The document summarizes the steps of rational decision making and different models of decision making. It outlines the six steps of rational decision making as define the problem, identify decision criteria, weight the criteria, generate alternatives, evaluate each alternative, and select the optimal decision. It also discusses limitations of rational decision making and introduces bounded rationality, intuitive decision making, and creative decision making as alternative models. Managers must choose the appropriate decision making method based on whether goals are clear, time pressure, and need to generate new solutions.

1. Chapter5
PlanningandDecisionMaking

2. MANA3335
typesof
decisionmaking
2

3. MANA3335
Rational Decision Making: A systematic process of defining problems,
evaluating alternatives, and choosing optimal solutions.
3
Define the problem
Identify decision criteria
Weight the criteria
Generate alternative courses of action
Evaluate each alternative
Compute the optimal decision
1
2
3
4
5
6

4. MANA3335
4
Stepstorationaldecisionmaking
Define the problem1
• A problem exists when there is a gap between a desired state and an
existing state
• To make decisions about problems, managers must…
• Be aware of the gap.
• Be motivated to reduce the gap.
• Have the knowledge, skills, abilities, and resources to fix the problem.
One of the most critical steps! Incorrectly defining the
problem or identifying the wrong problem is a frequent cause
of poor decision making.

5. MANA3335
5
Stepstorationaldecisionmaking
Identify decision criteria2
• Standards used to guide judgments and
decisions.
• The more criteria a potential solution meets,
the better that solution should be.
Decision makers must determine the
relevant criteria that will influence the
situation.

6. MANA3335
6
Stepstorationaldecisionmaking
Weight the criteria3
• Absolute comparisons
• Each criterion is compared to a standard or ranked on its own merits
• Relative comparisons
• Each criterion is compared directly to every other criterion
In order to prioritize and balance the criteria,
they must be given weightings:
rarely are all criteria of equal importance to the decision.

7. MANA3335
7
Stepstorationaldecisionmaking
Generate alternative courses of action4
• In general, the idea is to generate as many
alternatives as possible.
Listing (not assessing) all possible ways
in which the problem can be solved.

8. MANA3335
Stepstorationaldecisionmaking
8
Evaluate each alternative5
• Each alternative is systematically evaluated against each criterion.
• This step can take much longer and be more expensive than other
steps in the process.
Rate each alternative upon each criterion.
Critically analyze and evaluate each alternative against
the identified and weighted criteria.

9. MANA3335
9
Stepstorationaldecisionmaking
Compute the optimal decision6
• Determine the value of each potential alternative
• Sum of (rating for each criterion x weight for
each criterion) for all criterion that are relevant
for evaluating a potential solution alternative
Ranking the rated alternatives and selecting
the alternative with the highest score.

10. MANA3335
10
Stepstorationaldecisionmaking
Define the problem1
2
3
4
5
6
I’m craving ice cream and nothing else will do.

11. MANA3335
11
Stepstorationaldecisionmaking
Define the problem
Identify decision criteria
1
2
3
4
5
6
It has to be sweet, chocolate is a must, and I want
something unique.
Flavor Sweet Chocolate Unique
I’m craving ice cream and nothing else will do.

12. MANA3335
12
Stepstorationaldecisionmaking
Define the problem
Identify decision criteria
Weight the criteria
1
2
3
4
5
6
It has to be sweet, chocolate is a must, and I want
something unique.
Flavor Sweet Chocolate Unique
weights 5 4 2
On a scale from 1 to 5 the importance of each criteria is…
I’m craving ice cream and nothing else will do.

13. MANA3335
Stepstorationaldecisionmaking
13
Define the problem
Identify decision criteria
Weight the criteria
1
2
3
4
5
6
It has to be sweet, chocolate is a must, and I want
something unique.
Flavor Sweet Chocolate Unique
weights 5 4 2
Marshmallow with
choc sprinkles
Mint Choc Chip
Chocolate
On a scale from 1 to 5 the importance of each criteria is…
I’m craving ice cream and nothing else will do.
Generate alternative courses of action

14. MANA3335
Stepstorationaldecisionmaking
14
Define the problem
Identify decision criteria
Weight the criteria
Generate alternative courses of action
Evaluate each alternative
1
2
3
4
5
6
It has to be sweet, chocolate is a must, and I want
something unique.
Flavor Sweet Chocolate Unique
weights 5 4 2
Marshmallow with
choc sprinkles
5 1 4
Mint Choc Chip 5 3 3
Chocolate 5 5 1
On a scale from 1 to 5 the importance of each criteria is…
I’m craving ice cream and nothing else will do.

15. MANA3335
Stepstorationaldecisionmaking
15
Define the problem
Identify decision criteria
Weight the criteria
Generate alternative courses of action
Evaluate each alternative
Compute the optimal decision
1
2
3
4
5
6
It has to be sweet, chocolate is a must, and I want
something unique.
Flavor Sweet Chocolate Unique Weighted
Score
Ranking
weights 5 4 2
Marshmallow
with choc
sprinkles
5 1 4 37 3
Mint Choc
Chip
5 3 3 43 2
Chocolate 5 5 1 47 1
On a scale from 1 to 5 the importance of each criteria is…
I’m craving ice cream and nothing else will do.

16. MANA3335
Dodecisionmakersactually
makedecisionsthisway?
16

17. MANA3335
Limitstorationaldecisionmaking
• In theory, maximize decisions by choosing the optimal solution.
• This doesn’t always happen.
• Limited resources, attention, memory, and expertise
• Flaws of Rational Decision Making Model
• Assumes that people understand what the decision to be made is
• Assumes that people know all their available choices
• Assumes the people have no perceptual biases
• Assumes that people want to make optimal decisions
17

18. MANA3335
Boundedrationalitymodel
• Making a “good-enough” decision
• Recognizes limits on ability to process information
• Decision makers knowingly limit their options
• Choose the best alternative without conducting an exhaustive search for
alternatives
• Satisficing may occur which refers to accepting the first alternative that meets
minimum criteria
18

19. MANA3335
Intuitivedecisionmaking
• Within a given situation, experts making decisions scan the environment for cues
to recognize patterns.
• Once a pattern is recognized, they can plan a potential course of action based on
their prior experience.
19

20. MANA3335
Creativedecisionmaking
20
Step 1
Problem
Recognition
Step 2
Immersion
Step 3
Incubation
Step 4
Illumination
Step 5
Verification
&
Application

21. MANA3335
Choosingadecisionmakingmethod
21
Model Use This Model When:
Rational
 Information on alternatives can be gathered and quantified.
 The decision is important.
 You are trying to maximize your outcome.
Bounded
Rationality
 The minimum criteria are clear.
 You do not have or you are not willing to invest much time to
making the decision.
 You are not trying to maximize your outcome.
Intuitive
 Goals are unclear.
 There is time pressure and analysis paralysis would be costly.
 You have experience with the problem.
Creative
 Solutions to the problem are not clear.
 New solutions need to be generated.
 You have time to immerse yourself in the issues.

22. MANA3335
Exam1
22
Topics:
– Management (Ch1)
– Organizational Environments and Cultures (Ch3)
– Organizational Strategy (Ch6)
– Planning and Decision Making (Ch5)
• 100 points
• 50 multiple choice questions (2 points each)
– Bring a light blue, GENERAL PURPOSE NCS ANSWER SHEET form no. 4521
– Arrive on time
• Will cover ALL lecture content as well as content in assigned reading

23. MANA3335
GOODLUCK!
STUDY!!
23