MGT212: Organizational Management

Instructor: Dr. Jashim Uddin Ahmed

Chapter TWO
Making Decision

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 The Decision-Making Process
Decision
 Making a choice from two or more
alternatives
Sources of Complexity for Today’s
Managerial Decision Makers
 Multiple criteria
 Intangibles
 Risk and uncertainty
 Long-term implications
 Interdisciplinary input
 Pooled decision making
 Value judgments
 Unintended consequences
Chapter 11, Carlene M. Cassidy and Robert Kreitner, Principles of Management, Twelfth Edition. Copyright © 2013 Cengage Learning.
Chapter 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall.
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 Exhibit 6-1
Decision-Making Process

Chapter 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall.
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 The Decision-Making Process (cont’d)

Step 1: Identify a Problem

Problem: An obstacle that makes it difficult to
achieve a desired goal or purpose
Every decision starts with a problem, a
discrepancy between an existing and a desired
condition.
Example: Amanda is a sales manager whose reps
need new laptops
Step 2: Identify Decision Criteria
Decision criteria are factors that are important
or relevant to resolving the problem.
Example: Amanda decides that memory and storage
capabilities, display quality, battery life, warranty,
and
Chapter 6, Stephen carrying
P. Robbins and Mary Coulter,weight areEdition.
Management, Twelfth the relevant
Copyright © 2013 Pearsoncriteria in her
Education, Inc. publishing as Prentice Hall.
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 The Decision-Making Process (cont’d)

Step 3: Allocate Weights to the Criteria

If the relevant criteria aren’t equally
important, the decision maker must weight the
items in order to give them the correct priority
in the decision.
Example: See Exhibit 6-2
Step 4: Develop Alternatives
List viable alternatives that could resolve the
problem
Example: Amanda, identifies eight laptops as possible
choices (See Exhibit 6-3)

Chapter 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall.
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 Exhibit 6-2
Important Decision Criteria

Chapter 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall.
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 Exhibit 6-3
Possible Alternatives

Chapter 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall.
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 The Decision-Making Process (cont’d)

Step 5: Analyze Alternatives

Appraising each alternative’s strengths and
weaknesses
An alternative’s appraisal is based on its ability
to resolve the issues related to the criteria and
criteria weight.
Example: See Exhibit 6-4
Step 6: Select an Alternative
Choosing the best alternative
 The alternative with the highest total weight is
chosen.

Chapter 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall.
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 Exhibit 6-4
Evaluation of Alternatives

Chapter 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall.
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 The Decision-Making Process (cont’d)

Step 7: Implement the Alternative

Putting the chosen alternative into action
Conveying the decision to and gaining
commitment from those who will carry out the
alternative
Step 8: Evaluate Decision Effectiveness
Evaluating the outcome of the decision to see
whether the problem was resolved
If the problem still exists, then the manager
needs to assess what went wrong.

Chapter 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall.
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 Making Decisions: Rationality
Rational Decision Making
Describes choices that are logical and
consistent and maximize value

Chapter 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall.
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 Making Decisions: Bounded Rationality
Bounded Rationality
Decision making that’s rational, but limited
(bounded) by an individual’s ability to process
information.
Satisfice: Accepting solutions that are “good
enough”
 Because managers can’t possibly analyze all
information on all alternatives, they satisfice, rather
than maximize.
Escalation of Commitment
An increased commitment to a previous
decision despite evidence it may have been
wrong (“throwing good money after bad”).
Chapter 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall.
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 Making Decisions: The Role of Intuition
and Evidence-Based Management
Intuitive Decision Making
Making decisions on the basis of experience,
feelings, and accumulated judgment.
Evidence-Based Management (EBMgt)
The systematic use of the best available
evidence to improve management practice.

Chapter 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall.
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 Structured Problems and Programmed
Decisions
Structured Problems
Straightforward, familiar, and easily defined
problems.
Programmed Decision
A repetitive decision that can be handled by a
routine approach.
Example: Decision related to handling common
customer complaints

Chapter 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall.
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 Unstructured Problems and
Nonprogrammed Decisions
Unstructured Problems
Problems that are new or unusual and for
which information is ambiguous or incomplete.
Nonprogrammed Decisions
Unique and nonrecurring decisions that
require custom made solutions.
Example: Decision related to building a new
manufacturing facility

Chapter 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall.
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 Decision-Making Conditions
Certainty
Exists when a solid factual basis allows
prediction of a decision’s outcome
Risk
Exists when a decision is made on the basis of
incomplete but reliable information
Uncertainty
Exists when no reliable data exist on which to
base a decision

Chapter 11, Carlene M. Cassidy and Robert Kreitner, Principles of Management, Twelfth Edition. Copyright © 2013 Cengage Learning.
Chapter 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall.
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 Decision-Making Biases and Errors
12 Common Decision Making Biases and
Errors
Overconfidence Bias: Holding unrealistically
positive views of oneself and one’s
performance.
Immediate Gratification Bias: Choosing
alternatives that offer immediate rewards and
avoid immediate costs.
Anchoring Effect: Fixating on initial
information and ignoring subsequent
information.
Selective Perception Bias: Selecting,
organizing and interpreting events based on
Chapter 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall.
the decision maker’s biased perceptions. 17
 Decision-Making Biases and Errors (cont’d)
Framing Bias: Selecting and highlighting
certain aspects of a situation while ignoring
other aspects.
Availability Bias: Losing decision-making
objectivity by focusing on the most recent
events.
Representation Bias: Drawing analogies and
seeing identical situations when none exist.
Randomness Bias: Creating unfounded
meaning out of random events.
Sunk Costs Errors: Forgetting that current
actions cannot influence past events and relate
only to future consequences.
Chapter 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall.
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 Decision-Making Biases and Errors (cont’d)
Self-Serving Bias: Taking quick credit for
successes and blaming outside factors for
failures.
Hindsight Bias: Mistakenly believing that an
event could have been predicted once the
actual outcome is known.
Some Other Definitions
Framing Error: The way in which information
is presented influences one’s interpretation of
it, which, in turn, may alter a decision based on
the information.
Heuristics: Using “rules of thumb” to simplify
decision making.
Chapter 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall.
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Thank you

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