The document outlines the 8 step decision making process managers follow which includes: 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. It also discusses types of decisions, decision making styles, biases that can influence decisions, and quantitative tools that can aid the decision making process such as decision trees, payoff matrices, and break even analysis.

1. Source: Management by Stephen Robbins and Mary
Coulter, 10th Edition

2. The Decision Making Process
 Decision making is the essence of management.
Mangers, when they plan, organize, lead, and control,
make decisions.
 Decisions- a choice from two or more alternatives
 To make a decision, a manager must follow a process to
be more effective and efficient.

3. 8 Steps of Decision Making Process
1. Identification of a Problem
 Problem- an obstacle that makes achieving a desired
goal or purpose difficult
 Gathering of information
 Root cause analysis- separating the symptoms from
the “real problem”

4. 8 Steps of Decision Making Process
2. Indentifying Decision Criteria- identifying possible
resolution to the problem. Must consider the pros
and cons of each criteria based on what is needed.

5. 8 Steps of Decision Making Process
3. Allocating Weights to the Criteria- each possible
solution must have features or cons and pros. A
manager should score the criteria according to the
need of the situation.

6. 8 Steps of Decision Making Process
5. Developing Alternatives- as manager it is advised you
select a viable alternative that could also resolve the
problem. At this point we are just listing not
evaluating the alternatives.

7. 8 Steps of Decision Making Process
6. Analyzing Alternatives- each alternative is evaluated
by using the criteria created in step 2.

8. 8 Steps of Decision Making Process
7. Selecting an Alternative-choosing the best
alternative or the one that scored the highest total in
step 5.

9. 8 Steps of Decision Making Process
7. Implementing the Alternative- putting the decision
into action by conveying into those affected and
getting their commitment to it.

10. 8 Steps of Decision Making Process
8. Evaluating Decision Effectiveness- evaluating the
outcome or result of the decision to see of the
problem was resolved. If the problem still persists,
the managers should re-assess the problem and start
over again.

11. Making Decisions
 Rational Decision Making – a type of decision making
in which choices are logical and consistent and
maximizes value. Mangers have to be objective as well.
 Assumption of Rationality- the decision is made to the
best interest of the organization. These decisions are
not realistic.

12. Making Decisions
 Bounded Rationality-decisions making that’s rational
but limited (bounded) by an individuals ability to
process information.
 Satisfice- accept solution that is good enough.
 Escalation of Commitment- an increase in
commitment to the previous decision despite of high
probability of failure or mistake.

13. Making Decisions
 The Role of Intuition- managers use their intuition in
making decisions. Most of this managers have long
managerial experiences already.
 Intuitive Decision Making- making decision on the
basis of experience, feelings, and accumulated
judgment.
 Values/Ethics based -Experience Based
 Affect initiated (Emotions) -Cognitive Based
 Subconscious mental processing

14. Types of Decisions
 Structured Problems and Programmed decisions- a
straightforward, familiar, and easily defined problem
that can be solved by a repetitive decision that can be
handled by a routine approach
 Procedure-a series of sequential steps used to respond
to a well-structured problem.
 Rule-an explicit statement that tells managers what
can or can’t be done.
 Policy-a guideline for making decisions.

15. Types of Decisions
 Unstructured Problems and Non-Programmed
decisions-a problem that is new or unusual and for
which information is ambiguous or incomplete usually
resolved by a unique and non recurring decision that
requires customer made solution.

16. Decision Making Conditions
 Certainty- a situation in which a decision maker can
make accurate decision because all outcomes are
known.
 Risk-a situation in which the decision maker is able to
estimate the likelihood of a certain outcome.
 Uncertainty-a situation in which a decision maker has
neither certainty nor reasonable probability estimates
available

17. Uncertainty
 Maximax- used by optimistic managers. Maximizing
of maximum payoff
 Maximin-somehow a pessimist manager. Maximizing
the minimum payoff.
 Minimax- minimize the maximum regret.

18. Decision Making Styles
 Linear Thinking Style- a decision characterized by a
person’s reference for using external data and facts and
processing this information through rational and
logical thinking.
 Non-Linear Thinking Style- a decision style
characterized by a person’s preference for the internal
sources of information and processing this
information with internal insights, feeling, and
hunches.

19. Biases and Errors
 Overconfidence Bias-too much confidence on oneself
or knowledge and resources.
 Immediate gratification-the want of immediate
rewards
 Anchoring Effect-fixate their decision on an initial
information as a starting point.
 Selective Perception Bias-selective organization and
perception of events
 Confirmation Bias-reaffirms their past choices and
discount information that contradicts past judgment

20. Biases and Errors
 Framing Bias- selecting and highlighting certain aspects of
a situation while excluding others.
 Availability bias-tend to remember events that are most
recent and vivid in memory. Distorts ability to be objective.
 Representation Bias-similarity to previous events
 Randomness Bias-creation meaning out of random events.
 Sunk Costs Errors-forgetting current choices can’t correct
the past.
 Self Serve Bias-credit self for success and blame others for
failure
 Hindsight Bias-false belief that they could have predicted
the outcome

21. Quantitative Decision Making Aids
 Pay off Matrix

22. Quantitative Decision Making Aids
 Decision Tree-are a useful way to analyze hiring,
marketing, investment, equipment purchase, pricing,
and similar decisions that involve progression of
decisions.

23. Quantitative Decision Making Aids
 Break Evan Analysis – used to make profit projections

24. Quantitative Decision Making Aids

25. Quantitative Decision Making Aids
 Ratio Analysis
 Current Ratio- company’s current asset vs current
liabilities. The answer should be =>2:1
 Acid-Test Ration- same as current only that the
inventory is reduced based on the dollar value. Ratio
should be 1:1

28. Quantitative Decision Making Aids
 Linear Programming- a mathematical technique used
to resolve allocation problems. Maybe used in
transportation, advertising budget, staffing, etc.
 Queuing theory- a technique that balances the cost of
having a waiting line against the cost of service to
maintain that line.

29. Quantitative Decision Making Aids
 Economic Order Quantity- is a technique used for
lowbalancing purchase, ordering, carrying, stock out
costs to derive the optimum quantity for a purchase
order.