DECISION
MAKING
LEARNING OBJECTIVES/OUTCOMES
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Explain why decision making is an
important component of good
management.
Discuss the difference between
programmed and non-programmed
decision and the decision characteristics
of certainty and uncertainty.
Explain the process by which managers
actually make decisions in the real world.
Identify the six steps used in managerial
decision making.
Describe four personal decision styles
used by managers and explain the biases
that frequently cause managers to make
bad decisions.
Identify and explain techniques for
innovative group decision making.
DECISION – is a choice made from
available alternatives.
DECISION MAKING – is the process of
identifying problems and opportunities and
then resolving them
TYPES OF DECISIONS AND
PROBLEMS
 Programmed
Decisions
 Non-programmed
Decisions
Programmed Decisions
Nonprogrammed Decisions
Problem
situations that occur often
to enable rules
situations that are unique
or poorly defined and
unstructured
Procedure
Dependence on policies,
rules, and definite
procedures.
Necessity for certainty,
intuition, tolerance for
ambiguity, creative problem
solving.
Business firm
Periodic reorders of
inventory.
Diversification into new
products and markets.
University
Necessary grade-point
average for good academic
standing.
Construction into new
classrooms and facilities.
Health care
Procedure for admitting
patients.
Purchase of experimental
equipment.
Government
Merit system for promotion
of state employees.
Reorganization of state
government agencies.
Examples
Why do we need to make
tough decisions?
Decision Making in Today’s
Environment
FACING CERTAINTY AND UNCERTAINTY
 Certainty: the information needed is
available
 Risk: the future outcome is subject to
chance regardless of the information
available
 Uncertainty: goals are clear but
information about future events are
incomplete
 Ambiguity: the goals and/or problem are
unclear and difficult to define
CONDITIONS THAT AFFECT THE POSSIBILITY OF
DECISION FAILURE
Organizational
Problem
LOW
Certainty
Possibility of Failure
Risk
Uncertainty
Programmed
Decisions
HIGH
Ambiguity
Nonprogrammed
Decisions
Problem Solution
AGING AND DECISION MAKING: HOW AGING
AFFECTS DECISIONS UNDER UNCERTAINTY
(Research Study)
(1) Older adults are less willing to take financial
risks than young adults
(2) Ambiguity behavior changes with age
(3) Young and older subjects gamble less in
ambiguity conditions than in risk conditions.
The study only partially confirms our hypotheses:
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As older adults seem to be equally willing to take
risks as young adults are (refuting hypothesis)
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Ambiguity behavior effectively differs with age
(confirming hypothesis 2)
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And young subjects do gamble less in ambiguous
conditions than in risky conditions, but older adults
show no significant difference between risk and
ambiguity behavior (partially confirming hypothesis
3).
http://www.uni-heidelberg.de/md/awi/forschung/dp508.pdf
DECISION-MAKING
MODELS
CLASSICAL MODEL
ADMINISTRATIVE
MODEL
POLITICAL MODEL
Classical Model - A decision-making
model based on the assumption that
managers should make logical decisions
that will be in the organization’s best
economic interests.
Views the manager as acting rationally in a
certain world. Decision maker is fully
informed about the possible alternative.
Administrative Model - A decision-making model that
describes how managers actually make decisions in
situations characterized by non-programmed decisions,
uncertainty, and ambiguity.
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Bounded Rationality - People have the time and
cognitive ability to process only a limited amount of
information on which to base decisions.
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Satisficing - To choose the first solution alternative
that satisfies minimal decision criteria, regardless of
whether better solutions are presumed to exist.
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Intuition - The immediate comprehension of a
decision situation based on past experience but
without conscious thought.
Political Model –is useful for making nonprogrammed decisions when conditions
are uncertain, information is limited and
there are manager conflicts, what goals to
pursue or what course of action to take.
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Coalition – is an informal alliance
among managers who support a
specific goal.
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Coalition Building – is the process of
forming alliances among managers.
THE DECISION - MAKING PROCESS
Step 1:
Identify and
Define the
Problem
Step 2:
Generate and
Evaluate
Alternative
Solutions
Step 3:
Decide on
Preferred
Cause of
Action
Step 4:
Implement
the Decision
Double check on ethical
reasoning
Step 5:
Evaluate
Results
BARRIERS TO EFFECTIVE DECISION
MAKING
A. PSYCHOLOGICAL BIASES
○ Illusion of control
○ Framing effects
○ Discount the future
B. TIME PRESSURES
C. SOCIAL REALITIES
PERSONAL DECISION
FRAMEWORK
Directive Style
 Analytical Style
 Conceptual Style
 Behavioral Style
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WHY DO MANAGERS MAKE
BAD DECISIONS?
Being influenced by initial impressions.
 Seeing what you want to see
 Overconfidence
 Rely Too Much on Past Experience
 Addicted to Corporate Politics
 Lack Clarity of goals
 Mismanage Resources
 Don’t See the Opportunity
 Don’t Trust Themselves to Lead
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WHAT CAN LEADERS DO TO INCREASE
THEIR CHANCES OF AVOIDING PITFALLS?
RED FLAG CONDITIONS
M I S L E A D I NG
E X P E R I ENCE S
M I S L E A D I NG
PREJUDGE
MENT S
I N A P P R O P RIAT E
S E L F - I N T E REST
I N A P P R O PRIA T E
A T T A C H MENTS
USING GROUPS TO
IMPROVE
DECISION MAKING
METHODS AND TECHNIQUES
 ADVANTAGES AND
PITFALLS OF GROUP
DECISION MAKING
 STRUCTURED CONFLICT
 NOMINAL GROUP TECHNIQUE
 DELPHI TECHNIQUE
 STEPLADDER TECHNIQUE
 ELECTRONIC BRAINSTORMING
ADVANTAGES
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Group can think better than individuals because they can view problems in
multiple perspectives because group members usually possess different
knowledge, skills abilities and experiences. They can perform better on
complex tasks and make better decisions than individuals.
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Group can find and access much more information than individuals alone.
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With groups we can generate more alternative solutions
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People who participate in a group discussion are more likely to understand why
the decision was made. They will have heard the relevant arguments both for
the chosen alternative and against the rejected alternatives.
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Group discussion typically leads to a higher level of commitment to the
decision. Buying into the proposed solution translates into high motivation to
ensure that it is executed well.
PITFALLS
Groupthink – a barrier to good decision making caused by pressure
within the group for members to agree with each other. It occurs in a
highly cohesive group when group members feel intense pressure to
agree with each other so that the group can approve a proposed solution.
Groupthink is most likely to occur under the following conditions.
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The group is insulated from others with different perspective
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Sometimes one group member dominates the discussion
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The group leader begins by expressing a strong preference for a particular decision.
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The group has to established procedure for systematically defining problems and
exploring alternatives.
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Group members have similar backgrounds and experiences
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Goal displacement often occurs in groups
STRUCTURED CONFLICT
Most people view conflict
negatively. Yet the right kind
of conflict can lead to much
better group decision making
Cognitive Conflict – C - Type conflicts - Focuses on
problem and issue related differences of opinion.
Two methods of introducing structured c-type conflict into
the group decision making process.
Devil’s Advocacy
 Dialectical Inquiry
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Affective Conflict – A- Type Conflict -Refers to the
emotional reaction that can occur when disagreements
become personal rather than professional.
DELPHI TECHNIQUE
A decision making method in
which members of a panel of
experts respond to questions
and to each other until reaching
agreement on an issue.
STEPLADDER TECHNIQUE
A decision making method in which group members are added
to a group discussion one at a time (like a stepladder) the
existing group members listen to each new members thought,
ideas, and recommendations; then the group shares the ideas
and suggestions that it had already considered, discusses the
new and old ideas, and makes a decision.
ELECTRONIC BRAINSTORMING
Brainstorming - a decision making method in which group
members build on each other’s’ ideas to generate as many
alternative solutions as possible.
Electronic Brainstorming
– a decision making method
in which group members use
computers to build on each
other’s ideas and generate as
many alternative solution as
possible. This overcomes the
disadvantages associated
with face-to-face brainstorming.
Disadvantages:
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Production Blocking – a disadvantage or
faced-to-faced brainstorming in which a
group must wait to share an idea because
another member is presenting an idea.
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Evaluation Apprehension – fears of what
others will think of you.
ORGANIZATIONAL DECISION MAKING
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MANAGEMENT SCIENCE APPROACH
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THE CARNEGIE MODEL
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INCREMENTAL MODEL
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GARBAGE SCAN MODEL
MANAGEMENT SCIENCE APPROACH
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Use of statistics to identify relevant variables
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Remove human element
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Very successful for military problems
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Good tool for decisions where variables can
be identified and measured
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A drawback of management science is that
quantitative data are not rich and lack tacit
knowledge
CARNEGIE MODEL
INCREMENTAL MODEL
Managers select alternative courses of action that are only slightly, or
incrementally, different from those used in the past.
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Focus on structured sequence of activities from discovery to solution
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Perceived to lessen the chances of making a mistake
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They correct or avoid mistakes through a succession of incremental
changes
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Tries to explain how organizations improve their programmed decisions
over time
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Large decisions are a collection of small choices
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Decision interrupts are barriers
– Identification Phase
– Development Phase
– Selection Phase
– Dynamic Factors
GARBAGE CAN MODEL
Model of organizational decision making depicting a chaotic process and
seemingly random decisions
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Decision makers are as likely to start decision making from the solution
side as the problem side
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Create decision-making opportunities that they can solve with readymade solutions based on their competencies and skills
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Different coalitions may champion different alternatives
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Decision making becomes a “garbage can” in which
problems, solutions, and people all mix and contend
for organizational action.
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Selection of an alternative depends on which
person’s or group’s definition of the current situation holds sway.
Consequences of the Garbage Can Model
1. Solutions may be proposed even when
problems do not exist
2. Choices are made without solving
Problems
3. Problems may persist without
being solved
4. A few problems are solved
REFERENCES:

Williams, C. Effective Management: A Multimedia Approach, 5th Edition, 2012, South Western,
Cengage Learning.
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Daft, Richard. New Era of Management, 9th Edition, 2010, South Western, Cengage Learning.
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Alec Sproten, Carsten Diener ,Christian Fiebach, Christiane Schwieren. University of Heidelberg
Department of Economics Discussion Paper Series No. 508Aging and decision making: How aging
affects decisions under uncertainty. December 2010
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Bateman, Thomas S. and Snell Scott A. Management Leading & Collaborating in a Competitive World,
7th Edition, 2007, Mc Graw-Hill International Edition
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John R. Schermerhorn . Management ,11th Edition, Oct 18, 2010, John Wiley & Sons
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http://besatuva.com/2011/09/05/chrysler-case-study-managerial-decision-making/
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http://www.forbes.com/sites/johnkotter/2012/05/02/barriers-to-change-the-real-reason-behind-thekodak-downfall/
http://www.uen.org/Lessonplan/downloadFile.cgi?file=555-6-3625 decision case
studies.doc&filename=decision_case_studies.doc.
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https://www.google.com.ph/search?q=DECISION+MAKING+CASE+STUDIES&ie=utf-8&oe=utf8&aq=t&rls=org.mozilla:en-US:official&client=firefoxa&channel=sb&gfe_rd=cr&ei=nxoRVIP7C8uL8QeB34DYDA#
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Andrew Campbell and Jo Whitehead. The Ashridge Journal: Think again Spring 2009 3600
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Erin White. Wall Street Journal -Business :Why do managers make bad decisions? 2009
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http://www.hrpub.org/download/201309/csit.2013.010211.pdf
Thank you for
listening!!!!!!!!!!!
Jhudz & Jen