1. MANAGEMENT
RICHARD L. DAFT

2. Managerial Decision Making
Managerial Decision Making
CHAPTER 8

3. Learning Outcomes
Explain why decision making is an important component of good management.
Discuss the difference between programmed and nonprogrammed decision and the decision characteristics of certainty and uncertainty.
Describe the ideal, rational model of decision making and the political model of decision making.
Explain the process by which managers actually make decisions in the real world.
Identify the six steps used in managerial decision making.
Describe four personal decision styles used by managers and explain the biases that frequently cause managers to make bad decisions.
Identify and explain techniques for innovative group decision making.
Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

4. How Do You Make Decisions?
People make decisions everyday without realizing their diverse decision-making styles
Managers are referred to as decision makers
Organizations grow and prosper based on decisions made by managers
Good decision making is a vital part of good management
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5. Types of Decisions and Problems
A decision is a choice made from available alternatives
Decision making is the process of identifying problems and opportunities and then resolving them
Programmed Decisions – situations that occur often to enable rules
Nonprogrammed – situations that are unique or poorly defined and unstructured
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6. Facing Certainty and Uncertainty
Programmed and nonprogrammed decisions differ because of uncertainty
Certainty: the information needed is available
Risk: the future outcome is subject to chance regardless of the information available
Uncertainty: information about future events are incomplete
Ambiguity and Conflict: the goals and/or problem are unclear and difficult to define
Managers attempt to obtain information about decision alternatives
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7. Conditions That Affect the Possibility of Decision Failure
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8. Decision-Making Models
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9. The Ideal, Rational Model
Strive to make economically sensible decisions
Four assumptions of the model:
The decision maker operates to accomplish goals that are known and agreed on.
Decision maker strives for conditions of certainty. All alternatives are calculated.
Criteria for evaluating alternatives are known.
The decision maker is rational and uses logic to assign values. Attempt to maximize organizational goals.
Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

10. Administrative Model
Descriptive approach that recognizes human and environmental limitations
Focus on organizational factors that influence decisions
Seek to find alternatives for complex problems instead of rational approach
Decision goals are vague and lack consensus.
Rational procedures are not always used.
Search for alternatives is limited because of human, information and resource constraints.
Managers will settle for satisficing rather than maximizing.
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11. Bounded Rationality and Satisficing
Bounded Rationality – people have limits and boundaries on how rational they can be
Organizations are complex systems
Satisficing – decision makers choose the first solution alternative that satisfies minimal decision criteria
Intuition – quick apprehension of a decision situation based on past experience but without conscious thought
Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

12. Political Model Useful for nonprogrammed decisions
Useful for nonprogrammed decisions
Resembles the real environment in which managers operate
Four basic assumptions:
Organizations are made up of diverse interests
Information is ambiguous and incomplete
Managers do not have the resources to identify all dimensions of the problem
Managers engage in the push and pull of debate to decide goals and alternatives
Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

13. Decision-Making Steps
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14. Recognition of Decision Requirement
When a problem or opportunity is presented, decisions must be made
Problem – occurs when organizational accomplishment is less than established goals
Opportunity – when managers see potential accomplishment that exceeds specified current goals
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15. Diagnosis and Analysis of Causes
Managers must understand the situation—diagnosis
Managers ask a series of questions:
What is the state of disequilibrium affecting us?
When did it occur?
Where did it occur?
How did it occur?
To whom did it occur?
What is the urgency of the problem?
What is the interconnectedness of events?
What result came from which activity?
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16. Develop of Alternatives
Generate possible alternative solutions
For programmed decisions, feasible alternatives are easy to identify
Nonprogrammed decisions, however require developing new courses of action
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17. Selection of Desired Alternative
Managers will choose the most promising of several alternative courses of action
The selection should fit the goals and objectives
The manager tries to select the choice with the least amount of risk and uncertainty
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18. Implementation of Chosen Alternative
Use managerial, administrative and persuasive abilities to ensure that the alternative is carried out
Success depends on the managers ability to translate alternative into action
Implementation requires communication, motivation, and leadership
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19. Decision Alternatives with Different Levels of Risk
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20. Evaluation and Feedback
How well was the alternative implemented?
Was the alternative successful?
Feedback is a continuous process
Large problems may involve several alternatives in sequence
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21. Personal Decision Framework
How individuals personally proceed through the decision making process
Directive Style
Analytical Style
Conceptual Style
Behavioral Style
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22. 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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23. Innovative Group Decision Making
Start with Brainstorming
Engage in Rigorous Debate
Avoid Groupthink
Know When to Bail
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