition
• increase the likelihood of creative and unique
solutions
– Disadvantages - diverse employees:
• require more time to reach a decision
• may have problems of communication
• may create a more complex, confusing, and
ambiguous decision-making process
• may have difficulty in reaching agreement 6-30
Overview Of Managerial Decision Making
Decision-Making Approach
• Rationality
• Bounded Rationality
• Intuition
Types of Problems and Decisions
• Well-structured
- programmed
• Poorly structured
- nonprogrammed
Decision-Making Conditions
• Certainty
• Risk
• Uncertainty
Decision-Making
Process
Decision Maker Style
• Directive
• Analytic
• Conceptual
• Behavioral
Decision
• Choose best
alternative
- maximizing
- satisficing
• Implementing
• Evaluating
6-31