Decision-Making:

The Essence of a
Managers Job
The Decision-Making Process
Decision
A choice made from two or more alternatives
Decision-making process
A set of eight steps that include identifying a
problem, selecting an alternative, and
evaluating the decisions effectiveness.
The Decision-Making Process
Step 1: Identifying a Problem
Step 2: Identifying Decision Criteria
Step 3: Allocating Weights to the Criteria
Step 4: Developing Alternatives
Step 5: Analyzing Alternatives
Step 6: Selecting an Alternative
Step 7: Implementing the Alternative
Step 8: Evaluating Decision Effectiveness
Defining some terms
Problem
A discrepancy between an existing and a
desired state of affairs
Characteristics of a Problem
Awareness of discrepancy
Sufficient resources to do something
Pressure to act
Well-Structured Problems and
Programmed Decisions
Well-Structured Problems Straightforward,
familiar, easily defined problems
Programmed Decision - A repetitive decision
that can be handled by a routine approach
Procedure A series of interrelated
sequential steps that can be used to respond
to a structured problem
Rule An explicit statement that tells
managers what they ought or ought not to do
Policy A guide that establishes parameters
for making decisions
Ill-Structured Problems and
Nonprogrammed Decisions
Ill-Structured Problems New problems
in which information is ambiguous or
incomplete
Nonprogrammed Decision - A unique
decision that requires a custom-made
solution
Integration
Level
Well-Structured
Programmed
Decisions
Top Ill-Structured
Type
Lower
Nonprogrammed
Decisions
Planning
Definition of Planning
Planning
A process that involves defining the
organizations objectives or goals, establishing
an overall strategy for achieving those goals,
and developing a comprehensive hierarchy of
plans to integrate and coordinate activities
Planning and Performance
According to studies
1. Formal planning is associated with higher
profits and positive financial results.
2. The quality of the planning process and
appropriate implementation contribute more
to higher performance than the extent of
planning.
3. In those studies in which formal planning
didnt lead to higher performance, the
environment was the culprit.
Objectives: The Foundation of
Planning
Objectives
Desired outcomes for individuals, groups, or
entire organizations
Multiplicity of objectives
Closer analysis reveals that all organizations
have multiple objectives
Types of Plans
By breadth:
Strategic versus Operational
Strategic Plans
Plans that are organization-wide, establish
overall objectives, and position an
organization in terms of its environment
Operational Plans
Plans that specify details on how overall
objectives are to be achieved
Types of Plans
By time frame:
Short-term versus Long-term
Short-term Plans
Plans that cover one year or less
Long-term Plans
Plans that extend beyond three years
Types of Plans
By specificity:
Specific versus Directional
Specific Plans
Plans that are clearly defined and leave no
room for interpretation
Directional Plans
Flexible plans that set out general guidelines
Types of Plans
By frequency of use:
Single-use versus Standing
Single-use Plans
A one-time plan that is specifically designed to meet
the needs of a unique situation and s created in
response to non-programmed decisions managers
make
Standing Plans
Ongoing plans that provide guidance for activities
repeatedly performed in the organization and that are
created in response to programmed decisions that
managers make
Techniques for Assessing the
Environment
Environmental Scanning - The screening of
large amounts of information to detect
emerging trends and to create scenarios
Competitor Intelligence Environmental scanning
activity that seeks to identify who competitors are,
what they are doing, and how their actions will
affect the focus organization.
Forecasting - Predictions of outcomes
Benchmarking - The search for the best
practices among competitors or
noncompetitors that lead to their superior
performance.
Budgets
A numerical plan for allocating
resources to specific activities
Fixed budget
a budget that assumes a fixed level
of sales or production
Variable budget
A budget that takes into account the
costs that vary with volume
Operational Planning Tools
Scheduling A list of necessary activities, their
order of accomplishment, who is to do each,
and the time needed to complete them
Gantt chart a scheduling chart developed by
Henry Gantt that shows actual and planned
output over a period of time
Load chart A modified Gantt chart that
schedules capacity by work stations
Program Evaluation and Review Technique
(PERT) A technique for scheduling complicated
projects comprising many activities, some of
which are interdependent
Gantt Chart
Load Chart
PERT Network
Critical Path: A - B -
C - D - G - H - J - K
Organizing
Definitions
Organizing
Determining what tasks are to be done, who
is to do them, how the tasks are to be
grouped, who reports to whom, and where
decisions are to be made
or
The process of creating an organizational
structure
Definitions
Organizational Structure
The organizations formal framework by
which job tasks are divided, grouped, and
coordinated
Organizational Design
The developing or changing of an
organizations structure
Six Key Elements
1. Work specialization
2. Departmentalization
3. Chain of command
4. Span of control
5. Centralization and Decentralization
6. Formalization
Work Specialization
The degree to which tasks in an organization
are divided into separate jobs. Also known
as division of labor.
Most managers today see work specialization as
an important organizing mechanism but not as a
source of endlessly increasing productivity.
Overspecialization can result in human
diseconomies from boredom, fatigue, stress, poor
quality, increased absenteeism, and higher
turnover.
Departmentalization by Type
Functional
Grouping jobs by
functions performed
Product
Grouping jobs by
product line
Geographic
Grouping jobs on the
basis of territory or
geography
Process
Grouping jobs on the
basis of product or
customer flow
Customer
Grouping jobs by type
of customer and needs
Functional Departmentalization
Advantages
Efficiencies from putting together similar specialties and people
with common skills, knowledge, and orientations
Coordination within functional area
In-depth specialization
Disadvantages
Poor communication across functional areas
Limited view of organizational goals
Geographical Departmentalization
Advantages
More effective and efficient handling of specific regional
issues that arise
Serve needs of unique geographic markets better
Disadvantages
Duplication of functions
Can feel isolated from other organizational areas
Product Departmentalization
+ Allows specialization in particular products and services
+ Managers can become experts in their industry
+ Closer to customers
Duplication of functions
Limited view of organizational goals
Process Departmentalization
+ More efficient flow of work activities
Can only be used with certain types of products
Customer Departmentalization
+ Customers needs and problems can be met by specialists
- Duplication of functions
- Limited view of organizational goals
Chain of Command
The continuous line of authority that extends
from upper levels of an organization to the
lowest levels of the organization and clarifies
who reports to who.
Chain of Command
Authority
The rights inherent in a managerial position to
tell people what to do and to expect them to do
it.
Responsibility
The obligation or expectation to perform.
Unity of Command
The concept that a person should have one
boss and should report only to that person.
Span of Control
The number of employees who can be effectively
and efficiently supervised by a manager.
Width of span is affected by:
Skills and abilities of the manager
Employee characteristics
Characteristics of the work being done
Similarity of tasks
Complexity of tasks
Physical proximity of subordinates
Standardization of tasks
Centralization &
Decentralization
Centralization
The degree to which decision-
making is concentrated in the
upper levels of the organization
Decentralization
The handing down of decision-
making authority to lower levels in
an organization
Factors that Influence
Centralization and Decentralization
More Centralization
Environment is stable
Lower-level managers are not
as capable or experienced at
making decisions as upper-level
managers
Lower-level managers do not
want to have a say in decisions
Decisions are significant
Organization is facing a crisis or
the risk of company failure
Company is large
Effective implementation of
strategies depends on
managers retaining say over
what happens
More Decentralization
Environment is complex,
uncertain
Lower-level managers are
capable and experienced at
making decisions
Lower-level managers want a
voice in decisions
Decisions are relatively minor
Company culture is open to
allowing managers to have a
say in what happens
Company is geographically
dispersed
Effective implementation of
company strategies depends on
managers having involvement
and flexibility to make decisions
Formalization
The degree to which jobs within the
organization are standardized and the extent
to which employee behavior is guided by rules
and procedures.
Highly formalized jobs offer little discretion over
what is to be done.
Low formalization means fewer constraints on
how employees do their work.
Mechanistic versus Organic
Organization
Mechanistic Organization
A rigid and tightly controlled
structure
High specialization
Rigid departmentalization
Clear chain of command
Narrow spans of control
Centralization
High formalization
Limited information network
(downward)
Low decision participation
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Highly flexible and adaptable
structure
Cross-functional / Cross-
hierarchal teams
Open communication
network / Free flow of
information
Wide spans of control
Decentralization / Little
direct supervision
Low formalization
Non-standardized jobs
Empowered employees