This document discusses managerial decision making. It begins by stating that all managers make decisions that can vary in impact and consequences. A 7-step decision making process is then outlined: 1) Identifying problems/opportunities 2) Setting objectives 3) Generating alternatives 4) Evaluating alternatives 5) Reaching a decision 6) Implementing strategies 7) Monitoring outcomes. Two types of decisions are also defined: programmed decisions for routine matters and non-programmed for unique situations. Finally, two models of decision making are introduced: rational/economic and behavioral.

1. Decision Making
QSB2413 Management Science

2. Everything Managers Do involves
Making Decision

3. Construction World
• In construction industry, managers are making
decisions anytime and every where.
• How to make a good decision in such a
frequent changing industry?
• What are the basic requirements /
characteristics needed by the managers in
making the decision effectively?

4. Introduction
• All managers make decisions, the kinds of
decisions required will vary with their level of
authority and type of assignment.
• Some decisions are routine with relatively minor
consequences, others are critical and can have
major impact on the organization.
• Poor decisions can be disastrous to a department
and an organization.
• Good decisions facilitate the smooth flow of work
and enable an organization to achieve its goals.

5. Managerial Decision Making
• Decision making is not easy.
• How to make a good decision?
• How to improve the effectiveness in making
decisions?
• Is the decision made by a manager will be
always right?

6. In this chapter, we will examine the
concepts and models that focus on
the demands of managerial
decision making.

7. Managerial Decision Making
• Managers may not always make the right
decisions, but they can use their knowledge of
appropriate decision-making processes to
increase their probability of success. (past
experiences – decision-making skills)
• How managers in organizations make decisions?
(1) Discuss the 7 steps in the decision-making
process.
(2) Examine 2 models of decision behavior.

8. Decision Making
• Decision making is the process by which
managers at all levels in an organization
identify and resolve problems or capitalize on
opportunities.

9. Decision Making
• Good decision making begins with recognizing
specific problems or potential opportunities
and concludes with assessing the results of
action taken to solve those problems or
capitalize on those opportunities.
• A problem occurs when some aspect of
organizational performance (profits, market
share, output productivity, quality of output,
worker satisfaction) is undesirable.

10. Decision Making
• When unsatisfactory results have occurred, the
successful manager will both recognize the
problem and find a solution for it.
• Examples of decision made in response to some
problems:-
(1) In 2014, over 34 million vehicles in United States
and many million more worldwide are involved
in Takata airbag recalls. (defective airbags)
(2) In 2016, Samsung decided to stop selling Galaxy
Note7 and will replace the current device with
new one. (battery cell issue)

11. Decision Making
• Managers do not always make decisions in
response to problem situations. Often decisions
are made because an opportunity arises.
• An opportunity is any situation that has potential
to provide additional beneficial outcomes.
• Recognize the potential benefits and then
embark upon a course of action to achieve them.
• Example, not long after Apple introduced it
revolutionary iPhone, Samsung and Motorola and
a host of other manufacturers came out with
their own versions of device.

12. Decision-Making Process
• An effective decision-making process includes the
seven steps shown below:-
(1) Identifying opportunities and diagnosing
problems
(2) Identifying objectives
(3) Generating alternatives
(4) Evaluating alternatives
(5) Reaching decisions
(6) Choosing implementation strategies
(7) Monitoring and evaluating

13. (1) Identifying Opportunities and
Diagnosing Problems
• The first step in the decision-making process is
the clear identification of opportunities or the
diagnosis of problems that required a decision.
• Discrepancies between the actual and desired
conditions alert a manager to a potential
opportunity or problem.
• Managers must obtain accurate and reliable
information in order to assess the opportunities
and problems accurately.

14. (1) Identifying Opportunities and
Diagnosing Problems
• Poor-quality or inaccurate information can
waste time and lead a manager to overlook a
situation’s underlying causes.
• Example, some companies spend millions
dollars each year on market research to
identify trends in consumer preferences and
buying decisions.

15. (2) Identifying Objectives
• Objectives (targets, standards) reflect the results
the organization wants to attain and will guide
the decision maker in selecting the appropriate
course of action.
• Objectives can be measured along a variety of
dimensions. For example, profit objectives are
measured in monetary units, productivity
objectives may be measured in units of output
per labor hour, and quality objectives may be
measured in defects per million units produced.

16. (2) Identifying Objectives
• Objectives can be expressed for long spans of
time (years or decades) or for short spans of
time (hours, days or months).
• Long-range objectives usually direct much of
the strategic decision making of the
organization, whereas short-range objectives
usually guide operational decision making.

17. (3) Generating Alternatives
• Once an opportunity has been identified or a
problem diagnosed correctly, a manager
develops various ways to solve the problem
and achieve objectives.
• This step involves generating alternatives,
which are strategies that might be
implemented in the decision-making situation.
• Creativity and imagination are often required
in this step.

18. (3) Generating Alternatives
• In generating alternatives, the manger must
keep in mind the goals and objectives that he
or she is trying to achieve.
• Several different alternatives will emerge. The
manager increases the likelihood that many
good alternative courses of action will be
considered and evaluated.

19. (3) Generating Alternatives
• Example, the never-ending burger wars,
Burger King routinely considers many
alternative additions to its menu to combat
rival MacDonald’s menu changes.
• Managers may rely on their training, personal
experience, education and situational
knowledge to generate alternatives (standard
or innovative and unique).

20. (4) Evaluating Alternatives
• Determine the value or adequacy of the
alternatives generated.
• Which solution is the best?
• Ability to assess the value or relative advantages
and disadvantages of each alternative under
consideration.
• For example, the manager might ask, “Will this
alternative help achieve our objectives? What is
the anticipated cost of this alternative? What are
the uncertainties and risks associated with it?”

21. (5) Reaching Decisions
• Consider all the alternatives and select the
one that best solves the problem.
• The best decision is based on careful
judgements, making a good decision involves
carefully examining all the facts, determining
whether sufficient information is available and
finally selecting the best alternative.

22. (6) Choosing Implementation
Strategies
• When decisions involve taking action or
making changes, choosing ways to put these
actions or changes into effect becomes
essential managerial task. (implementation)
• The keys to effective implementation are:-
(1) Sensitivity to those who will be affected by
the decisions
(2) Proper planning and consideration of the
resources necessary to carry out the decision

23. (6) Choosing Implementation
Strategies
• Those who will be affected by the decision must
understand the choice and why it was made.
• The decision must be accepted and supported by
the people who are responsible for its
implementation.
• Involves employees in the early stages of the
decision process so that they will be motivated
and committed to its successful implementation.

24. (6) Choosing Implementation
Strategies
• The planning process is a key to effective
implementation.
• Without proper planning, the decision may
not be accepted by others in the organization,
cost overruns may occur, needed resources
may not be available and the objectives may
not be accomplished on schedule.

25. (7) Monitoring and Evaluation
Feedback
• No decision-making process is complete until a
decision’s impact has been evaluated.
• Managers must observe a decision’s impact as
objectively as possible and take further corrective
action if necessary.
• Monitoring the decision is useful whether the
feedback is positive or negative.
• Positive feedback indicates that the decision is
working and should be continued, and perhaps
applied elsewhere in the organization.

26. (7) Monitoring and Evaluation
Feedback
• Negative feedback indicates either that the
implementation requires more time,
resources, effort, or planning than originally
thought or that the decision was a poor one or
needs to be re-examined.
• Evaluation of past decisions as well as other
information should drive future decision
making as part of an ongoing decision-making
feedback loop.

27. Classifying Decision Situations

28. Classifications of Managerial Decisions
• Herbert Simon, a management scholar and
prolific researcher in the area of decision
making, proposed that decisions are either
programmed or non-programmed.

29. Types of Decisions
Programmed Decision
• When the decision situation is one that has
occurred in the past and the response is routine.
(SOP – return those defective materials to
suppliers once detected)
Non-programmed Decision
• When a decision is made in response to a
situation that is unique, unstructured or poorly
defined. (steel price increased greatly due to
Japan’s earthquake)

30. Models of Decision Making
• Two commonly used decision-making
models:-
(1) Rational- economic model
(2) Behavioral model
Note: Refer to the Two Contrasting Decision
Models (uploaded in FB group).

31. To be continued …