Chapter (7) The Decision-Making

Decision making is the essence of management.

And all managers would like to make good decisions

Managers at all levels and in all areas of organizations make decisions. That is,
they make choices.
For instance, top-level managers make decisions about their organization’s
goals, where to locate manufacturing facilities, or what new markets to
move into.
Middle and lower-level managers make decisions about production
schedules, product quality problems, pay raises, and employee discipline.
Making decisions isn’t something that just managers do; all organizational
members make decisions that affect their jobs and the organization they
work for. But our focus in this chapter is on how managers make decisions.

Step 1: Identifying a Problem

Managers also have to be cautious not to confuse problems with symptoms of the
problem. Is a 5 percent drop in sales a problem? Or are declining sales merely a
symptom of the real problem, such as poor-quality products, high prices, or bad
advertising? Also, keep in mind that problem identification is subjective. What one
manager considers a problem might not be considered a problem by another
manager. In addition, a manager who resolves the wrong problem perfectly is
likely to perform just as poorly as the manager who doesn’t even recognize a
problem and does nothing. As you can see, effectively identifying problems is
important, but not easy.
Every decision starts with a problem

Decision : A choice among two or more alternatives

Problem : An obstacle that makes it difficult to

achieve a desired goal or purpose

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Step 2: Identifying Decision Criteria
Once a manager has identified a problem, he or she must identify the decision
criteria that are important or relevant to resolving the problem. Every decision
maker has criteria guiding his or her decisions even if they’re not explicitly stated.

Step 3: Allocating Weights to the Criteria

If the relevant criteria aren’t equally important, the decision maker must weight the
items in order to give them the correct priority in the decision. How? A simple way
is to give the most important criterion a weight of 10 and then assign weights to the
rest using that standard. Of course, you could use any number as the highest
weight.
Step 4: Developing Alternatives
The fourth step in the decision-making process requires the decision maker to list
viable alternatives that could resolve the problem. In this step, a decision maker
needs to be creative. And the alternatives are only listed, not evaluated just yet.
Step 5: Analyzing Alternatives
Once alternatives have been identified, a decision maker must evaluate each one.
How? By using the criteria established Sometimes a decision maker might be able
to skip this step. If one alternative scores highest on every criterion, you wouldn’t
need to consider the weights because that alternative would already be the top
choice. Or if the weights were all equal, you could evaluate an alternative merely
by summing up the assessed values for each one.
Step 6: Selecting an Alternative
The sixth step in the decision-making process is choosing the best alternative or the
one that generated the highest total in Step 5.
Step 7: Implementing the Alternative
In step 7 in the decision-making process, you put the decision into action by
conveying it to those affected and getting their commitment to it. We know that if
the people who must implement a decision participate in the process, they’re more
likely to support it than if you just tell them what to do. Another thing managers
may need to do during implementation is reassess the environment for any
changes, especially if it’s a long-term decision. Are the criteria, alternatives, and

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choice still the best ones, or has the environment changed in such a way that we
need to reevaluate?

Step 8: Evaluating Decision Effectiveness

The last step in the decision-making process involves evaluating the outcome or
result of the decision to see whether the problem was resolved. If the evaluation
shows that the problem still exists, then the manager needs to assess what went
wrong. Was the problem incorrectly defined? Were errors made when evaluating
alternatives? Was the right alternative selected but poorly implemented? The
answers might lead you to redo an earlier step or might even require starting the
whole process over.
Managers Making Decisions
Although everyone in an organization makes decisions, decision making is
particularly important to managers. As Exhibit 7 shows, it’s part of all four
managerial functions. In fact, that’s why we say that decision making is the
essence of management.7 And that’s why managers—when they plan, organize,
lead, and control—are called decision makers.
EXHIBIT -7
Decisions Managers May Make
Planning
• What are the organization’s long-term objectives?
• What strategies will best achieve those objectives?
• What should the organization’s short-term objectives be?
• How difficult should individual goals be?
Organizing
• How many employees should I have report directly to me?
• How much centralization should there be in the organization?
• How should jobs be designed?
• When should the organization implement a different structure?
Leading
• How do I handle employees who appear to be unmotivated?
• What is the most effective leadership style in a given situation?
• How will a specific change affect worker productivity?
• When is the right time to stimulate conflict?
Controlling
• What activities in the organization need to be controlled?
• How should those activities be controlled?
• When is a performance deviation significant?
• What type of management information system should the organization have?

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Types of Decisions and Decision-Making Conditions
Restaurant managers in New York City make routine decisions weekly about
purchasing food supplies and scheduling employee work shifts. It’s something
they’ve done numerous times. But now they’re facing a different kind of
decision—one they’ve never encountered—how to adapt to the new law requiring
that nutritional information be posted.
Types of Decisions
Such situations aren’t all that unusual. Managers in all kinds of organizations face
different types of problems and decisions as they do their jobs. Depending on the
nature of the problem, a manager can use one of two different types of decisions.
1. Programmed and non-programmed decisions :
The programmed decisions are the routine and repetitive decisions for which the
organization has developed specific processes. Thus, they involve no extraordinary
judgment, analysis and authority. They are basically devised so that the problem
may not be treated as a unique case each time it arises.
On the other hand, the non-programmed decisions are the one-shot, ill structured,
novel policy decisions that are handled by general problem solving processes.
Thus, they are of extraordinary nature and require a thorough study of the problem,
its in-depth analysis and the solving the problem. They are basically non-repetitive
in nature and may be called as strategic decisions.
2. Basic and routine decisions :
Routine decisions are of repetitive nature and they involve the application of
familiar principles to a situation. Basic or genuine decisions are those which
require a good deal of deliberation on new principles through conscious thought
process, plant location, distribution are some examples of basic decisions.
3. Policy and operative decisions : Policy decisions are important decisions and
they involve a change in the procedure, planning or strategy of the organization.
Thus, they are of a fundamental character affecting the whole business. Such
decisions are taken by the top management. On the contrary, operating decisions
are those which are taken by lower levels of management for the purpose of
executing policy decisions. They are generally concerned with the routine type of
work, hence unimportant for the top management. They mostly relate to the
decision-makers own work and behavior while policy decision influences the work
and behavior of subordinates.

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4. Individual and group decisions : Individual decisions are those decisions
which are made by one individual – whether owner of the business or by a top
executive. On the other hand, group-decisions are the decisions taken by a group of
managers – board, team, committee or a sub-committee.

Effective Decision Making in Today’s World

Effective decision-making in today’s world requires a blend of traditional wisdom,
modern tools, and a deep understanding of the ever-changing environment. With
rapid technological advancements, an overload of information, and complex global
challenges, making good decisions has become both more crucial and more
difficult. Here are strategies to make more effective decisions:
1. Gather Relevant Information
 Research and Analysis: Collect data from reliable sources. In the digital age,
information is abundant, but quality and relevance are crucial.
 Utilize Technology: Use data analytics tools, AI, and machine learning to process large
amounts of data and identify trends that inform decisions.
2. Define Clear Objectives
 Know Your Goals: Have a clear understanding of the desired outcome. This will provide
focus and prevent distractions.
 Set Priorities: Weigh the importance of various factors involved in the decision and align
them with long-term goals.
3. Critical Thinking
 Evaluate Alternatives: Consider various possible solutions, and assess the pros and cons
of each option.
 Think Ahead: Look beyond the immediate consequences and consider the long-term
impacts of your decision.
4. Leverage Collaboration and Diverse Perspectives
 Consult Experts and Stakeholders: Seek input from those with experience or insight
into the decision, especially when the decision has widespread implications.
 Diversity of Thought: Different perspectives lead to more creative and well-rounded
decisions. Collaborating with others who have varied backgrounds can uncover new
solutions.
5. Limit Cognitive Biases
 Use Structured Decision-Making Models: Techniques such as decision trees or SWOT
analysis can help mitigate bias by making the evaluation process more systematic and
objective.

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6. Adopt Agile Decision-Making
 Be Adaptable: In a fast-paced world, flexibility is key. Be prepared to adjust your
decisions as new information or circumstances arise.
 Pilot and Iterate: Instead of committing fully upfront, start with small, reversible actions
to test the waters. This allows for quick adjustments.
7. Manage Risk and Uncertainty
 Risk Assessment: Understand the potential risks of your decisions and assess the
likelihood of these risks occurring.
 Plan for Uncertainty: There will always be unknowns. Build contingency plans to
address unexpected outcomes and be ready to pivot when necessary.
8. Embrace Technology and Automation
 Use Decision Support Tools: AI and automation can help process data, forecast potential
outcomes, and suggest optimal decisions.
9. Trust Your Intuition, But Verify
 Intuitive Decision-Making: In some cases, especially with experience, intuition can
provide valuable insights. However, combine this with rational analysis for better
outcomes.
 Seek Confirmation: Validate gut feelings by cross-checking with facts and data.
10. Learn from Past Decisions
 Review Past Decisions: Reflect on previous successes and failures. What worked? What
didn’t? What can you learn from those experiences?
 Continuous Improvement: View every decision as an opportunity for learning and
growth. Keep refining your decision-making processes over time.
11. Be Decisive, but Flexible
 Decisiveness: In a world that moves quickly, hesitation can be costly. Make decisions
promptly to maintain momentum, especially in fast-changing environments.
 Flexibility: Being decisive doesn’t mean being rigid. Be ready to adjust and change
course when necessary.
12. Take Responsibility and Stay Accountable
 Own the Decision: Once a decision is made, take responsibility for the results, whether
positive or negative.
 Learn from Mistakes: When things don’t go as planned, analyze what went wrong and
apply those lessons to future decisions.
13. Maintain Emotional Intelligence (EQ)
 Self-Awareness: Understand how emotions influence your decisions. High EQ helps you
stay calm under pressure and make rational choices.
14. Measure and Evaluate Outcomes
 Track Results: Monitor the outcomes of your decisions and measure them against
predefined goals.

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  Adjust Based on Feedback: Collect feedback and use it to refine your decision-making
process.
15. Consider the Ethical Implications
 Ethical Decision-Making: In today’s interconnected world, ethical considerations are
more important than ever. Ensure that your decisions align with your values and
principles.
 Corporate Social Responsibility (CSR): Organizations must consider the broader
impact of their decisions on society, the environment, and stakeholders.
By combining these strategies, individuals and organizations can make better,
more informed, and responsible decisions in today’s complex and rapidly changing
world.
Making decisions in today’s fast-moving world isn’t easy. Successful managers
need good decision-making skills to plan, organize, lead, and control.

I had a happy semester with you. I hope you benefited from the Business
Administration course. It is not only a scientific course, but it is also important for
managing your life. I wish everyone success and prosperity.
DR assistant professor l Salwa zagloul