The document outlines the eight steps of the decision-making process: 1) identifying the problem, 2) identifying decision criteria, 3) allocating weights to criteria, 4) developing alternatives, 5) analyzing alternatives, 6) selecting an alternative, 7) implementing the alternative, and 8) evaluating the decision's effectiveness. It also discusses programmed decisions for structured, recurring problems, and nonprogrammed decisions for unique, unstructured problems that require custom solutions. Exhibits provide examples of applying the decision-making process to choosing a new laptop computer.

1. Decision makingDecision making
6–1

2. L E A R N I N G O U T L I N EL E A R N I N G O U T L I N E
Follow this Learning Outline as you read and study this chapter.Follow this Learning Outline as you read and study this chapter.
The Decision-Making ProcessThe Decision-Making Process
• Define decision and decision-making process.Define decision and decision-making process.
• Describe the eight steps in the decision-making process.Describe the eight steps in the decision-making process.
The Manager as Decision MakerThe Manager as Decision Maker
• Contrast programmed and non programmed decisions.Contrast programmed and non programmed decisions.
• Explain how managers can make effective decisions inExplain how managers can make effective decisions in
today’s world.today’s world.

3. 6–3
Decision MakingDecision Making
• DecisionDecision
 Making a choice from two or more alternatives.Making a choice from two or more alternatives.
• The Decision-Making ProcessThe Decision-Making Process
 Identifying a problem and decision criteria andIdentifying a problem and decision criteria and
allocating weights to the criteria.allocating weights to the criteria.
 Developing, analyzing, and selecting an alternativeDeveloping, 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. The Decision-Making ProcessThe Decision-Making Process

5. Step 1: Identifying the ProblemStep 1: Identifying the Problem
• ProblemProblem
 A discrepancy between an existing and desired stateA discrepancy between an existing and desired state
of affairs.of affairs.
• Characteristics of ProblemsCharacteristics of Problems
 A problem becomes a problem when a managerA 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, orThe manager must have the authority, information, or
resources needed to solve the problem.resources needed to solve the problem.

6. Step 2: Identifying Decision CriteriaStep 2: Identifying Decision Criteria
• Decision criteria are factors that are importantDecision 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 CriteriaStep 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 inAssigning a weight to each item places the items in
the correct priority order of their importance in thethe correct priority order of their importance in the
decision making process.decision making process.

7. Exhibit 6–2Exhibit 6–2 Criteria and Weights for Computer Replacement DecisionCriteria and Weights for Computer Replacement Decision
Criterion Weight
Memory and Storage 10
Battery life 8
Carrying Weight 6
Warranty 4
Display Quality 3

8. Step 4: Developing AlternativesStep 4: Developing Alternatives
• Identifying viable alternativesIdentifying viable alternatives
 Alternatives are listed (without evaluation) that canAlternatives are listed (without evaluation) that can
resolve the problem.resolve the problem.
Step 5: Analyzing AlternativesStep 5: Analyzing Alternatives
• Appraising each alternative’s strengths andAppraising each alternative’s strengths and
weaknessesweaknesses
 An alternative’s appraisal is based on its ability toAn 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.

9. Exhibit 6–3Exhibit 6–3 Assessed Values of Laptop ComputersAssessed Values of Laptop Computers
Using Decision CriteriaUsing Decision Criteria

10. Step 6: Selecting an AlternativeStep 6: Selecting an Alternative
• Choosing the best alternativeChoosing the best alternative
 The alternative with the highest total weight isThe alternative with the highest total weight is
chosen.chosen.
Step 7: Implementing the AlternativeStep 7: Implementing the Alternative
• Putting the chosen alternative into action.Putting the chosen alternative into action.
 Conveying the decision to and gaining commitmentConveying the decision to and gaining commitment
from those who will carry out the decision.from those who will carry out the decision.

11. Exhibit 6–4Exhibit 6–4 Evaluation of Laptop AlternativesEvaluation of Laptop Alternatives
Against Weighted CriteriaAgainst Weighted Criteria

12. Step 8: Evaluating the Decision’sStep 8: Evaluating the Decision’s
EffectivenessEffectiveness
• The soundness of the decision is judged by itsThe soundness of the decision is judged by its
outcomes.outcomes.
 How effectively was the problem resolved byHow 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?

13. Exhibit 6–5Exhibit 6–5 Decisions in the Management FunctionsDecisions in the Management Functions

14. Assumptions of RationalityAssumptions of Rationality

15. Types of Problems and DecisionsTypes of Problems and Decisions
• Structured ProblemsStructured Problems
 Involve goals that clear.Involve goals that clear.
 Are familiar (have occurred before).Are familiar (have occurred before).
 Are easily and completely definedAre easily and completely defined—infor—information aboutmation about
the problem is available and complete.the problem is available and complete.
• Programmed DecisionProgrammed Decision
 A repetitive decision that can be handled by a routineA repetitive decision that can be handled by a routine
approach.approach.

16. Types of Programmed DecisionsTypes of Programmed Decisions
• PolicyPolicy
 A general guideline for making a decision about aA general guideline for making a decision about a
structured problem.structured problem.
• ProcedureProcedure
 A series of interrelated steps that a manager can useA 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.
• RuleRule
 An explicit statement that limits what a manager orAn explicit statement that limits what a manager or
employee can or cannot do.employee can or cannot do.

17. Policy, Procedure, and Rule ExamplesPolicy, Procedure, and Rule Examples
• PolicyPolicy
 Accept all customer-returned merchandise.Accept all customer-returned merchandise.
• ProcedureProcedure
 Follow all steps for completing merchandise returnFollow all steps for completing merchandise return
documentation.documentation.
• RulesRules
 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.

18. Problems and Decisions (cont’d)Problems and Decisions (cont’d)
• Unstructured ProblemsUnstructured Problems
 Problems that are new or unusual and for whichProblems 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 DecisionsNonprogrammed Decisions
 Decisions that are unique and nonrecurring.Decisions that are unique and nonrecurring.
 Decisions that generate unique responses.Decisions that generate unique responses.