Learning Objectives

After completing this chapter,

students should be able to:
Discuss the nature of the decisionmaking process
Describe the rational of decisionmaking
Describe the participative approach
to decision-making

DEFINITIONS OF
DECISION MAKING

Definition of Decision
Making
The process by which a course of action is selected as

the way to deal with a specific problem

The process through which managers and leaders
identify and resolve problems and capitalize
on opportunities.
Problem
A condition that occurs when some aspect of
organizational performance is less than desirable.
Opportunity
Any situation that has the potential to provide
additional beneficial outcomes.

TYPES OF DECISION
MAKING
Programmed
Decisions
Non-Programmed
Decisions

Types Of Decision
Making
Programmed Decisions
It is structured. A repetitive decision that can

be handled by a routine approach.

Routine, virtually automatic decision making
that follows established rules or guidelines
A decision that is fairly structured or recurs with
some frequency (or both)
Example: Rules & regulations
i.e. when storage shelves are three quarter
empty, order more copy paper
i.e. whenever student enrollment increase by
40% hire a new lecturer

Types Of Decision
Making
Non-Programmed Decisions
Deals with unique, unusual or exceptional problem.

It is unstructured and requires higher level management

Non-routine decision making that occurs in response to
unusual unpredictable opportunities and threat
A decision that is relatively unstructured and occurs
much less often than a Programmed Decision
i.e. enter a new market, expand internationally,
managing a rescue work for a plane crash
E.g.: Governments decision to prevent H1N1 by stopped
all the travelling outside country.
Depend heavily on judgment and intuition
Judgment develop opinion based on the
information on hand
Intuition make decision based on past experience
and immediate feeling about information on hand

Responses to Decision
Situations
Programmed
Decisions

Nonprogrammed
Decisions

Alternatives are familiar

to decision makers.

Alternatives are not

familiar to decision
makers.

Responses are routine.

Responses require
creativity.

UNDER DECISION
MAKING
Condition Under
Certainty
Condition Under Risk
Condition Under
Uncertainty

Types of Conditions Under

Decision Making
Condition Under Certainty

Decision maker know exactly what will happen and able

to predict the outcome precisely

E.g.: If you put RM1000 in bank under fixed deposit or a
year at 5% interest, then interest earned will be RM50 after
1 year

Condition Under Risk

Refer to future conditions that are not always known

in advance
Some information is available, but it is not enough to
answer all questions about the outcomes

Condition Under Uncertainty

Situation in which the individual cannot even assign

probabilities to each of the possible states of nature and

assumption is made that the individual has no information
or intuitive judgment.

DEFINITION OF
RATIONAL DECISION
MAKING

Definition of Rational
Decision Making
A systematic process of

defining problems, evaluating

alternatives, and choosing
optimal solutions

THE RATIONAL
MODEL OF DECISION
MAKING
Investigate the situation
Develop alternatives
Evaluate alternative and select
the best one
Implement and monitor

The Rational Model of

Decision Making
The Rational Model of Decision Making has 4 steps:
Investigate the situation

Define problem
Diagnose causes
Identify decision objectives

Develop alternatives

Seek creative alternatives

Do not evaluate yet

The Rational Model of

Decision Making
Evaluate alternative & select the best one

Evaluate alternative: Time required, costs

involved, risk involved, benefits or advantages
& limitation
Select the best alternative

Implement & monitor

Plan implementation- review the plan

periodically
Monitor implementation & make necessary
adjustment

7 STEPS IN THE
DECISION-MAKING
PROCESS

7 Steps in the Decision-Making

Process
Identifying opportunities and
diagnosing problems
Identifying objectives
Generating alternatives
Evaluating alternatives
Reaching decisions
Choosing implementation
strategies
Monitoring and evaluating

Step 1: Identifying
opportunities and
diagnosing problems

Managers regularly review data related

to their areas of responsibility, including

both outside information and reports and
information from within the organization
The clear identification of opportunities
or the diagnosis of problems that require
a decision.
An assessment of opportunities and
problems will only be as accurate as the
information on which it is based

Step 2: Identifying
objectives
Objectives

reflect the results

organization wants to attain.
called targets, standards or ends.

the
Also

The

quantity and quality of the desired

results should be specified, for these aspects
will ultimately guide the decision maker in
selecting the appropriate course of action.
Objectives can be measured on a variety of
dimensions (monetary units, output per hour,
% of defects, etc.) and whether the
objectives are long-term versus short-term.

Objectives can be short range or long

range

Step 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.
The alternatives can be standard and
obvious as well as innovative and unique.
Alternatives

Strategies that might be

implemented in the decision-making situation
Creativity and imagination are often required
in this step

Step 4: Evaluating
alternatives
Assess the value or relative advantages or

disadvantages of each alternative under

consideration
Determining the value or adequacy of the
alternatives generated.
Predetermined decision criteria may be used in the
evaluation process.
Quality desired
Anticipated costs
Benefits
Uncertainties
Risks

Step 5: Reaching
decisions
Making a final choice
Decision making is commonly associated with

making a final choice.

Although choosing an alternative would seem to
be a straightforward proposition, in reality the
choice is rarely clear-cut.
The best decisions are often based on careful
judgments, making a good decision involves
carefully examining all the facts, determining
whether sufficient information is available, and
finally selecting the best alternatives

Step 6: Choosing
implementation strategies
The bridge between reaching a decision and evaluating

the results.
The keys to effective implementation are:
Sensitivity to those who will be affected by the decision.
Proper planning and consideration of the resources
necessary to carry out the decision.
When decisions involve taking action or making changes,
choosing ways to put these actions or changes into effect
become an essential managerial task
The key to effective implementation are:

Sensitivity to those who will be affected by the decision

Proper planning and considerating of the resources

necessary to carry out the decision

Step 7: Monitoring and

evaluating feedback
No decision-making process is complete until the

impact of the decision has been evaluated

Managers must observe the impact of the decision
and take further action if it becomes necessary

Group Decision Making

Techniques
Group decision making is becoming more

common as organizations focus on

improving customer service and push
decision making to lower levels

Participative Decision
Making:
Group Size
In general, as group size increases:
The leader becomes more psychologically

distant from the other members.

The demands on the leaders time and attention
are greater
The groups tolerance of direction from the
leader is greater, and the teams decision
making becomes more centralized.
The atmosphere is less friendly, less personal
and, in general, less satisfying.
Rules and procedures become more formalized.

Advantages and
Disadvantages of Group
Decision Making
Advantages

Disadvantages

Experience and expertise of

several individuals available

Greater time requirement

More information, data, and

facts accumulated
Problems viewed from several
perspectives
Higher member satisfaction
Greater acceptance and
commitment to decisions

Minority domination
Compromise
Concern for individual rather
than group goals
Social pressure to conform
Groupthink

Techniques for Quality

in Group Decision
Making
Brainstorming
Nominal Group Technique
Delphi Technique
Devils Advocacy Approach
Dialectical Inquiry

Techniques for Enhancing the

Quality of Participative
Decision-Making

1) Brainstorming A technique used to enhance creativity that

encourages group members to generate as many novel
ideas as possible on a given topic without evaluating them
Can enhance creativity by overcoming pressures for conformity
that can retard the development of creative decision-making
Focuses on generating ideas rather than on choosing an
alternative
Rules of Brainstorming
Freewheeling is encouraged.
Ideas are not criticized as they are being generated.
Quality is encouraged.
The wilder the ideas, the better.
Piggyback on previously stated ideas.
Ideas are evaluated after alternatives are generated.

Techniques for Enhancing the

Quality of Participative
Decision-Making
2) Nominal group technique (NGT) A structured
process designed to stimulate creative group
decision-making in which agreement is lacking
or the members have incomplete knowledge
concerning the nature of the problem
Individual members list their ideas on the specific
problem and present the ideas at one time,
without discussion
Members ideas are recorded so that everyone can
see them
After all members ideas are presented, the group
discusses the ideas to clarify and evaluate them

Techniques for Enhancing the

Quality of Participative
Decision-Making
3) Delphi technique An approach that uses the
experts to make predictions and forecasts about
future events without meeting face-to-face
Using survey instruments or questionnaires, a group
leader collects written expert opinions on a topic
4) Devils Advocacy - An individual or subgroup
appointed to critique a proposed course of action
and identify problems to consider before the
decision is final.
5) Dialectical Inquiry - Approaches a decision from
two opposite points and structures a debate
between conflicting views.

Advantages of Group
Decision Making

Experience and expertise of several

individuals available
More information, data, and facts

accumulated
Problems viewed from several perspectives
Higher member satisfaction
Greater acceptance and commitment to

decisions

Disadvantages of Group
Decision Making
Greater time requirement
Minority domination
Compromise
Concern for individual rather than group goals
Social pressure to conform
Groupthink