An Overview of Decision Making

The Managerial Decision-Making Process
E. FRANK HARRISON
Fifth Edition
Copyright 1999 Houghton Mifflin Company. All rights reserved.
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The Managerial Decision-Making Process

Fifth Edition
Author: E. Frank Harrison, Ph.D. Slides by Monique A. Pelletier, Ph.D.
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Chapter 1
An Overview of Decision Making

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Profile of a Decision
n n n
The Decision-Making Process
The Decision Maker

The Decision
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Decision Making and Problem Solving

n
Problem solving is concerned with overcoming obstacles in the path toward an objective. Problem solving may or may not require action. A decision is an act requiring judgment that is translated into action.
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Decision Making and Problem Solving (contd)

n
Decision making is much more comprehensive than problem solving. The terms are interrelated, but not interchangeable.
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The Significance of Decision Making

n
Decision making is the one truly distinctive characteristic of managers. Decisions made by top managers commit the total organization toward particular courses of action.
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The Significance of Decision Making

(contd)
n
Decisions made by lower levels of management implement the strategic decisions of top managers in the operating areas of the organization.
Decisions invariably involve organizational change and the commitment of scarce resources.
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The Scope of Decision Making

n
Individual decision making
n
n
Group decision making

Organizational decision making
Metaorganizational decision making
(Note: Refer to Figure 1.1)

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Figure 1.1 The Scope of Decision Making

Decisional Inputs
(Objectives, information, resources, energy)
Metaorganization Organization Group Individual
Interactional Levels
Permeable Boundaries
Decisional Outputs
(Actions transactions, outcomes)
External Environment
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A Typology of Decisions
n
Decision-making strategies (Fig. 1.2)

l l l l
Computational Judgmental
Compromise
Inspirational
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n
(contd)
Decision categories
l
Category I - routine, recurring,

certainty with regard to the outcome Category II - nonroutine, nonrecurring, uncertainty with regard to the outcome
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n Decision combinations
l l
(contd)
Category I / Computational strategy Category II / Judgmental strategy
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Table 1.1 A Categorization of Decision Characteristics

Category I Decisions Classifications Structure
Programmable; routine; generic; computational; negotiated; compromise Procedural; predictable; certainty regarding cause/effect relationships; recurring; within existing technologies; well-defined information channels; definite decision criteria; outcome preferences may be certain or uncertain Reliance upon rules and principles; habitual reactions; prefabricated response; uniform processing; computational techniques; accepted methods for handling
Category II Decisions
Nonprogrammable; unique; judgmental; creative; adaptive; innovative; inspirational Novel, unstructured, consequential, elusive, and complex; uncertain cause/ effect relationships; nonrecurring; information channels undefined, incomplete information; decision criteria may be unknown; outcome preferences may be certain or uncertain Reliance on judgment, intuition, and creativity; individual processing; heuristic problem-solving techniques; rules of thumb; general problem-solving processes
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Strategy
Figure 1.2 The Concept of Decision-Making Strategies
Knowledge Regarding the Outcome

High Level of Knowledge
Preference for the Outcome

Strong Preference
Computational Decision-Making Strategy
Weak Preference
Compromise Decision-Making Strategy
Low Level of Knowledge
Judgmental Decision-Making Strategy
Inspirational Decision-Making Strategy
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The Locus of Choice

n
Top management makes Category II decisions. Operating management makes Category I decisions.
Middle management supervises the making of Category I decisions and supports the making of Category II decisions.
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Characteristics of Managerial Decisions (Category II)

n
n
Long-range organizational objectives

Best choice from among a set of alternatives Decision involves organizational change
Decision requires a commitment of resources

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Characteristics of Managerial Decisions (Category II) (contd)

n
Choice is a means to an end, not an end to itself
Decision maker tends to overestimate success

Success is measurable through objectives attainment
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Perspectives on Managerial Decision Making

n n
The integrative perspective The interdisciplinary perspective
n
n
The interlocking perspective

The interrelational perspective
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An Overview of Decision Making

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The Managerial Decision-Making Process

Copyright 1999 Houghton Mifflin Company. All rights reserved.

The Managerial Decision-Making Process

Author: E. Frank Harrison, Ph.D. Slides by Monique A. Pelletier, Ph.D.

Copyright 1999 Houghton Mifflin Company. All rights reserved.