ESSENTIALS OF MANAGEMENT: An International Perspective

Sixth Edition Weihrich and Koontz

Chapter 6. Decision Making

2004 H. Weihrich

Chap. 6. Decision Making

After studying this chapter, you understand:

1. Decision making as a rational process. 2. The development of alternative courses of action 3. The selection from among alternatives. 4. The differences between programmed and nonprogrammed decisions. 5. Decisions made under conditions of certainty, uncertainty, and risk. 6. The importance of creativity and innovation in managing. 7. The major principles, or guides, for planning
2004 H. Weihrich Chap. 6. Decision Making

Decision Making
Decision making is defined as the selection of a course of action from among alternatives

2004 H. Weihrich

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Decision Making Process

1. Premising, 2. Identifying alternatives, 3. Evaluating alternatives in terms of the goal sought, and 4. Choosing an alternative, that is, making a decision

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Limited, or "Bounded," Rationality

Limitations of information, time, and certainty limit rationality, even though a manager tries earnestly to be completely rational Satisficing is picking a course of action that is satisfactory or good enough under the circumstances
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Development of Alternatives and the Limiting Factor

A limiting factor is something that stands in the way of accomplishing a desired objective The principle of the limiting factor: By recognizing and overcoming those factors that stand critically in the way of a goal, the best alternative course of action can be selected
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Quantitative and Qualitative Factors

Quantitative factors are factors that can be measured in numerical terms Qualitative, or intangible, factors are those that are difficult to measure numerically

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Marginal Analysis
Marginal analysis is to compare additional revenues and the additional cost arising from increasing output

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Cost Effectiveness Analysis

Cost effectiveness analysis seeks the best ratio of benefit and cost

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Selecting an Alternative: Three Approaches

When selecting from among alternatives, managers can use: 1. Experience, 2. Experimentation, and 3. Research and analysis.

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Programmed And Nonprogrammed Decisions Programmed decisions are used for structured or routine work Nonprogrammed decisions are used for unstructured, novel, and ill-defined situations of a nonrecurring nature

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Creativity and Innovation

Creativity refers to the ability and power to develop new ideas Innovation means the use of new ideas

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The Creative Process

1. 2. 3. 4. The creative process is seldom simple and linear It generally consists of four overlapping and interacting phases: Unconscious scanning Intuition Insight Logical formulation or verification

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Rules for Brainstorming

1. No ideas are criticized 2. The more radical the ideas are, the better 3. The quantity of idea production is stressed 4. The improvement of ideas by others is encouraged

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