DECISION MAKING:
THE ESSENCE OF
THE MANAGER’S
© Prentice Hall, 2002
JOB 6-1
Learning Objectives
You should learn to:
– Outline the steps in the decision-making process
– Explain why decision making is so pervasive in organizations
– Describe the rational decision maker
– Contrast the perfectly rational and boundedly rational approaches to
decision making
– Explain the role that intuition plays in the decision-making process
Acer Acer
Compaq Compaq Evaluation
Gateway Gateway Gateway
of Decision
HP HP
Effectiveness
Micromedia Micromedia
NEC NEC
Sony Sony
Toshiba Toshiba
Preferences
No time or cost
are constant
constraints exist
and stable
Subconscious Cognitive-
mental based
processing decisions
Decisions based Decisions based
on subconscious on skills,
data knowledge,
or training
© Prentice Hall, 2002 6-15
The Manager As A Decision Maker (cont.)
Types of Problems and Decisions
– Well-Structured Problems - straightforward, familiar,
and easily defined
– Programmed Decisions - used to address structured
problems
– minimize the need for managers to use discretion
– facilitate organizational efficiency
• procedure - series of interrelated sequential steps used
to respond to a structured problem
• rule - explicit statement of what to do or not to do
• policy - guidelines or parameters for decision making
© Prentice Hall, 2002 6-16
The Manager As A Decision Maker (cont.)
Types of Problems and Decisions (cont.)
– Poorly-Structured Problems - new, unusual problems for
which information is ambiguous or incomplete
– Nonprogrammed Decisions - used to address poorly-
structured problems
• produce a custom-made response
• more frequent among higher-level managers
– few decisions in the real world are either fully programmed or
nonprogrammed
Ill-structured Top
Nonprogrammed
Type of Decisions Level in
Problem Organization
Programmed
Decisions
Well-structured Lower
High
Tolerance for Ambiguity
Analytic Conceptual
Directive Behavioral
Low
Rational Intuitiv
Way of Thinking
e
© Prentice Hall, 2002 6-25
Managing Workforce Diversity
Diversity in Decision Making
– Advantages - diverse employees:
• provide fresh perspectives
• offer differing interpretations of problem definition
• increase the likelihood of creative and unique
solutions
– Disadvantages - diverse employees:
• require more time to reach a decision
• may have problems of communication
• may create a more complex, confusing, and
ambiguous decision-making process
• may have difficulty in reaching agreement
© Prentice Hall, 2002 6-26
Overview Of Managerial Decision Making
Decision-Making Approach
• Rationality
• Bounded Rationality
• Intuition