The Managerial                                          Decision-Making Process                                           ...
The Managerial Decision-Making Process                                                              Fifth Edition         ...
Chapter 2                         The Managerial                         Decision-Making                             Proce...
The Managerial                          Decision-Making Process      n    Process components are decision-           makin...
Figure 2.1 The Decision-Making Process                                         Revise        Setting                      ...
Decision-Making Function No. 1    Setting Managerial Objectives:        n     Objectives constitute the foundation        ...
Decision-Making Function No. 2       Searching for Alternatives:        n     The limitations of time and money        n  ...
Figure 2.2 The Cost of Additional Information          cost of additional information                                     ...
Decision-Making Function No. 3        Comparing and Evaluating        Alternatives:  n     Alternatives result from the se...
Decision-Making Function No. 3                                                                  (cont’d)        Also:     ...
Decision-Making Function No. 4        The Act of Choice:        n     The choice is the culmination of the              pr...
Decision-Making Function No. 4                                                                  (cont’d)        Also:     ...
Decision-Making Function No. 5       Implementing Decisions:                      Decision success is a function          ...
Decision-Making Function No. 5                                                                  (cont’d)        Areas cont...
Decision-Making Function No. 5                                                                  (cont’d)        Areas detr...
Figure 2.3 Evaluation of Strategic                          Decision Success       Strategic    Strategic       Decision =...
Decision-Making Function No. 6        Follow-Up and Control        n     Follow-up and control is essential to            ...
Decision-Making Function No. 6                                                                  (cont’d)        Also:n    ...
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Chap02

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Chap02

  1. 1. The Managerial Decision-Making Process E. FRANK HARRISON Fifth EditionCopyright © 1999 Houghton Mifflin Company. All rights reserved. 2-0
  2. 2. The Managerial Decision-Making Process Fifth Edition Author: E. Frank Harrison, Ph.D. Slides by Monique A. Pelletier, Ph.D.Copyright © 1999 Houghton Mifflin Company. All rights reserved. 2-1
  3. 3. Chapter 2 The Managerial Decision-Making ProcessCopyright © 1999 Houghton Mifflin Company. All rights reserved. 2-2
  4. 4. The Managerial Decision-Making Process n Process components are decision- making functions. n Decision-making functions are highly interrelated and interdependent. n The process is highly dynamic with several subprocesses. n The process can accommodate several concurrent Category II decisions.Copyright © 1999 Houghton Mifflin Company. All rights reserved. 2-3
  5. 5. Figure 2.1 The Decision-Making Process Revise Setting objectives Searching Comparing & managerial for evaluating objectives alternatives alternatives Revise or update Renew objectives search Follow-up Implementing The act and Take decisions of choice control corrective action as necessaryCopyright © 1999 Houghton Mifflin Company. All rights reserved. 2-4
  6. 6. Decision-Making Function No. 1 Setting Managerial Objectives: n Objectives constitute the foundation for rational decision making. n Objectives are the ends for the means of managerial decision making. n Attainment of the objective is the ultimate measure of decision success.Copyright © 1999 Houghton Mifflin Company. All rights reserved. 2-5
  7. 7. Decision-Making Function No. 2 Searching for Alternatives: n The limitations of time and money n The declining value of additional information n The rising cost of additional information n Abort the search in the zone of cost effectivenessCopyright © 1999 Houghton Mifflin Company. All rights reserved. 2-6
  8. 8. Figure 2.2 The Cost of Additional Information cost of additional information Average value Value and Point of Cost optimality Marginal Zone of value cost effectiveness 0 Perfection of information 100%Copyright © 1999 Houghton Mifflin Company. All rights reserved. 2-7
  9. 9. Decision-Making Function No. 3 Comparing and Evaluating Alternatives: n Alternatives result from the search. n There are usually three to five alternatives. n One alternative is to do nothing. n Alternatives are evaluated using criteria derived from the objective.Copyright © 1999 Houghton Mifflin Company. All rights reserved. 2-8
  10. 10. Decision-Making Function No. 3 (cont’d) Also: n Evaluation should include an anticipation of the likely outcome for each alternative. n Evaluation should also anticipate obstacles or difficulties at the time of implementation.Copyright © 1999 Houghton Mifflin Company. All rights reserved. 2-9
  11. 11. Decision-Making Function No. 4 The Act of Choice: n The choice is the culmination of the process, not all of it. n The choice confronts the decision maker with discernible constraints. n The best alternative may not be readily apparent to the decision maker.Copyright © 1999 Houghton Mifflin Company. All rights reserved. 2 - 10
  12. 12. Decision-Making Function No. 4 (cont’d) Also: n The best choice is likely to ensue from the right approach. n The choice should be the alternative most likely to result in the attainment of the objective.Copyright © 1999 Houghton Mifflin Company. All rights reserved. 2 - 11
  13. 13. Decision-Making Function No. 5 Implementing Decisions: Decision success is a function of decision quality and decision implementation.Copyright © 1999 Houghton Mifflin Company. All rights reserved. 2 - 12
  14. 14. Decision-Making Function No. 5 (cont’d) Areas contributing to decision success: n Observance of operating constraints n Influence of the decision maker n Involvement of decision implementers n Absence of conflict of interestCopyright © 1999 Houghton Mifflin Company. All rights reserved. 2 - 13
  15. 15. Decision-Making Function No. 5 (cont’d) Areas detracting from decision success: n Disregard of timeliness n Unlimited additional information n Disregard of risk/reward relationshipsCopyright © 1999 Houghton Mifflin Company. All rights reserved. 2 - 14
  16. 16. Figure 2.3 Evaluation of Strategic Decision Success Strategic Strategic Decision = f Decision + f Strategic Decision Success Quality Implementation 1. Compatibility with 1. Conflict of interest. operating constraints. 2. Timeliness. 2. Risk-reward factor. 3. Optimum amount of 3. Understanding the information. decision. 4. Influence of the decision maker.Copyright © 1999 Houghton Mifflin Company. All rights reserved. 2 - 15
  17. 17. Decision-Making Function No. 6 Follow-Up and Control n Follow-up and control is essential to ensure that an implemented decision meets its objective. n Performance is measured by observing the implemented decision in relation to its standard derived from the objective.Copyright © 1999 Houghton Mifflin Company. All rights reserved. 2 - 16
  18. 18. Decision-Making Function No. 6 (cont’d) Also:n Unacceptable variance from standard performance should elicit timely and appropriate corrective action.n Corrective action (subprocess no. 1) may result in the implementation of another alternative (subprocess no. 2), which, if not successful, may result in a revision of the original objective (subprocess no. 3).Copyright © 1999 Houghton Mifflin Company. All rights reserved. 2 - 17

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