DECISION-MAKING

INTRODUCTION
DECISION-MAKING AS A MANAGEMENT RESPONSIBILITY
An Engineer manager should develop his skills in decision-making for he is responsible for the rise or fall of
whatever outcomes his decision may bring.

WHAT IS DECISION-MAKING?
DECISIONS are judgments which directly affect a course of action.
DECISION-MAKING process of identifying and choosing set of alternative courses of action in a manner
appropriate to the demands of the situation.
- process of thought and action that leads to a decision
- lies at the heart of management.

I. THEORIES IN DECISION-MAKING
A. BEHAVIORAL THEORY OF DECISION-MAKING
- Simon (1957) who put forward the man of administrative man as a more realistic alternative to the
rational economic man of classical theories. Administrative man is a satisfier rather than a perfectionist
and his decision-making behavior looks forward.
B. CLASSICAL THEORY OF DECISION-MAKING
- A rational economic man is perfectionist, so decision makers:
1. Has complete knowledge of all possible alternative courses of action.
2. Has complete knowledge of the consequences of taking every alternative.
3. Can attach definite payoffs to each possible outcome.
4. Can put each payoff in order from the highest to the lowest payoff.

II. DECISION-MAKING PROCESS

- According to David H. Holt, rational decision-making is a process involving the following steps:
1. DIAGNOSE PROBLEM
- a problem exists when there is a difference between an actual situation and desired situation.
2. ANALYZE THE ENVIRONMENT
- Its objective is to identify the constraints, which may be spelled out as either internal or external limitations.
a. Internal Limitations
a.1 Limited funds available for the purchase of equipment.
a.2 Limited training on the part of the employees.
a.3 ill-designed facilities.
b. External Limitations
b.1 Patents are controlled by other organizations.
b.2 A very limited market for the companys products and services exists.
b.3 Strict enforcement of local zoning regulations.

3. ARTICULATE PROBLEM OR OPPURTUNITY

- Examination of resources such as;
a. Man-power who is available to help; who has experience and training which could help; how many
people are available to do any extra work involved?
b. Money cost of project
c. Materials required
4. DEVELOP VARIABLE ALTERNATIVES
- This is made possible by using a procedure with the following steps:
a. Prepare list of alternative solutions.
b. Determine the viability of each solution.
c. Revise the list striking out those which are not viable.
5. EVALUATE ALTERNATIVES
- Proper evaluation makes choosing the right solution less difficult. Evaluating the alternative solutions
involves beginning with the assessing how will each meets the desired end.
6. MAKE A CHOICE
- Choice making refers to the process of selecting among alternatives representing potential solutions to a
problem. To make the selection process easier, the alternatives can be ranked from best to worst on the
basis of some factors like benefit, cost, or risk.
7. IMPLEMENT DECISION
- Implementation refers to carrying out the decision so that the objectives sought will be achieved.
8. EVALUATE AND ADAPT DECISION RESULTS
Feedback refers to the process which requires checking at each stage of the process to assure that the
alternatives generated, the criteria used in evaluation, and the solution selected for impletion are in keeping
with the goals and objectives originally specified.
Control refers to the actions made to ensure that activities or goals, that have been set.

PROBLEMS IN THE DECISION-MAKING PROCESS

1. Misunderstanding a situation.
2. Rushing the decision-making process

IMPROVING DECISION-MAKING EFFECTIVENESS

1. Devils Advocate a decision-making technique in which an individual is assigned the role of challenging the
assumptions and assertions made by the group in order to prevent premature consensus.
2. Multiple Advocacy a decision-making technique that involves several advocates and presentation of multiple
points of view including minor and unpopular opinions.
3. Dialectical Inquiry a decision-making technique in which groups are assigned to challenge the underlying
values and assumptions associated with each problem definition presented.
4. Brainstorming a decision-making technique in which group members present spontaneous suggestions for
problem-solution regardless of their likelihood of implementation in order to promote free more creative
thinking within the group.

III APPROACHES IN SOLVING PROBLEMS

A. QUALITATIVE EVALUATION refers to evaluation of alternatives using intuition and subjective judgement.
Managers tend to use the qualitative approach when:
The problem is fairly simple.
The problem is familiar.
The costs involved are not great.
Immediate decisions are needed.
B. QUANTITATIVE EVALUATION refers to the evaluation of alternatives using any technique in a group classified
as rational and analytical.

TYPES OF QUATITATIVE TECHNIQUES

1. INVENTORY MODELS designed to help the engineer manager make decisions regarding inventory. Types are as
follows:
a. Economic order quantity model use to calculate the number of items that should be ordered at
one time to minimize the total yearly cost of placing orders and carrying the items in inventory.
b. Production model quantity model this is an economic order quantity technique applied to
production orders.
c. Back order inventory model this is an inventory model used for planned shortages.
d. Quantity discount model - an inventory model used to minimize the total cost when quantity
discounts are offered by supplier.
2. QUEING THEORY use to determine the number of service units that will minimize both customer waiting time
and cost services.
- This model balance an organizations cost of having lines against what is costs to lose
customers on their goodwill.
3. NETWORK MODELS where large complex tasks are broken into smaller segments that can be managed
independently. Two most prominent models are:
a. The Program Evaluation Review Technique (PERT) a technique which enables engineer managers to
schedule, monitor, and control large and complex projects by employing three times estimates for each
activity.
b. The Critical path Method (CPM) this is a network-technique using only one time factor per activity
that enables engineer managers to schedule, monitor and control large and complex projects.
4. FORECASTING the collection of past and current information to make predictions about future.
5. REGRESSION MODEL a forecasting method that examines the association between two or more variables. It
uses data from previous periods to predict future events.
6. SIMULATION a model constructed to present reality, on which conclusions about real-life problems can be
used.
7. LINEAR PROGRAMMING a quantitative technique that is used to produce an optimum solution within the
buns imposed by constraints upon the decision.
Step 1 Define the relevant decision variables. These variables must be controllable by the manager.
Step 2 define the objective in terms of the decision variables. There can be only one objective; thus, it must be
chose carefully.