Managerial Decision Making

2.
1 Overview of Managerial Decision-Making

Decision-Making
● action or process of thinking through possible options and selecting one.

● It is important to recognize that managers are continually making decisions, and that the
quality of their decision-making has an impact—sometimes quite significant—on the
effectiveness of the organization and its stakeholders.
● Stakeholders are all the individuals or groups that are affected by an organization (such
as customers, employees, shareholders, etc.).
○ A good decision can enable the organization to thrive and survive long-term
○ A poor decision can lead a business into bankruptcy.
Deciding When to Decide
● When deciding among various options and uncertain outcomes, managers need to gather
information, which leads them to another necessary decision: how much information is
needed to make a good decision.
● Effective managers recognize that given the complexity of many tasks, some failures are
inevitable.
2.2 How the Brain Processes Information to Make Decisions

The two systems in the brain for decision-making are;
1. Reactive System - is quick, impulsive, and intuitive, relying on emotions or habits to

provide cues for what to do next.
2. Reflective System - is logical, analytical, deliberate, and methodical.
● Reactive Decision-Making
○ The quick, intuitive route can be lifesaving; when we suddenly feel intense fear, a
fight-or-flight response kicks in that leads to immediate action without
methodically weighing all possible options and their consequences.
● Reflective Decision-Making
○ When faced with novel and complex situations, it is better to process available
information logically, analytically, and methodically to come-up with the best
decision.
● Emotional Intelligence
○ is the ability to recognize, understand, pay attention to, and manage one’s own
emotions and the emotions of others.
■ Self-awareness and self-regulation — essentially, this is a toggling back
and forth between emotions and logic so that we analyze and understand
our own emotions and then exert the necessary control to manage them as
appropriate for the situation.
■ Empathy — the ability to understand other peoples’ emotions (and an
interest in doing so).
■ Social skills — manage the emotional aspects of relationships with others.
2.3 Programmed and Non-programmed Decisions

Programmed Decisions
● Those that are repeated over time and for which an existing set of rules can be developed
to guide the process.
Non-programmed Decisions
● Are novel, unstructured decisions that are generally based on criteria that are not
well defined.
● Nonprogrammed decisions, information is more likely to be ambiguous or incomplete,
and the decision maker may need to exercise some thoughtful judgment and creative
thinking to reach a good solution.
The Decision-Making Process
1. Recognize that a decision needs to be made.

2. Generate multiple alternatives.
3. Analyze the alternatives.
4. Select an alternative.
5. Implement the selected alternative.
6. Evaluate its effectiveness.
2.4 Barriers to Effective Decision-Making

● Bounded Rationality
○ is the idea that for complex issues we cannot be completely rational because
we cannot fully grasp all the possible alternatives, nor can we understand all
the implications of every possible alternative. Our brains have limitations in
terms of the amount of information they can process.
● Escalation of Commitment
○ is the tendency of decision makers to remain committed to poor decision,
even when doing so leads to increasingly negative outcomes. Once we commit
to a decision, we may find it difficult to reevaluate that decision rationally.
● Time Constraints
○ with little time available don’t necessarily lead to the best possible solution
● Uncertainty
○ managers frequently make decisions under conditions of uncertainty— they
cannot know the outcome of each alternative until they’ve actually chosen
that alternative.
● Personal Biases
○ Our decision-making is also limited by our own biases. We tend to be more
comfortable with ideas, concepts, things, and people that are familiar to us or
similar to us. We tend to be less comfortable with that which is unfamiliar,
new, and different.
● Conflict
○ Finally, effective decision-making can be difficult because of conflict. Most
individuals dislike conflict and will avoid it when possible. However, the best
decision might be one that is going to involve some conflict.
2.5 Improving the Quality of Decision-Making

Type of Decision Technique Benefit
Programmed Heuristics (mental shortcuts) Saves time

Decisions
Satisficing (choosing first acceptable Saves time

solution)
Nonprogrammed Systematically go through the six steps Improves quality

Decisions of the decision-making process
Talk to other people Improves quality: generates

more options, reduce bias
Be creative Improves quality: generates

more options
Conduct research; engage in Improves quality

evidence-based decision-making
Engage in critical thinking Improves quality

Think about the long-term implications Improves quality
Consider the ethical implications Improves quality
2.6 Group Decision-Making

● Involving more people in the decision-making process can greatly improve the
quality of a manager's decisions and outcomes. However, involving more people can
also increase conflict and generate other challenges. We turn now to the advantages
and disadvantages of group decision-making.
Advantages of Group Decisions
● An advantage to involving groups in decision-making is that you can incorporate

different perspectives and ideas.
Disadvantages of Group Decisions
● Group decision-making is not without challenges. Some groups get bogged down by
conflict, while others go to the opposite extreme and push for agreement at the expense of
quality discussions.
Before I enter college, I always contemplate about what course should I take. I dreamed of going
to my dream school with my dream course. but, I end up giving up my dreams because it might
not turned out well and my family will not like it. now, I’m taking the course that will help me
and my family in the future but I’m kind of uncomfortable by it.

Managerial Decision Making

Uploaded by

Copyright:

Available Formats

Managerial Decision Making

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Managerial Decision Making

Uploaded by

Copyright:

Available Formats

2.

1 Overview of Managerial Decision-Making

● action or process of thinking through possible options and selecting one.

Deciding When to Decide

2.2 How the Brain Processes Information to Make Decisions

1. Reactive System - is quick, impulsive, and intuitive, relying on emotions or habits to

2.3 Programmed and Non-programmed Decisions

The Decision-Making Process

1. Recognize that a decision needs to be made.

2.4 Barriers to Effective Decision-Making

2.5 Improving the Quality of Decision-Making

Programmed Heuristics (mental shortcuts) Saves time

Satisficing (choosing first acceptable Saves time

Nonprogrammed Systematically go through the six steps Improves quality

Talk to other people Improves quality: generates

Be creative Improves quality: generates

Conduct research; engage in Improves quality

Engage in critical thinking Improves quality

Consider the ethical implications Improves quality

2.6 Group Decision-Making

Advantages of Group Decisions

● An advantage to involving groups in decision-making is that you can incorporate

Disadvantages of Group Decisions

You might also like