1. Managerial Decision Making
Chapter 9
Managerial Decision Making

2. Types of Decisions and Problems
Decision making is the process of identifying opportunities
A decision is a choice made from available alternatives
Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

3. Programmed and Nonprogrammed Decisions
Recurring problems
Apply rule
Nonprogrammed Decisions
Unique situations
Poorly defined
Unstructured
Important consequences
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4. Facing Certainty and Uncertainty
Difference between programmed and unprogrammed decisions
Uncertainty depends on the amount and value of information available
Certainty – situation in which all information is fully available
Risk – the future outcomes associated with an alternative are subject to chance
Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

5. 9.1 Conditions That Affect the Possibility of Decision Failure
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6. Ambiguity and Conflict
Ambiguity makes decisions difficult
The goals and the problem are unclear
Wicked Decisions involve conflict over goals and have changing circumstances, fuzzy information, and unclear links
There is often no “right” answer
Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

7. The Ideal, Rational Model
Rational economic assumptions drive decisions
Operates to accomplish established goals, problem is defined
Decision maker strives for information and certainty, alternatives evaluated
Criteria for evaluating alternatives is known, select alternative with maximum benefit
Decision maker is rationale and uses logic
Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

8. How Managers Actually Make Decisions
Administrative/descriptive approach
How managers really make decisions
Recognize human and environmental limitations
Bounded rationality – people have limits or boundaries
Satisficing – decision makers choose the first solution that satisfies minimal decision criteria
Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

9. Steps in the Administrative Model
Goals are often vague
Rational procedures are not always used
Managers’ searches for alternatives are limited
Most managers settle for satisficing
Intuition – quick apprehension of situation based on practice and experience
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10. Decision-Making Model: Political
Decisions involve managers with diverse interests
Managers must engage in coalition building
Informal alliance to support specific goal
Without a coalition, powerful groups can derail the decision-making process
Political model resembles the real environment
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11. 9.2 Comparing the Models
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12. Decision-Making Steps
Recognition of Decision Requirement – identify problem or opportunity
Diagnosis and Analysis – analyze underlying causal factors
Develop Alternatives – define feasible alternatives
Selection of Desired Alternative – alternative with most desirable outcome
Implementation of Chosen Alternative – use of management persuasive abilities to execute
Evaluation and Feedback – gather information about effectiveness
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13. 9.3 Six Steps in the Managerial Decision-Making Process
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14. 9.4 Decision Alternatives with Different Levels of Risk
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15. 9.5 Personal Decision Framework
Many managers depend on their own
decision-making style to make decisions
Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

16. Personal Decision Framework
Directive style – people who prefer simple, clear- cut solutions to problems
Analytic style – managers prefer complex solutions based on a lot of data
Conceptual style – managers like a broad amount of information
Behavioral style – managers with a deep concern for others
Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

17. Why Do Managers Make Bad Decisions?
Being influenced by initial impressions
Justifying past decisions
Seeing what you want to see
Perpetuating the status quo
Being influenced by problem framing
Overconfidence
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18. Innovative Group Decision Making
Start with brainstorming – spontaneous suggestions in a group
Engage in rigorous debate – use divergent points of view to focus problems
Avoid groupthink – acknowledge disagreement as value instead of blind agreement
Act with speed – some decisions have to be made incredibly quickly
Don’t ignore crisis – managers should expect and plan for crises (with speed)
Know when to bail – good managers must know when to pull the plug!
Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.