Download Chapter-8 Dec. Mak. File

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1. A fundamental understanding of the term decision
2. An understanding of each element of the decision situation
3. An ability to use the decision-making process
4. An appreciation for the various situations in which
decisions are made
5. An understanding of probability theory and decision trees
as decision-making tools
6. Insights into groups as decision makers
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Decision Making Skill
The ability to choose alternatives that
increase the likelihood of accomplishing
objectives.
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Definition of a Decision
Types of Decisions
Programmed
Non-programmed
The Responsibility for Making Organizational Decisions
Elements of the Decision Situation
• The Decision Makers
• Goals to Be Served
• Relevant Alternatives
• Ordering of Alternatives
• Choice of Alternatives
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
Definition of a Decision
Decision is a choice made between two or more available
alternatives. DM is the process of choosing the best alternative for
reaching objectives.
DM is required for all functions of management planning, organising,
influencing and controlling.
We make decisions every day.
Managers make decisions affecting the organisation daily and
communicate those decisions to other organization members.
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Can be categorised
How much time you need to spend?
Who must be involved?
Which org. Functions they should follow?
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A programmed decision: is routine and
repetitive so org. Have specific ways to
handle these decisions. E.g. How products can
be arranged on shelves of a supermarket.
A Nonprogrammed decision: is typically
a
one-shot decision that is usually less
structured than programmed decision. (e.g.
expand operations in Africa)
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The Decision Makers
Weak decision makers usually have one of
four orientations.
Receptive(on suggestions of others),
Exploitative (all info is out/ steal ideas),
Hoarding(self-reliant) and marketing (what
others think of their decisions).
- Goal to be Served
- Relevant Alternatives(eliminate irrelevant)
- Ordering Alternatives,
- Choice of Alternatives
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1.
2.
3.
4.
5.
Identify an existing problem
List possible alternatives for solving
problem
Select the most beneficial of these
alternatives
Implement the selected alternatives
Gather feedback to find out whether the
implement alternative is solving the
identified problem.
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 Identifying
an Existing Problem
Problems are brought to the attention of managers
by:
1. Orders issued by managers’ supervisors
2. Situations relayed to managers by their subordinates
3. The normal activity of the managers themselves
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
Listing Alternative Solutions
Limitations on the number of problem-solving alternatives
available:
1. Authority factors
2. Biological or human factors
3. Physical factors
4. Technological factors
5. Economic factors
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
Selecting the Most Beneficial Alternative
1) List the potential effects of each alternative
2) Assign a probability factor to each of the potential effects
3) Compare each alternative’s expected effects
and the respective probabilities of those effects

Implementing the Chosen Alternative

Gathering Problem-Related Feedback
Feedback determines the implemented alternative’s effect on
problem
If problem is not solved, seek out and implement another
alternative
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
For example, a property development company may be faced with
the decision of whether to sell one of its properties now, or
whether to wait for a year in the hope the property market
improves. If it sells the property now it knows it will receive
£250,000.
However, if it sells in one year there are two possibilities:
1. There is a slump in the property market, so that the property can
only be sold for £200,000. There is a nine out of ten chance that
this will happen.
2. There is a boom in the property market, so that the property can
be sold for £800,000. There is a one out of ten chance that this will
happen.
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Decision at uncertainty?
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 Decision
– Making Heuristics and Biases
 Decision
– Making Conditions: Risks and
Uncertainty
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
Probability Theory

Decision Trees
To compare financial consequences, management must:
1. Study estimates of investment amounts necessary for:
Building a large plant
Building a small plant
Expanding a small plant
2. Weigh the probabilities of facing different product demand
levels
3. Consider projected income yields for each decision
alternative
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 Advantages
and Disadvantages of Using
Groups to Make Decisions
 Processes
for Making Group Decisions
• Brainstorming
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
Processes for Making Group Decisions (continued)
Nominal Group Technique
Step 1 — Each group member writes down individual ideas
Step 2 — Each member presents individual ideas orally
Step 3 — After members present ideas, entire group discusses ideas
Step 4 — When discussion completed, a secret ballot is taken
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
Processes for Making Group Decisions (continued)
Delphi Technique
Step 1—A problem is identified
Step 2—Group members are asked to offer solutions to the problem
Step 3—Responses of all group members are compiled and sent out
Step 4—Members are asked to generate a new individual solution
Step 5 – Steps 3 and 4 are repeated until a consensus is reached
Evaluating Group Decision-Making Processes
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