Decision making is the process by which managers analyze opportunities and threats, generate and evaluate alternative courses of action, and choose among alternatives to pursue specific organizational goals. There are two main types of decisions - programmed decisions that follow established procedures and non-programmed decisions that are more complex and unpredictable. The six steps of effective decision making are to recognize the need for a decision, generate alternatives, assess those alternatives, choose among them, implement the choice, and learn from feedback.

1. 5-1
DECISION MAKING PROCESS

2. Decision Making
 Making effective decisions, as well as recognizing when a bad
decision has been made and quickly responding to mistakes, is a key
ingredient in organizational effectiveness.
 Decision making is the most basic and fundamental of all
managerial activities.

3. Definition and nature of decision making
Decision making:
Process by which managers respond to opportunities and threats by
analysing options, and making determinations about specific
organizational goals and courses of action
• Decision making is the act of choosing one alternative from among a set
of alternatives.

4. Types of Decision Making
• Programmed decision: Routine, virtually automatic
decision making that follows established rules or
guidelines
• Managers have made these decisions many times
before
• Define rules or guidelines to follow based on
experience with past decisions
• Little ambiguity involved

5. Types of Decision Making
• Non-programmed decisions: Nonroutine decision
making that occurs in response to unusual,
unpredictable opportunities and threats
• In the absence of decision rules managers may rely
on their intuition

6. Decision Making
Intuition
• Feelings, beliefs, and
hunches that come
readily to mind
• Require little effort and
information gathering
• Result in on-the-spot
decisions
Reasoned judgment
• Decisions that take
time and effort
• Result from careful
information gathering,
generation of
alternatives, and
evaluation of
alternatives

7. Six Steps in Decision Making

8. Decision Making Steps
• Step 1 - Recognize need for a decision
• Sparked by stimuli such as changes in the
organizational environment
• Managers who actively pursue opportunities to use
these competencies create the need to make
decisions

9. Decision Making Steps
• Step 2 - Generate alternatives
• Managers must develop feasible alternative courses
of action
• Failure to properly generate and consider different
alternatives sometimes leads to bad decisions
• It is hard to develop creative alternative solutions

10. Decision Making Steps
• Step 3 - Assess alternatives
• Key to a good assessment of the alternatives
• Define the opportunity or threat exactly
• Specify the criteria that should influence the selection
of alternatives

11. Decision Making Steps
• Step 4 - Choose among alternatives
• Rank the various alternatives and make a decision
• There is a tendency for managers to ignore critical
information, even when available

12. Decision Making Steps
• Step 5 - Implement chosen alternative
• Managers must now implement the selected course
of action
• Implementing the chosen course of action would
require making subsequent decisions
• Managers should take up the responsibility for
making the follow-up decisions necessary to achieve
the goal

13. Decision Making Steps
• Step 6 - Learn from feedback
• Compare what happened to what was expected to
happen
• Explore why any expectations for the decision were
not met
• Derive guidelines that will help in future decision
making