Making Decisions

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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 makersCopyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall

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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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1. Identify an existing problem2. List possible alternatives for solving

problem3. Select the most beneficial of these

alternatives4. Implement the selected alternatives5. Gather feedback to find out whether

the implement alternative is solving the identified problem.


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


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

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



Decision – Making Heuristics and Biases

Decision – Making Conditions: Risks and Uncertainty

Probability Theory

Decision TreesTo compare financial consequences, management must:

1. Study estimates of investment amounts necessary for:Building a large plantBuilding a small plantExpanding a small plant

2. Weigh the probabilities of facing different product demand levels

3. Consider projected income yields for each decision alternative


Advantages and Disadvantages of Using Groups to Make Decisions

Processes for Making Group Decisions

• Brainstorming


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


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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Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall

Making Decisions

Business

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