1. © Prentice Hall, 2002 7 - 1 Modern Management 9 th edition.

2. © Prentice Hall, 2002 7 - 2  Objectives A fundamental understanding of the term decision An understanding of each element of the decision situation An ability to use the decision-making process An appreciation for the various situations in which decisions are made An understanding of probability theory and decision trees as decision-making tools Insights into groups as decision makers.

3. © Prentice Hall, 2002 7 - 3 F UNDAMENTALS O F D ECISIONS Definition of a Decision Types of Decisions Programmed Nonprogrammed.

4. © Prentice Hall, 2002 7 - 4 F UNDAMENTALS O F D ECISIONS Table 7.1 Traditional and Modern Ways of Handling Programmed and Nonprogrammed Decisions Decision-Making Techniques Types of DecisionsTraditionalModern Programmed: Routine, repetitive decisions1.Habit1.Operations research: Organization develops specific 2.Clerical routine: Mathematical analysis models processes for handling them Standard operating procedures Computer simulation 3.Organization structure:2.Electronic data processing Common expectations A system of subgoals Well-defined information channels Nonprogrammed: One-shot, ill-structured,1.Judgment, intuition,1.Heuristic problem-solving novel policy decisions and creativity techniques applied to: Handled by general makers 2.Rules of thumb Training human decision problem-solving processes 3.Selection and training Constructing heuristic of executives computer programs.

5. © Prentice Hall, 2002 7 - 5 F UNDAMENTALS O F D ECISIONS Figure 7.1 Decision programming continuum.

6. © Prentice Hall, 2002 7 - 6 F UNDAMENTALS O F D ECISIONS The Responsibility for Making Organizational Decisions Scope of the decision Broader scope Consensus.

7. © Prentice Hall, 2002 7 - 7 F UNDAMENTALS O F D ECISIONS Figure 7.2 Level of managers responsible for making decisions as decision scope increases from A to B to C.

8. © Prentice Hall, 2002 7 - 8 F UNDAMENTALS O F D ECISIONS Figure 7.3 How scope of decision affects management level making decision at DuPont.

9. © Prentice Hall, 2002 7 - 9 F UNDAMENTALS O F D ECISIONS Elements of the Decision Situation The Decision Makers Goals To Be Served Relevant Alternatives Ordering of Alternatives Choice of Alternatives.

10. © Prentice Hall, 2002 7 - 10 T HE D ECISION- M AKING P ROCESS Figure 7.4 Model of the decision-making process.

11. © Prentice Hall, 2002 7 - 11 T HE D ECISION- M AKING P ROCESS Identifying an Existing Problem Managers learn of problems by: Orders from superiors Situations relayed by subordinates Normal activity Listing Alternative Solutions Authority factors Biological or human factors Physical factors Technological factors Economic factors.

12. © Prentice Hall, 2002 7 - 12 T HE D ECISION- M AKING P ROCESS Figure 7.5 Additional factors that limit a manager’s number of acceptable alternatives.

13. © Prentice Hall, 2002 7 - 13 T HE D ECISION- M AKING P ROCESS Selecting the Most Beneficial Alternative Implementing the Chosen Alternative Gathering Problem-Related Feedback.

14. © Prentice Hall, 2002 7 - 14 D ECISION- M AKING C ONDITIONS Complete Certainty Condition Complete Uncertainty Condition Risk Condition.

15. © Prentice Hall, 2002 7 - 15 D ECISION- M AKING T OOLS Probability Theory Expected value (EV = I × P) Decision Trees.

16. © Prentice Hall, 2002 7 - 16 D ECISION- M AKING T OOLS Figure 7.6 Expected values from locating surfboard rental store in each of three possible locations.

17. © Prentice Hall, 2002 7 - 17 D ECISION- M AKING T OOLS Figure 7.7 A basic decision tree illustrating the decision facing Stygian management.

18. © Prentice Hall, 2002 7 - 18 G ROUP D ECISION M AKING Advantages and Disadvantages of Using Groups to Make Decisions Advantages: More and better alternatives than individual Implementation supported more fervently Disadvantages: Takes longer Costs the organization more Lower quality if contaminated (Groupthink).

19. © Prentice Hall, 2002 7 - 19 G ROUP D ECISION M AKING Processes for Making Group Decisions Brainstorming Nominal Group Technique 1. Writes down individual ideas 2. Presents individual ideas orally 3. Entire group discusses ideas 4. Secret ballot is taken.

20. © Prentice Hall, 2002 7 - 20 G ROUP D ECISION M AKING Processes for Making Group Decisions (con’t) Delphi Technique 1. Identify problem 2. Offer solutions anonymously 3. Compile and send responses 4. Generate new solutions 5. Repeat 3 and 4 until consensus reached Evaluating Group Decision-Making Processes.

21. © Prentice Hall, 2002 7 - 21 G ROUP D ECISION M AKING Figure 7.8 The brainstorming process.

22. © Prentice Hall, 2002 7 - 22 Chapter Seven Questions