This document discusses different models and approaches to decision making. It describes programmed versus non-programmed decisions, and how decision making involves varying degrees of certainty and risk. The ideal rational model is contrasted with how managers actually make decisions in practice, taking into account human limitations and satisficing. Different decision making steps and styles are outlined. The political model is presented as resembling real-world environments where diverse interests must be balanced. Factors that can lead to bad decisions are also listed.

1. Lecture 5
Decision Making

2. Types of Decisions
and Problems
Decision making is
the process of
identifying
opportunities
A decision is a
choice made
from available
alternatives
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3. Programmed and Nonprogrammed
Decisions
Programmed Decisions
– Recurring problems
– Apply rule
Nonprogrammed Decisions
– Unique situations
– Poorly defined
– Unstructured
– Important consequences
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4. Facing Certainty
and Uncertainty
• Difference between programmed and
unprogrammed decisions
• Uncertainty depends on the amount and
value of information available
• Certainty – situation in which all information
is fully available
• Risk – the future outcomes associated with
an alternative are subject to chance
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5. 9.1 Conditions That Affect the Possibility
of Decision Failure
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6. Ambiguity and Conflict
• Ambiguity makes decisions difficult
– The goals and the problem are unclear
• Wicked Decisions involve conflict over goals and
have changing circumstances, fuzzy information,
and unclear links
– There is often no “right” answer
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7. The Ideal, Rational Model
Rational economic assumptions drive decisions
 Operates to accomplish established goals, problem
is defined
 Decision maker strives for information and
certainty, alternatives evaluated
 Criteria for evaluating alternatives is known, select
alternative with maximum benefit
 Decision maker is rationale and uses logic
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8. How Managers Actually
Make Decisions
• Administrative/descriptive approach
– How managers really make decisions
– Recognize human and environmental limitations
• Bounded rationality – people have limits or
boundaries
• Satisficing – decision makers choose the first
solution that satisfies minimal decision criteria
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9. Steps in the Administrative Model
• Goals are often vague
• Rational procedures are not always used
• Managers’ searches for alternatives are limited
• Most managers settle for satisficing
Intuition – quick apprehension of situation based
on practice and experience
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10. Decision-Making Model: Political
• Decisions involve managers with diverse interests
• Managers must engage in coalition building
– Informal alliance to support specific goal
• Without a coalition, powerful groups can derail
the decision-making process
• Political model resembles the real environment
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11. 9.2 Comparing the Models
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12. Decision-Making Steps
1. Recognition of Decision Requirement – identify
problem or opportunity
2. Diagnosis and Analysis – analyze underlying causal
factors
3. Develop Alternatives – define feasible alternatives
4. Selection of Desired Alternative – alternative with most
desirable outcome
5. Implementation of Chosen Alternative – use of
management persuasive abilities to execute
6. Evaluation and Feedback – gather information about
effectiveness
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13. 9.3 Six Steps in the Managerial Decision-
Making Process
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14. 9.4 Decision Alternatives
with Different Levels of Risk
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15. 9.5 Personal Decision Framework
Many managers depend on their own
decision-making style to make decisions
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16. Personal Decision Framework
• Directive style – people who prefer simple, clear-cut
solutions to problems
• Analytic style – managers prefer complex
solutions based on a lot of data
• Conceptual style – managers like a broad amount
of information
• Behavioral style – managers with a deep concern
for others
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17. Why Do Managers Make
Bad Decisions?
 Being influenced by initial impressions
 Justifying past decisions
 Seeing what you want to see
 Perpetuating the status quo
 Being influenced by problem framing
 Overconfidence
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18. Innovative Group
Decision Making
• Start with brainstorming – spontaneous
suggestions in a group
• Engage in rigorous debate – use divergent points
of view to focus problems
• Avoid groupthink – acknowledge disagreement as
value instead of blind agreement
• Act with speed – some decisions have to be made
incredibly quickly
• Don’t ignore crisis – managers should expect and
plan for crises (with speed)
• Know when to bail – good managers must know
when to pull the plug!
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