BUS 3209 Chapter 4

BUS 209
Chapter
4
Decision-Making: The Essence

of the Manager’s Job
Decision Making
• Decision
 Making a choice from two or more alternatives.
• The Decision-Making Process

 Identifying a problem and decision criteria and
allocating weights to the criteria.
 Developing, analyzing, and selecting an alternative
that can resolve the problem.
 Implementing the selected alternative.
 Evaluating the decision’s effectiveness.
6–3
Step 1: Identifying the Problem
• Problem
 A discrepancy between an existing and desired state
of affairs.
• Characteristics of Problems
 A problem becomes a problem when a manager
becomes aware of it.
 There is pressure to solve the problem.
 The manager must have the authority, information, or
resources needed to solve the problem.
Step 2: Identifying Decision Criteria
• Decision criteria are factors that are
important (relevant) to resolving the problem.
 Costs that will be incurred (investments required)
 Risks likely to be encountered (chance of failure)
 Outcomes that are desired (growth of the firm)
Step 3: Allocating Weights to the Criteria

• Decision criteria are not of equal
importance:
 Assigning a weight to each item places the items in
the correct priority order of their importance in the
decision making process.
Criteria and Weights for Computer Replacement Decision
Criterion Weight
Memory and Storage 10
Battery life 8
Carrying Weight 6
Warranty 4
Display Quality 3
Step 4: Developing Alternatives
• Identifying viable alternatives
 Alternatives are listed (without evaluation) that can resolve
the problem.
Step 5: Analyzing Alternatives
• Appraising each alternative’s strengths and
weaknesses
 An alternative’s appraisal is based on its ability to resolve
the issues identified in steps 2 and 3.
Step 6: Selecting an Alternative
• Choosing the best alternative
 The alternative with the highest total weight is
chosen.
Assessed Values of Laptop Computers Using Decision Criteria
Evaluation of Laptop Alternatives Against Weighted Criteria

Step 7: Implementing the Alternative
• Putting the chosen alternative into action.
 Conveying the decision to and gaining commitment
from those who will carry out the decision.
Step 8: Evaluating the Decision’s Effectiveness
• The soundness of the decision is judged by its

outcomes.
 How effectively was the problem resolved by
outcomes resulting from the chosen alternatives?
 If the problem was not resolved, what went wrong?
Decisions in the Management Functions
Making Decisions
• Rationality
Managers make consistent, value-maximizing
choices with specified constraints.
Assumptions of Rationality
Making Decisions (cont’d)
Bounded Rationality
Managers try to make logical decisions, but their ability to
handle information is limited.
They usually:
1.Don’t look for or know all the options.
2.Settle for the first option that seems good enough,
instead of finding the best one.
How it affects decision-making:
•Escalation of commitment: This happens when someone
continues to stick with a decision even though there’s
proof it might be wrong.
The Role of Intuition:
Intuitive decision making: Making decisions on the basis of experience, feelings,
and accumulated judgment.
© 2007 Prentice Hall, Inc. All rights reserved.

Types of Problems and Decisions
• Structured Problems
 Involve goals that clear.
 Are familiar (have occurred before).
 Are easily and completely defined—information about
the problem is available and complete.
• Programmed Decision
 A repetitive decision that can be handled by a routine
approach.
Types of Programmed Decisions
• Policy
 A general guideline for making a decision about a
structured problem.
• Procedure
 A series of interrelated steps that a manager can use
to respond (applying a policy) to a structured problem.
• Rule
 An explicit statement that limits what a manager or
employee can or cannot do.
Problems and Decisions (cont’d)
• Unstructured Problems
 Problems that are new or unusual and for which
information is ambiguous or incomplete.
 Problems that will require custom-made solutions.
• Nonprogrammed Decisions
 Decisions that are unique and nonrecurring.
 Decisions that generate unique responses.
Decision-Making Styles
• Dimensions of Decision-Making Styles
Ways of thinking
 Rational, orderly, and consistent
 Intuitive, creative, and unique
Tolerance for ambiguity
 Low tolerance: require consistency and order
 High tolerance: multiple thoughts simultaneously
Decision-Making Styles (cont’d)
• Types of Decision Makers
 Directive
 Logical and Fast. Use minimal information and consider few
alternatives.
 Analytic
 Make careful decisions in unique situations. Seeks complete
information
 Conceptual
 Maintaina broad outlook and consider many alternatives in
making decisions.
 Behavioral
 Avoid conflict by working well with others and being receptive
to suggestions. Creative Thinking Skills and Solutions
Decision-Making Matrix
Decision-Making Biases and Errors
• Heuristics
 Using “rules of thumb” to simplify decision making.
• Overconfidence Bias
 Holding unrealistically positive views of one’s self and
one’s performance.
• Immediate Gratification Bias

 Choosing alternatives that offer immediate rewards
and that to avoid immediate costs.
Decision-Making Biases and Errors
(cont’d)
• Anchoring Effect
 Fixating on initial information and ignoring subsequent
information.
• Selective Perception Bias
 Selecting organizing and interpreting events based on
the decision maker’s biased perceptions.
• Confirmation Bias
 Seeking out information that reaffirms past choices
and discounting contradictory information.
Group Decision Making
• Advantages • Disadvantages
 Makes more accurate  Is more time-consuming
decisions and less efficient
 Provides more complete  Can result in minority
information domination that
 Offers a greater diversity influences decision
process
of experiences and
perspectives  Can produce increased
 Generates more pressures to conform to
the group’s mindset
alternatives
(groupthink)
 Increases acceptance of a
 Can create ambiguous
solution
responsibility for the
 Increases the legitimacy of outcomes of decisions
a decision. 4–22
Case Study:
Assigning Engineers for an Overseas Project
You are a supervisor in charge of 12 engineers. They all have

similar training and experience, so they can work on any project
equally well. One day, your manager tells you that an office in
another country needs four engineers from your team to work there
for about six to eight months. Both you and your manager agree that
the request should be met.All your engineers are capable of handling
the job, and there’s no specific reason to keep any one person over
another. However, the location of the assignment is not very
appealing, which makes the decision a bit tricky.
Questions to Consider:
How would you decide which engineers should go on the overseas

assignment? What important factors would affect your decision? 6–23
References
Stephen P. Robbins, D. A. (2013). Fundamentals of
Management Essential Concepts and Applications. 6th
Edition, Pearson.
Leslie W. Rue, L. L. (2005). Management Skills and

Application. 11th Edition, New York: Mcgraw Hill.

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BUS 209

Decision-Making: The Essence

• The Decision-Making Process

Step 3: Allocating Weights to the Criteria

Evaluation of Laptop Alternatives Against Weighted Criteria

Step 8: Evaluating the Decision’s Effectiveness

• The soundness of the decision is judged by its

© 2007 Prentice Hall, Inc. All rights reserved.

• Immediate Gratification Bias

You are a supervisor in charge of 12 engineers. They all have

How would you decide which engineers should go on the overseas

Leslie W. Rue, L. L. (2005). Management Skills and

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