Copyright ©2015 Pearson Education, Inc.4-1 Chapter 3 Foundations of Decision Making

Copyright ©2015 Pearson Education, Inc. 4-1

Chapter3Foundationsof Decision Making

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.


Learning Outcomes (cont.)

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

decision making.



4.1Describe the decision-making process.

How Do Managers Make Decisions?


Identifying a Decision Problem

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


Identifying Decision Criteria

Relevant Factors:• Price• Model• Size• Manufacturer• Options• Repair record


Weighting Criteria

1. Most important criterion assigned a weight of 10.

2. Other weights assigned against this standard.


Developing Alternatives

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Analyzing Alternatives


Selecting the Best Alternative

Implementing the Decision

Decision implementation:putting a decision into action.


Evaluating the Decision

Appraising the outcome of the decision:

Was the problem resolved?


Common Errors



4.2Explain the three approaches managers can use to make decisions.

Three Approaches Used to Make Decisions: Types of Decisions

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Rational Model

Rational decision making:choices that are consistent and value-maximizing within specified constraints.


Bounded Rationality

Satisfice

Escalation of commitment


Intuitive Decision Making



4.3 Describe the types of decisions and decision-making conditions that managers face.

Types of Problems

1. Structured problem2. Unstructured problem


Types of Decisions

Programmed:Repetitive decisions that can be handled

using a routine approach.


Types of Decisions (cont.)

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


Problems, Decision Types, and Organizational Levels


Decision-Making Conditions

• Certainty• Risk• Uncertainty



4.4Discuss group decision-making.

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


Advantages of Group Decision Making

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


Disadvantages of Group Decision Making

• Time-consuming• Minority domination• Ambiguous responsibility• Pressures to conform


GroupthinkWhen 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


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


Improving Group Decision MakingMake group decisions more creative by:

1. Brainstorming2. The nominal group technique3. Electronic meetings



4.5 Discuss contemporary issues in managerial decision making.

Contemporary Issues

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


Contemporary Issues

Creativity lets the decision maker:

• Understand a problem more fully• See problems others can’t• Identify all viable alternatives


Contemporary Issues

Design thinking:approaching management problems as designers approach design problems


Contemporary Issues

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


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Copyright ©2015 Pearson Education, Inc.4-1 Chapter 3 Foundations of Decision Making