chap01

The Managerial Decision-Making ProcessFifth Edition : 

The Managerial Decision-Making ProcessFifth Edition Author: E. Frank Harrison, Ph.D. Slides by Monique A. Pelletier, Ph.D.

An Overview of Decision Making : 

An Overview of Decision Making Chapter 1

Profile of a Decision : 

Profile of a Decision The Decision-Making Process The Decision Maker The Decision

Decision Making and Problem Solving : 

Decision Making and Problem Solving Problem solving is concerned with overcoming obstacles in the path toward an objective. Problem solving may or may not require action. A decision is an act requiring judgment that is translated into action.

Decision Making and Problem Solving (cont’d) : 

Decision Making and Problem Solving (cont’d) Decision making is much more comprehensive than problem solving. The terms are interrelated, but not interchangeable.

The Significance of Decision Making : 

The Significance of Decision Making Decision making is the one truly distinctive characteristic of managers. Decisions made by top managers commit the total organization toward particular courses of action.

The Significance of Decision Making (cont’d) : 

The Significance of Decision Making (cont’d) Decisions made by lower levels of management implement the strategic decisions of top managers in the operating areas of the organization. Decisions invariably involve organizational change and the commitment of scarce resources.

The Scope of Decision Making : 

The Scope of Decision Making Individual decision making Group decision making Organizational decision making Metaorganizational decision making (Note: Refer to Figure 1.1)

Figure 1.1 The Scope of Decision Making : 

Figure 1.1 The Scope of Decision Making Group Organization Metaorganization Individual Decisional Outputs (Actions transactions, outcomes) Decisional Inputs (Objectives, information, resources, energy) Permeable Boundaries Interactional Levels External Environment

A Typology of Decisions : 

A Typology of Decisions Decision-making strategies (Fig. 1.2) l Computational l Judgmental l Compromise l Inspirational

A Typology of Decisions (cont’d) : 

A Typology of Decisions (cont’d) l Category I - routine, recurring, certainty with regard to the outcome l Category II - nonroutine, nonrecurring, uncertainty with regard to the outcome Decision categories

A Typology of Decisions (cont’d) : 

A Typology of Decisions (cont’d) l Category I / Computational strategy l Category II / Judgmental strategy Decision combinations

Table 1.1 A Categorization of Decision Characteristics : 

Table 1.1 A Categorization of Decision Characteristics Category I Decisions Category II Decisions Classifications Programmable; routine; Nonprogrammable; unique; generic; computational; judgmental; creative; negotiated; compromise adaptive; innovative; inspirational Structure Procedural; predictable; Novel, unstructured, certainty regarding consequential, elusive, and cause/effect relationships; complex; uncertain cause/ recurring; within existing effect relationships; non- technologies; well-defined recurring; information information channels; channels undefined, incom- definite decision criteria; plete information; decision outcome preferences may criteria may be unknown; be certain or uncertain outcome preferences may be certain or uncertain Strategy Reliance upon rules and Reliance on judgment, principles; habitual intuition, and creativity; reactions; prefabricated individual processing; response; uniform heuristic problem-solving processing; computational techniques; rules of thumb; techniques; accepted general problem-solving methods for handling processes

Figure 1.2 The Concept of Decision-Making Strategies : 

Figure 1.2 The Concept of Decision-Making Strategies Knowledge Regarding the Outcome Strong Preference Weak Preference Preference for the Outcome Computational Decision-Making Strategy Compromise Decision-Making Strategy Judgmental Decision-Making Strategy Inspirational Decision-Making Strategy Low Level of Knowledge High Level of Knowledge

The Locus of Choice : 

The Locus of Choice Top management makes Category II decisions. Operating management makes Category I decisions. Middle management supervises the making of Category I decisions and supports the making of Category II decisions.

Characteristics of Managerial Decisions (Category II) : 

Characteristics of Managerial Decisions (Category II) Long-range organizational objectives Best choice from among a set of alternatives Decision involves organizational change Decision requires a commitment of resources

Characteristics of Managerial Decisions (Category II) (cont’d) : 

Characteristics of Managerial Decisions (Category II) (cont’d) Choice is a means to an end, not an end to itself Decision maker tends to overestimate success Success is measurable through objectives attainment

Perspectives on Managerial Decision Making : 

Perspectives on Managerial Decision Making The integrative perspective The interdisciplinary perspective The interlocking perspective The interrelational perspective