DECISION MAKING

Decision making:

The act of choosing one

alternative from among a set of
alternatives.
The process of developing and
analyzing alternatives and
choosing from them

Decision-making process:

Recognizing and defining the

nature of a decision situation,
identifying alternatives, choosing
the best alternative, and putting
it into practice.
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Programmed
Nonprogrammed

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1. Programmed Decision
Making

Routine, virtually automatic

decision making that follows
established rules or guidelines
A decision that is fairly
structured or recurs with some
frequency (or both).
i.e. when storage shelves are
three quarter empty, order
more copy paper
i.e. whenever student
enrollment increase by 40%,
hire a new lecturer

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2. Non-Programmed Decision
Making

Non-routine decision making that

occurs in response to unusual,
unpredictable opportunities and
threat
A decision that is relatively
unstructured and occurs much
less often than a PROGRAMMED
DECISION.
i.e. enter a new market, expand
internationally, managing a rescue
work for a plane crash
Depend heavily on judgment and
intuition
Judgment develop opinion based
on the information on hand
Intuition make decision based on
past experience and immediate
feeling about information on hand

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Certainty

A situation in which manager can make accurate decisions

because all outcomes are known
i.e. deposit money- which bank to choose- interest rate know
how much interest we will get by the year end from each bank
decide which bank

Uncertainty

A situation in which a decision maker has neither certainty nor

reasonable probability about the outcome
i.e. no one can accurately predict the turnout for new storytelling festival, when many families are busy with school
activities and other events

Risk

Decision maker is able to estimate the likelihood of certain

outcome based on personal experience or secondary information
i.e.. Hotel Manager- for the past 3 years client increase during
the year end estimate this year will also be the same- so wants
to increase the number of rooms to increase profits.

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The decision
maker faces
conditions of:

Certainty

Risk

Uncertainty

Level of ambiguity and chances of making a bad decision

Lower

Moderate

Higher
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A process that helps management weigh

alternative and choose the alternative with
the best chance of success

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STEPS
1. Recognize and
diagnose problems.
2. Identify objectives.
3. Generate alternatives.
4. Evaluate alternatives.
5. Select alternative/reach
decisions.
6. Implement alternative.
7. Follow up and evaluate
results (monitoring)
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Argues that the decision-makers: Have incomplete and imperfect information

Are constrained by bounded rationality
Tend to satisfice when making decisions

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Decisions are made by groups and teams

rather than by individuals.

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Brainstorming
Delphi technique
Nominal group technique

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Is a decision making technique in which

members openly discuss, argue about, and
agree on the best alternative

Advantage:
- Interaction sparks new ideas and promotes
understanding

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A group decision making technique in which

a group is used to achieve a consensus of
expert opinion.
Combine opinions of experts.
Group members do not see each other.

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A structured technique used to generate

creative and innovative alternatives or
ideas.
Group members do not interact freely &
write down alternatives individually.
Discussion is limited to simple clarification.
The decision is based on high-ranking
alternative.

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More information and knowledge are

available
More alternatives are likely to be generated
More acceptance of the final decision
Enhance communication of the decision
Better decisions

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The process is longer than individual

decision making, and costlier
Compromise decisions resulting from
indecisiveness may emerge
One person may dominate the group
Groupthink may occur

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A situation that occurs when a group or

teams desire for consensus and
cohesiveness overwhelms its desire to
reach the best possible action.

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