4

Chapte
r

Foundation
s
of Decision
Making
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Learning Outcomes
Describe the decision-making process.
Explain the three approaches
managers can use to make decisions.
Describe the types of decisions and
decision-making conditions managers
face.

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Learning Outcomes (cont.)

Discuss group decision-making.
Discuss contemporary issues in
managerial decision making.

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4.1 Describe the

decision-making
process.

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How Do Managers Make

Decisions?

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Identifying a Decision
Problem
Problem:
a discrepancy between an existing and
a desired state of affairs.

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Identifying Decision
Criteria
Relevant Factors:
Price
Model
Size
Manufacturer
Options
Repair record

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Weighting Criteria
1. Most important
criterion
assigned a
weight of 10.
2. Other weights
assigned
against this
standard.

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Developing Alternatives

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Analyzing Alternatives

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Selecting the Best

Alternative

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Implementing the
Decision
Decision implementation:
putting a decision into action.

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Evaluating the Decision

Appraising the outcome of the
decision:
Was the problem resolved?

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Common Errors

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4.2 Explain the three

approaches
managers can use to
make decisions.

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Three Approaches Used to

Make Decisions: Types of
Decisions

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Rational Model
Rational decision making:
choices that are consistent and valuemaximizing within specified constraints.

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Bounded Rationality
Satisfice
Escalation of
commitment

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Intuitive Decision Making

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4.3 Describe the types

of decisions and
decision-making
conditions that
managers face.

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Types of Problems
1. Structured problem
2. Unstructured problem

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Types of Decisions
Programmed:
Repetitive decisions that can be
handled using a routine approach.

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Types of Decisions (cont.)

Nonprogrammed:
Repetitive decisions that can be
handled using a routine approach

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Problems, Decision Types,

and Organizational Levels

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Decision-Making
Conditions
Certainty
Risk
Uncertainty

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4.4
Discuss group
decision-making.

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How Do Groups Make

Decisions?
Decisions are often made by groups
representing the people who will be most
affected by those decisions.
Committees
Task forces
Review panels
Work teams
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Advantages of Group
Decision Making

More complete information

Diversity of experiences/perspectives
More alternatives generated
Increased acceptance of solution
Increased legitimacy

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Disadvantages of Group
Decision Making

Time-consuming
Minority domination
Ambiguous responsibility
Pressures to conform

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Groupthink
When a group exerts extensive pressure
on an individual to withhold his or her
different views in order to appear to be
in agreement.
What it does
How it occurs
How to minimize it

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When Are Groups Most

Effective?
Individual
Faster decision
making
More efficient use
of work hours

Group
More accurate
decisions
More creative
More
heterogeneous
representation
Greater acceptance
of final solution

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Improving Group Decision

Making
Make group decisions more
creative by:

1. Brainstorming
2. The nominal group technique
3. Electronic meetings

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4.5 Discuss

contemporary
issues in
managerial decision
making.

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Contemporary Issues
National culture influences the way
decisions are made and the degree of
risk involved.

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Contemporary Issues
Creativity lets the decision maker:
Understand a problem more fully
See problems others cant
Identify all viable alternatives

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Contemporary Issues
Design thinking:
approaching
management
problems as
designers approach
design problems

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Contemporary Issues
Big data
The vast amounts of quantifiable
information that can be analyzed by
highly sophisticated data processing.

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