Chapter 5:
Decision Making
Types of Decisions and Problems
Decision making is the
Decision is a
process of identifying
choice made from
problems and
available
opportunities, and
alternatives
then resolving them
Types of Decisions and Problems
Programmed and Nonprogrammed Decisions
Programmed Decisions Nonprogrammed Decisions
•Recurring problems •Unique situations
•Apply rule •Poorly defined
•Unstructured
•Important consequences
Types of Decisions and Problems
Conditions that Affect the Possibility of Decision Failure
Types of Decisions and Problems
Facing Certainty and Uncertainty
Certainty – All information the decision maker needs is fully available
Risk – Future outcomes associated with an alternative are subject to
some chance of loss or failure
Uncertainty – Information about alternatives and future events is
incomplete
Types of Decisions and Problems
Ambiguity and Conflict
Ambiguity – Making decisions in difficult situations
•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
Models of Decision Making
The Ideal, Rational Model
Rational economic assumptions drive decisions
•Operates to accomplish established goals, problem is defined
•Decision maker strives for information and certainty; all alternatives
and their potential results are calculated
•Criteria for evaluating alternatives is known; select alternative with
maximum benefit
•Decision maker is rational and uses logic
Normative – how a decision maker should make a decision
Models of Decision Making
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 on how
rational they can be
Satisficing – Decision makers choose the first solution that
satisfies minimal decision criteria
Models of Decision Making
Assumptions of 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
Models of Decision Making
Political Model
Decisions involve managers with diverse interests
Managers must engage in coalition building (informal alliance
amongst managers who support a specific goal)
Without a coalition, powerful groups can derail the decision-
making process
Political model resembles the real environment
Models of Decision Making
Political Model
Assumptions of the political model
•Organizations are made up of groups with diverse interests, goals, values
•Information is ambiguous and incomplete
•Lack of time, resources, or mental capacity to process all information
regarding a problem
•Decsions are the result of bargaining and discussion among coalition
members
Models of Decision Making
Characteristics of Classical, Administrative, and Political Decision-Making Models
Decision-Making Steps
Six Steps in the Managerial Decision-Making Process
Decision-Making Steps
Recognition of Decision Requirement – Identify problem or
opportunity
Diagnosis and Analysis – Analyze underlying causal factors
Decision-Making Steps
Develop Alternatives – Define feasible alternatives
Selection of Desired Alternative – Alternative with most
desirable outcome
Decision-Making Steps
Implementation of Chosen Alternative – Use of managerial,
administrative, and persuasive abilities to execute chosen
alternative
Evaluation and Feedback – Gather information about
effectiveness
Personal Decision Models
Personal Decision Models
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
Behavioural style – Managers with a deep concern for others
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
Innovative Decision Making
Mechanisms to help reduce bias-related decision errors:
•Start with brainstorming
•Use hard evidence
Innovative Decision Making
Mechanisms to help reduce bias-related decision errors:
•Engage in rigorous debate
•Avoid groupthink
Innovative Decision Making
Mechanisms to help reduce bias-related decision errors:
•Know when to bail
•Do a premortem or postmortem
MARKETING LÀ GÌ ?
THANK YOU!
"Whenever you see a successful business,
someone once made a courageous decision."
— Peter F. Drucker