The document discusses the 8 key steps in decision making: [1] identifying a problem, [2] identifying decision criteria, [3] assigning weights to criteria, [4] developing alternatives, [5] analyzing alternatives, [6] choosing the best alternative, [7] implementing the decision, and [8] evaluating effectiveness. It also outlines 3 conditions for decision making: certainty, uncertainty, and risk. Finally, it examines common errors in decision making like overconfidence bias and anchoring effect that can lead managers to make flawed judgments.

1. CHAPTER 5 : FOUNDATIONS OF DECISIONS MAKING
Decisions…. A choice from 2 or more alternatives
1. 8 STEPS IN DECISION MAKING
Contoh…….Steps involved in buying a vehicle :
Step 1 : identifying a problem
- A process begins with the existence of a problem…contoh I need a car to send my kids to school.
Step 2 :Identifying decision criteria
- Factors that are relevant to a decision criteria
- I then identify a decision criteria to buy the car.. e.g – colour, price, performance.
Step3 : assigns or allocate weights to the criteria
- Criteria are all not equally important. So I must weight the items in order to give them the
correct priority to the decision.
- Simple approach…. To give the most important criterion a weight of 10 for an example sahaja
Step 4: Development of Alternatives
- I will make a list of alternatives that could resolve the problem
- Example – kancil, viva, myvi and the lists goes on.
Step 5: Analysing alternatives
- Once the alternatives have been identified, I must then critically analyse each one
- From this comparison strength and weaknesses of each alternatives become evident.
Step 6: Analysing an alternative
- Choosing the best alternative from among those considered.
- At this stage we have determined all the pertinent criteria in purchasing a car.
- Choose the alternative that generated the highest score.
Step 7: Implementing the Alternative
- Involves conveying the decision to those affected by it and getting their commitment.
- Example.. if a sales rep had participated in the computer purchase decision, they would
probably enthusiastically..( excited ) support the model chosen and any new training necessary.
- Putting a decision into actions.
Step 8: Evaluating decision effectiveness
Last step in the decision making process.
Involves appraising the outcome of the decision to see if the problem has been resolved.
Did the alternative in step 6 and implemented in step 7 accomplish the desired result?

2. DECISION MAKING CONDITION :
There are 3 decision making condition:
A. Certainty
- A situation in which a manager can make accurate decisions because the outcome of every
alternative is known.
- Example : when u have decided in which bank to deposit ur $, u know exactly how much interest
is being offered by each bank and will be earned on the interests.
B. Uncertainty
- What happens if you have a decision t make when you are not certain about the outcomes and
cannot make reasonably probability outcomes?....we call it as uncertainty…
- A situation in which a decision maker has neither certainty nor reasonable probability estimates
available.
- Under the conditions of uncertainty, the choice between alternatives is influenced by the
limited amount of information available to the decision maker.
C. Risk
- A condition where the decision maker is able to estimate the likelihood of certain outcomes.
Managers have historical data that allow them to assign probabilities to different alternatives.
3.Errors in Decision Making
- Heuristics?..
- A shortcut that allows people to solve problems and make judgments quickly and efficiently.
- The rule-of-thumb strategies shorten decision-making time and allow people to function without
constantly stopping to think about the next course of action.
- While heuristics are helpful in many situations, they can also lead to biases.
- using judgemental shortcuts or rule of thumb to simplify their decision making.
- 12 common decision errors that managers make ..
1. Overconfidence bias- managers think they know more than they do
2. Immediate gratification- decision makers who tend to want immediate rewards or decisions that
provide quick payoffs
3. Anchoring effect- when decision makers fixate (unable to stop thinking about something/pay
attention on something) on initial information as a starting point and then once set, fail to adjust
for subsequent information.( following in time or order)
- rely too heavily, or "anchor," on one trait or piece of information when making decisions.
4. Selective perceptions- when decision makers selectively organize and interpret events baed on
their perceptions.
5. Representative heuristics- to base judgments base on probability on things ( objects or events)

3. 6. Availability heuristics- when decision makers tend to remember events that are the most
recent and vivid in their memory (remaining distinct in the mind)
7. Escalation of commitment- increased commitment to a previous decision despite negative info
about the decisions present outcome.
- throwing more good resources into a proven bad project
Another 5 more biases to read on your own..