Decision Making Process in Management Theory and Practice
1. ninth edition
STEPHEN P. ROBBINS
PowerPoint Presentation by Charlie Cook
PowerPoint Presentation by Charlie Cook
The University of West Alabama
The University of West Alabama
MARY COULTER
Decision-Making:
Decision-Making:
The Essence of
The Essence of
the Manager’s Job
the Manager’s Job
2. 6–2
Decision Making
Decision Making
• Decision
Decision
Making a choice from two or more alternatives.
Making a choice from two or more alternatives.
• The Decision-Making Process
The Decision-Making Process
Identifying a problem and decision criteria and
Identifying a problem and decision criteria and
allocating weights to the criteria.
allocating weights to the criteria.
Developing, analyzing, and selecting an alternative
Developing, analyzing, and selecting an alternative
that can resolve the problem.
that can resolve the problem.
Implementing the selected alternative.
Implementing the selected alternative.
Evaluating the decision’s effectiveness.
Evaluating the decision’s effectiveness.
4. 6–4
Step 1: Identifying the Problem
Step 1: Identifying the Problem
• Problem
Problem
A discrepancy between an existing and desired state
A discrepancy between an existing and desired state
of affairs.
of affairs.
• Characteristics of Problems
Characteristics of Problems
A problem becomes a problem when a manager
A problem becomes a problem when a manager
becomes aware of it.
becomes aware of it.
There is pressure to solve the problem.
There is pressure to solve the problem.
The manager must have the authority, information, or
The manager must have the authority, information, or
resources needed to solve the problem.
resources needed to solve the problem.
5. 6–5
Step 2: Identifying Decision Criteria
Step 2: Identifying Decision Criteria
• Decision criteria are factors that are important
Decision criteria are factors that are important
(relevant) to resolving the problem.
(relevant) to resolving the problem.
Costs that will be incurred (investments required)
Costs that will be incurred (investments required)
Risks likely to be encountered (chance of failure)
Risks likely to be encountered (chance of failure)
Outcomes that are desired (growth of the firm)
Outcomes that are desired (growth of the firm)
Step 3: Allocating Weights to the Criteria
Step 3: Allocating Weights to the Criteria
• Decision criteria are not of equal importance:
Decision criteria are not of equal importance:
Assigning a weight to each item places the items in
Assigning a weight to each item places the items in
the correct priority order of their importance in the
the correct priority order of their importance in the
decision making process.
decision making process.
6. 6–6
Step 4: Developing Alternatives
Step 4: Developing Alternatives
• Identifying viable alternatives
Identifying viable alternatives
Alternatives are listed (without evaluation) that can
Alternatives are listed (without evaluation) that can
resolve the problem.
resolve the problem.
Step 5: Analyzing Alternatives
Step 5: Analyzing Alternatives
• Appraising each alternative’s strengths and
Appraising each alternative’s strengths and
weaknesses
weaknesses
An alternative’s appraisal is based on its ability to
An alternative’s appraisal is based on its ability to
resolve the issues identified in steps 2 and 3.
resolve the issues identified in steps 2 and 3.
7. 6–7
Step 6: Selecting an Alternative
Step 6: Selecting an Alternative
• Choosing the best alternative
Choosing the best alternative
The alternative with the highest total weight is
The alternative with the highest total weight is
chosen.
chosen.
Step 7: Implementing the Alternative
Step 7: Implementing the Alternative
• Putting the chosen alternative into action.
Putting the chosen alternative into action.
Conveying the decision to and gaining commitment
Conveying the decision to and gaining commitment
from those who will carry out the decision.
from those who will carry out the decision.
8. 6–8
Step 8: Evaluating the Decision’s
Step 8: Evaluating the Decision’s
Effectiveness
Effectiveness
• The soundness of the decision is judged by its
The soundness of the decision is judged by its
outcomes.
outcomes.
How effectively was the problem resolved by
How effectively was the problem resolved by
outcomes resulting from the chosen alternatives?
outcomes resulting from the chosen alternatives?
If the problem was not resolved, what went wrong?
If the problem was not resolved, what went wrong?
10. 6–10
Making Decisions
Making Decisions
• Rationality
Rationality
Managers make consistent, value-maximizing choices
Managers make consistent, value-maximizing choices
with specified constraints.
with specified constraints.
Assumptions are that decision makers:
Assumptions are that decision makers:
Are perfectly rational, fully objective, and logical.
Are perfectly rational, fully objective, and logical.
Have carefully defined the problem and identified all viable
Have carefully defined the problem and identified all viable
alternatives.
alternatives.
Have a clear and specific goal
Have a clear and specific goal
Will select the alternative that maximizes outcomes in the
Will select the alternative that maximizes outcomes in the
organization’s interests rather than in their personal interests.
organization’s interests rather than in their personal interests.
11. 6–11
Making Decisions (cont’d)
Making Decisions (cont’d)
• Bounded Rationality
Bounded Rationality
Managers make decisions rationally, but are limited
Managers make decisions rationally, but are limited
(bounded) by their ability to process information.
(bounded) by their ability to process information.
Assumptions are that decision makers:
Assumptions are that decision makers:
Will not seek out or have knowledge of all alternatives
Will not seek out or have knowledge of all alternatives
Will
Will satisfice
satisfice—choose the first alternative encountered that
—choose the first alternative encountered that
satisfactorily solves the problem—
satisfactorily solves the problem—rather than maximize the
rather than maximize the
outcome of their decision by considering all alternatives and
outcome of their decision by considering all alternatives and
choosing the best.
choosing the best.
Influence on decision making
Influence on decision making
Escalation of commitment: an increased commitment to a
Escalation of commitment: an increased commitment to a
previous decision despite evidence that it may have been
previous decision despite evidence that it may have been
wrong.
wrong.
12. 6–12
The Role of Intuition
The Role of Intuition
• Intuitive decision making
Intuitive decision making
Making decisions on the basis of experience, feelings,
Making decisions on the basis of experience, feelings,
and accumulated judgment.
and accumulated judgment.
13. 6–13
Types of Problems and Decisions
Types of Problems and Decisions
• Structured Problems
Structured Problems
Involve goals that clear.
Involve goals that clear.
Are familiar (have occurred before).
Are familiar (have occurred before).
Are easily and completely defined
Are easily and completely defined—infor
—information about
mation about
the problem is available and complete.
the problem is available and complete.
• Programmed Decision
Programmed Decision
A repetitive decision that can be handled by a routine
A repetitive decision that can be handled by a routine
approach.
approach.
14. 6–14
Types of Programmed Decisions
Types of Programmed Decisions
• Policy
Policy
A general guideline for making a decision about a
A general guideline for making a decision about a
structured problem.
structured problem.
• Procedure
Procedure
A series of interrelated steps that a manager can use
A series of interrelated steps that a manager can use
to respond (applying a policy) to a structured problem.
to respond (applying a policy) to a structured problem.
• Rule
Rule
An explicit statement that limits what a manager or
An explicit statement that limits what a manager or
employee can or cannot do.
employee can or cannot do.
15. 6–15
Policy, Procedure, and Rule Examples
Policy, Procedure, and Rule Examples
• Policy
Policy
Accept all customer-returned merchandise.
Accept all customer-returned merchandise.
• Procedure
Procedure
Follow all steps for completing merchandise return
Follow all steps for completing merchandise return
documentation.
documentation.
• Rules
Rules
Managers must approve all refunds over $50.00.
Managers must approve all refunds over $50.00.
No credit purchases are refunded for cash.
No credit purchases are refunded for cash.
16. 6–16
Problems and Decisions (cont’d)
Problems and Decisions (cont’d)
• Unstructured Problems
Unstructured Problems
Problems that are new or unusual and for which
Problems that are new or unusual and for which
information is ambiguous or incomplete.
information is ambiguous or incomplete.
Problems that will require custom-made solutions.
Problems that will require custom-made solutions.
• Nonprogrammed Decisions
Nonprogrammed Decisions
Decisions that are unique and nonrecurring.
Decisions that are unique and nonrecurring.
Decisions that generate unique responses.
Decisions that generate unique responses.
17. 6–17
Decision-Making Conditions
Decision-Making Conditions
• Certainty
Certainty
A situation in which a manager can make an accurate
A situation in which a manager can make an accurate
decision because the outcome of every alternative
decision because the outcome of every alternative
choice is known.
choice is known.
• Risk
Risk
A situation in which the manager is able to estimate
A situation in which the manager is able to estimate
the likelihood (probability) of outcomes that result
the likelihood (probability) of outcomes that result
from the choice of particular alternatives.
from the choice of particular alternatives.
18. 6–18
Decision-Making Conditions
Decision-Making Conditions
• Uncertainty
Uncertainty
Limited information prevents estimation of outcome
Limited information prevents estimation of outcome
probabilities for alternatives associated with the
probabilities for alternatives associated with the
problem and may force managers to rely on intuition,
problem and may force managers to rely on intuition,
hunches, and “gut feelings”.
hunches, and “gut feelings”.
19. 6–19
Decision-Making Styles
Decision-Making Styles
• Dimensions of Decision-Making Styles
Dimensions of Decision-Making Styles
Ways of thinking
Ways of thinking
Rational, orderly, and consistent
Rational, orderly, and consistent
Intuitive, creative, and unique
Intuitive, creative, and unique
Tolerance for ambiguity
Tolerance for ambiguity
Low tolerance: require consistency and order
Low tolerance: require consistency and order
High tolerance: multiple thoughts simultaneously
High tolerance: multiple thoughts simultaneously
20. 6–20
Decision-Making Styles (cont’d)
Decision-Making Styles (cont’d)
• Types of Decision Makers
Types of Decision Makers
Directive
Directive
Use minimal information and consider few alternatives.
Use minimal information and consider few alternatives.
Analytic
Analytic
Make careful decisions in unique situations.
Make careful decisions in unique situations.
Conceptual
Conceptual
Maintain a broad outlook and consider many alternatives in
Maintain a broad outlook and consider many alternatives in
making decisions.
making decisions.
Behavioral
Behavioral
Avoid conflict by working well with others and being receptive
Avoid conflict by working well with others and being receptive
to suggestions.
to suggestions.
23. 6–23
Decision Making for Today’s World
Decision Making for Today’s World
• Guidelines for making effective decisions:
Guidelines for making effective decisions:
Understand cultural differences.
Understand cultural differences.
Know when it’s time to call it quits.
Know when it’s time to call it quits.
Use an effective decision-making process.
Use an effective decision-making process.
• Habits of highly reliable organizations (HROs)
Habits of highly reliable organizations (HROs)
Are not tricked by their success.
Are not tricked by their success.
Defer to the experts on the front line.
Defer to the experts on the front line.
Let unexpected circumstances provide the solution.
Let unexpected circumstances provide the solution.
Embrace complexity.
Embrace complexity.
Anticipate, but also anticipate their limits.
Anticipate, but also anticipate their limits.
24. 6–24
Characteristics of an Effective Decision-
Characteristics of an Effective Decision-
Making Process
Making Process
• It focuses on what is important.
It focuses on what is important.
• It is logical and consistent.
It is logical and consistent.
• It acknowledges both subjective and objective thinking
It acknowledges both subjective and objective thinking
and blends analytical with intuitive thinking.
and blends analytical with intuitive thinking.
• It requires only as much information and analysis as is
It requires only as much information and analysis as is
necessary to resolve a particular dilemma.
necessary to resolve a particular dilemma.
• It encourages and guides the gathering of relevant
It encourages and guides the gathering of relevant
information and informed opinion.
information and informed opinion.
• It is straightforward, reliable, easy to use, and flexible.
It is straightforward, reliable, easy to use, and flexible.
