Managerial Decision Making

GROUP 4
Chona Gregorio
Sarah Monzon
Federico Benavides
Arthur Gerona
Ian Datario
Cesar Yu Jr.
What is a decision?
The Oxford Dictionary defines decision as a
conclusion or resolution reached after
consideration.
It is a choice made from available
alternatives.
Types of Decisions
• Programmed Decision is • Non-programmed Decision
a decision that is are made in response to
recurrent and can be situations that are not
expected. Its responses anticipated, unstructured
and have important
or actions can be
consequences for the
predefined.
organization.
Difference between programmed
and non-programmed decisions
Lies in the degree of certainty or
uncertainty that it involves.
 Conditions That Affect The Possibility of
Decision Failure
• Certainty means that all • Uncertainty means that goals
information needed to take are clear but information is
the decision is readily incomplete.
available.

• Risk means that information is • Ambiguity means that goals

available but the results are and problems are unclear
subject to chance. which makes alternatives
difficult to define.
Decision Making Models
I. Classical Model
 is based on rational economic assumptions
and manager beliefs about what ideal
decision-making should be.
 is normative because it defines how the
decision should be made.
 is most useful when applied to decisions
where certainty or risk is involved since the
information to take the decision is available.
Decision Making Models
II. Administrative Model
 describes how managers take decisions in complex
situations.
 is divided in three concepts:
1. Bounded rationality => outlines the limits or boundaries that
people has when taking decisions.

2. Satisficing => means that decision makers choose the first

option that satisfies the minimum decision criteria, regardless
of whether better solutions are presumed to exist.

3. Intuition => represents a quick apprehension of a decision

based on experience but without thorough consideration.
Decision Making Models
III.Political model
is useful for making non-programmed decisions
when conditions are uncertain, information is
limited and conflicts arise in between managers
in making decisions.
can be resolved through coalitions.

A coalition is an informal alliance among managers

supporting an specific goal.
Decision Making Steps
Personal Decision Framework
Four Major Decision Style
• Directive is used by people
who prefer simple and clear
solutions.
• Analytical is used by people
who like to take decisions
with as much information as
possible, carefully considering
alternatives.
• Conceptual considers a broad
amount of information but are
socially oriented.
• Behavioral considers the
personal development of
others to help them achieve
their goals in line with the
company’s goals and
objectives.
Why Do Managers Make Bad Decisions?
1. Being influenced by initial impressions.

2. Justifying past decisions.

3. Seeing what you want to see.

4. Perpetuating the status quo.

5. Being influenced by problem framing.

6. Overconfidence.
Group Decision Making

• Brainstorming builds on ideas • Rigorous Debate is a

given by other people where constructive conflict based on
all ideas are acceptable; divergent points that brings a
criticism and evaluation is not problem into focus and
allowed. improve decision quality.

• Electronic Brainstorming • Groupthink refers to the

brainwritings which brings tendency of people in groups
people together in an to suppress contrary opinions.
interactive group over a
computer network.
McDonald’s
Video Case Analysis
Brief Case Summary
• Leading worldwide fast food chain and the pioneer in
franchise success. Now facing competition problems.

• Principal competitors are gaining ground in the industry.

• The tough business and profitability decline starts in 2001.

• The first quarterly loss since 1954was recorded in 2002.

Six Decision Making Steps Used By
McDonald's Food Corp.
1. Recognition of Decision Requirement
 Decline of customer guest count and the need to change
the way they do business.

2. Diagnosis and Analysis of Causes

 Continued building additional restaurants and focusing in
short-term targets while neglecting the long-term needs of
the company.
 Too much expansion becomes ineffective because focus is
being done to new ones when old ones are left behind.
Six Decision Making Steps Used By
McDonald's Food Corp.
1. Recognition of Decision Requirement
 Decline of customer guest count and the need to change
the way they do business.

2. Diagnosis and Analysis of Causes

 Continued building additional restaurants and focusing in
short-term targets while neglecting the long-term needs of
the company.
 Too much expansion becomes ineffective because focus is
being done to new ones when old ones are left behind.
Six Decision Making Steps Used By
McDonalds Food Corp.
3. Development of Alternatives
 Develop new growth strategies by discovering what
the clientele wanted (Customer Satisfaction)
 Update brand to reflect positive changes going
underway.

4. Selection of Desired Alternative

 Develop new growth strategies by discovering what
the clientele wanted (Customer Satisfaction) by not
focusing so much on short-term goals.
Six Decision Making Steps Used By
McDonald’s Food Corp.
5. Implementation of Chosen Alternative
Reduced number of new restaurants
Focus on existing restaurants
Overhaul restaurant inside and out
Evolve menu offerings
Measure everything that matters
Six Decision Making Steps Used By
McDonald’s Food Corp.
6. Evaluation and Feedback
 When customer find more what they want and respond
positively to the new look and feel of the restaurant, SALES
INCREASED.
 Use of Tracking Matrix as a form of evaluation facilitates the
work performance and improve coordination among workers.
 Success of McDonald`s Decision to change are dependent on:
- Engagement from fellow managers
- Learning from past mistakes
- Taking some chances every now and then
Answers to Video Case Questions
1. When a company’s succession plan names as interim CEO, it
buys time to decide on a permanent replacement. What are
some of the risks a company might face during this process?
Having an interim CEO weakens the organization because:
▫ Workers tend to lie low while waiting for a permanent
replacement.
▫ Confusion in the ranks may arise such as questions on loyalty and
motivation.
▫ The temporary CEO may not give his 100% contribution and
loyalty. Worse is he/she may put his/her interests before that of
the organization’s.
▫ The organization may be put in an unstable and uncertain
environment.
▫ Continuity of operations and programs may also be disrupted.
Answers to Video Case Questions
2. When an organization is faced with unexpected change, what
can managers do to help insure that they made the right
choice?

For Programmed:
 Follow the 6 steps in decision making.
Review the set rules and processes of the organization.
Form a group for decision making:
Brainstorming team and Crisis team
Ask the five Why’s.

For Non-programmed:
Managers usually rely on their experience and intuition.
Use the company’s mission and vision as guide.
Answers to Video Case Questions
3. During Jim Cantalupo’s brief tenure as CEO,
McDonald's stock went up 49%. When the company
announced his replacement within a day of losing him,
the share price rose again. Give insights.

 The reason is probably because of the company’s

stability and profitability which makes it less
vulnerable to changes in management.
 The company was able to make corrective actions on the
problem of falling profitability. As a result, it’s cash flow
improved significantly which makes it very attractive to
investors.
Managerial Decision Making
End Of Presentation
Group 4