Decision Making

Process & Elements

 The condition under which individuals are:
1. fully informed about a problem,
2. alternative solutions are known, and
3. the results of each solution are known

 Both the problem and alternative solutions are

totally known and well defined
What is Risk?

 The condition under which individuals can:

1. define a problem,
2. specify the probability of certain events,
3. identify alternative solutions, and
4. state the probability of each solution leading
to a result

 Probability: the percentage of times that a

specific result would occur if an individual were to
make the same decision a large number of times
 What is Risk? (cont’d)

 Objective probability: the likelihood that a

specific result will occur, based on hard facts
and numbers

 Subjective probability: the likelihood that a

specific result will occur, based on personal
judgment
 What is Uncertainty?

 Condition under which individuals do not

have the necessary information to assign
probabilities to the outcomes of alternative
solutions
 May not even be able to define the problem,
much less identify alternative solutions and
possible outcomes
The Ideal Decision-making
Process
STEP 1 STEP 2
Define the problem Determine the
requirements that the
solution to the
problem must meet

STEP 3 STEP 4
Establish goals that Identify alternatives
solving the problem that will solve the
should accomplish problem

STEP 5
STEP 6
Develop valuation
Select a decision-
criteria based on the
making Tool
goals

STEP 7
STEP 8
Apply the tool to
Check the answer
select a
to make sure it
preferred alternative
solves the problem
 10 Steps of Decision
Making

1. Become aware of the situation

2. Investigate the nature of the situation
3. Determine the objective of the solution
4. Determine the alternatives
5. Weigh the consequences of alternatives
6. Evaluate or pilot test alternatives
7. Select the best alternative
8. Implement the decision- communicate, train
9. Evaluate the solution at intervals
10. Correct, change or withdraw the solution