Lecture 12 (MGT)

ninth edition
STEPHEN P. ROBBINS MARY COULTER
Chapter
Decision-Making:
6 The Essence of
the Manager’s Job
Decision Making
Decision
 Making a choice from two or more alternatives.
The Decision-Making Process

 Identifying a problem and decision criteria and
allocating weights to the criteria.
 Developing, analyzing, and selecting an alternative
that can resolve the problem.
 Implementing the selected alternative.
 Evaluating the decision’s effectiveness.
Exhibit 6–1
The Decision-Making Process
Step 1: Identifying the Problem
Problem
 A discrepancy between an existing and desired state of
affairs.
Characteristics of Problems
 A problem becomes a problem when a manager
becomes aware of it.
 There is pressure to solve the problem.
 The manager must have the authority, information, or
resources needed to solve the problem.
Step 2: Identifying Decision Criteria
Decision criteria are factors that are important
(relevant) to resolving the problem.
 Costs that will be incurred (investments required)
 Risks likely to be encountered (chance of failure)
 Outcomes that are desired (growth of the firm)
Step 3: Allocating Weights to the Criteria

Decision criteria are not of equal importance:
 Assigning a weight to each item places the items in the
correct priority order of their importance in the
decision making process.
Exhibit 6–2 Criteria and Weights for Computer Replacement Decision
Criterion Weight
Memory and Storage 10
Battery life 8
Carrying Weight 6
Warranty 4
Display Quality 3
Step 4: Developing Alternatives
Identifying viable alternatives
 Alternatives are listed (without evaluation) that can
resolve the problem.
Step 5: Analyzing Alternatives

Appraising each alternative’s strengths and
weaknesses
 An alternative’s appraisal is based on its ability to
resolve the issues identified in steps 2 and 3.
Exhibit 6–3 Assessed Values of Laptop Computers Using
Decision Criteria
Step 6: Selecting an Alternative
Choosing the best alternative
 The alternative with the highest total weight is
chosen.
Step 7: Implementing the Alternative

Putting the chosen alternative into action.
 Conveying the decision to and gaining commitment
from those who will carry out the decision.
Exhibit 6–4 Evaluation of Laptop Alternatives
Against Weighted Criteria
Step 8: Evaluating the Decision’s Effectiveness
The soundness of the decision is judged by its

outcomes.
 How effectively was the problem resolved by

outcomes resulting from the chosen alternatives?
 If the problem was not resolved, what went wrong?

Exhibit 6–5 Decisions in the Management Functions
Making Decisions
Rationality
 Managers make consistent, value-maximizing choices
with specified constraints.
 Assumptions are that decision makers:
 Are perfectly rational, fully objective, and logical.
 Have carefully defined the problem and identified all viable
alternatives.
 Have a clear and specific goal
 Will select the alternative that maximizes outcomes in the
organization’s interests rather than in their personal interests.
Exhibit 6–6 Assumptions of Rationality
Making Decisions (cont’d)
Bounded Rationality
 Managers make decisions rationally, but are limited
(bounded) by their ability to process information.
 Assumptions are that decision makers:
 Will not seek out or have knowledge of all alternatives
 Will satisfice—choose the first alternative encountered that
satisfactorily solves the problem—rather than maximize the
outcome of their decision by considering all alternatives and
choosing the best.
 Influence on decision making
 Escalation of commitment: an increased commitment to a
previous decision despite evidence that it may have been wrong.
The Role of Intuition
Intuitive decision making

 Making decisions on the basis of experience, feelings, and
accumulated judgment.
Exhibit 6–7 What is Intuition?
Types of Problems and Decisions
Structured Problems
 Involve goals that clear.
 Are familiar (have occurred before).
 Are easily and completely defined—information about
the problem is available and complete.
Programmed Decision
 A repetitive decision that can be handled by a routine
approach.
Types of Programmed Decisions
Policy
 A general guideline for making a decision about a
structured problem.
Procedure
 A series of interrelated steps that a manager can use to
respond (applying a policy) to a structured problem.
Rule
 An explicit statement that limits what a manager or
employee can or cannot do.
Policy, Procedure, and Rule Examples
Policy
 Accept all customer-returned merchandise.
Procedure
 Follow all steps for completing merchandise return
documentation.
Rules
 Managers must approve all refunds over $50.00.
 No credit purchases are refunded for cash.

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ninth edition

STEPHEN P. ROBBINS MARY COULTER

The Decision-Making Process

Step 3: Allocating Weights to the Criteria

Step 5: Analyzing Alternatives

Step 7: Implementing the Alternative

The soundness of the decision is judged by its

 How effectively was the problem resolved by

 If the problem was not resolved, what went wrong?

Intuitive decision making

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