The Role of Decision Making in
Management
Chapter 1
INTRODUCTION
• Decision Making is a key element in the process
of management
• To manage a complex job , it has to be broken
down in small pieces and study them in isolation.
• Managers must do planning and control they
managerial functions are most important of all
• Further breaking down those tasks into their
pieces , we find they both include stages of
decision making and problem solving
Decisions are inevitable
• All of us make decisions
• Some decisions are simple some are complex
• But most of the problem solving or decision
making are convoluted with much fuzziness
and backtracking
• Decision making is basic foundation of the
process of management
WHAT IS DECISION MAKING
PROCESS
Step #1:
Define the Problem
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What?
Where?
How?
When?
With whom?
Why?
Step #2:
Gather Additional Data
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Broad
Objective
Verifiable
Relevant
Step #3:
Lay It All Out
Step #4:
Identify Your Options
• What options do we
have?
• What has been
done in the same
situation by others?
• In other disciplines?
• How about
something new?
Step #5:
Evaluate Your Options
Step #6:
Make Your Decision
Step #7:
Move Forward
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Communicate the decision/solution
Plan the implementation
Monitor results
Learn as you go
Situation:
Something’s Gone Wrong
Find and correct the changes that
account for the fall-off in results.
Situation:
Increased – or Changing –
Expectations
Find new ways of operating.
Situation:
The Double Whammy
Find ways to reengineer the system –
correct and invent.
Situation:
It Never Did Work Right
Find ways to overhaul – or completely
rebuild.
Things That Can
Limit Your Thinking
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Searching for THE ONE RIGHT ANSWER
Not involving front line people
Looking inside the library only
Waiting for 100% agreement
Fear of embarrassment or failure
Types of Decisions
Decision making the process of identifying problems and opportunities, then resolving
them.
Programmed decisions:
• situations that occur often enough to enable
decision rules to be developed.
Nonprogrammed decisions:
• are made in response to situations that are
unique, are poorly defined and largely
unstructured.
• many involve strategic planning.
Programmed and
Nonprogrammed Decision
Differences
 Certainty
– all the information the decision maker needs is fully available.
 Risk
– decision has clear-cut goals.
– good information is available.
– future outcomes associated with each alternative are subject to chance.
 Uncertainty
– managers know which goals they with to achieve.
– information about alternatives and future events is incomplete.
– managers may have to come up with creative approaches to
alternatives.
 Ambiguity
– by far the most difficult decision situation.
– goals to be achieved or the problem to be solved is unclear.
– alternatives are difficult to define.
– information about outcomes is unavailable.
Conditions that Affect the Possibility of
Decision Failure
Organizational
Problem
Low
Possibility of Failure
Certainty
Risk
High
Uncertainty
Programmed
Decisions
Ambiguity
Nonprogrammed
Decisions
Problem
Solution
Three Decision Making Models
Political Model
Administrative Model
Classical Model
Classical Model
 Based on economic conditions
 Is considered to be normative
Classical Model
 Accomplishes goals that are known and agreed upon.
 Strives for certainty by gathering complete information.
 Criteria for evaluating alternatives are known.
 Decision maker is rational and uses logic.
Administrative Model
 How managers actually make decisions in situations characterized by
non-programmed decisions, uncertainty, and ambiguity.
 Focuses on organizational, rather than economic.
 Two concepts are instrumental in shaping the administrative model.
– bounded rationality: means that people have limits or boundaries on
how rational they can be.
– satisficing: means that decision makers choose the first solution
alternative that satisfies minimal decision criteria.
 Is considered to be descriptive.
 It is considered intuitive.
Political Model
Closely resembles the real environment in
which most managers and decision makers
operate.
Decisions are complex.
Disagreement and conflict over problems
and solutions are normal.
Coalition building is important.
Comparisons of:
Classical, Political, &
Administrative Models
Classical Model
Administrative Model
Political Model
Clear-cut problem and goals.
Vague problem and goals.
Pluralistic; conflicting goals.
Condition of certainty.
Condition of uncertainty.
Full information about
alternatives and their
outcomes.
Condition of
uncertainty/ambiguity.
Limited information about
alternatives and their outcomes. Inconsistent viewpoints;
ambiguous information.
Satisfying choice for resolving
problem using intuition.
Bargaining and discussion among
coalition members.
Rational choice by individual
for maximizing outcomes.