Learning Objectives

After completing this chapter, students should be able

to:
 Discuss the nature of the decision-making process
 Describe the rational of decision-making
 Describe the participative approach to decision-
making
 Definition of Decision Making
• “The process through which managers identify and resolve problems
and capitalize on opportunities”

• The process by which a course of action is selected as the way to deal

with a specific problem

•When trying to make a good decision , a manager must weight the

positives and negatives of each option, and consider all the alternatives.

•For effectivedecision making, a manager must be able to forecast the

outcome of each option as well, and based on all these items,
determine which option is the best for that particular situation.
 Types Of Decision Making
 Programmed Decisions
 It is structured. A repetitive or routine decision that can
be handled by a routine approach.
 Example: Daily Rules & regulations

 Non-Programmed Decisions
 Deals with unique, unusual, exceptional or non-recurring
problem, and are often made under crisis conditions.
 Unstructured and requires higher level management
 Involve plenty of ambiguity that specific procedures are
not available.
 E.g.: Government’s decision to prevent H1N1 by stopped
all the travelling outside country.
 Characteristics/Types of Condition Under
Decision Making
 Condition Under Certainty
 Decision maker know exactly what will happen and able to predict the
outcome precisely
 E.g.: If you put RM1000 in bank under fixed deposit or a year at 5% interest,
then interest earned will be RM50 after 1 year

 Condition Under Risk

 Refer to future conditions that are not always known in advance
 Some information is available, but it is not enough to answer all questions
about the outcomes
 E.g: Bursa Malaysia-share trading

 Condition Under Uncertainty

 Situation in which the individual cannot even assign probabilities to each of
the possible states of nature and assumption is made that the individual has
no information or intuitive judgment.
 E.g.: new product launching
Definition of Rational Decision Making
• “A systematic process of defining problems,
evaluating alternatives, and choosing optimal
solutions”
The Rational Model of Decision Making
• The Rational Model of Decision Making has 4 steps:
– Investigate the situation
• Define problem
• Diagnose causes
• Identify decision objectives

– Develop alternatives
• Seek creative alternatives
• Do not evaluate yet
 Cont’d…
– Evaluate alternative & select the best one
• Evaluate alternative: Time required, costs involved, risk
involved, benefits or advantages & limitation
• Select the best alternative

– Implement & monitor

• Plan implementation- review the plan periodically
• Monitor implementation & make necessary adjustment
Group Decision Making (GDM)
 Situation where people are brought together to
solve problems by sharing their opinions and
inputs.
 GDM is a complex process, which can be achieved
through several methods.
 Methods of GDM:
1. Authoritarian style
2. Brainstorming
3. Voting based method
7 Steps in the Decision-Making Process
Identifying opportunities and
diagnosing problems

Identifying objectives

Generating alternatives

Evaluating alternatives

Reaching decisions

Choosing implementation strategies

Monitoring and evaluating

7 Steps in the Decision-Making Process
1) Identifying opportunities and diagnosing problems
 Managers regularly review data related to their areas of
responsibility, including both outside information and
reports and information from within the organization

2) Identifying objectives
 Reflect the results the organization wants to attain. Both
the quantity and quality of the desired results should be
specified because these aspects of the objectives will
ultimately guide the decision maker in selecting the
appropriate course of action
 Objectives can be short range or long range
 Cont’d…
3) Generating alternatives
 Alternatives – Strategies that might be implemented in the
decision-making situation
 Creativity and imagination are often required in this step

4) Evaluating alternatives
 Assess the value or relative advantages or disadvantages of
each alternative under consideration

5) Reaching decisions
 Making a final choice
 Cont’d…
 The best decisions are often based on careful judgments,
making a good decision involves carefully examining all
the facts, determining whether sufficient information is
available, and finally selecting the best alternatives

6) Choosing implementation strategies

 When decisions involve taking action or making changes,
choosing ways to put these actions or changes into effect
become an essential managerial task
 The key to effective implementation are:
a) Sensitivity to those who will be affected by the decision
b) Proper planning and considerating of the resources
necessary to carry out the decision
 Cont’d…
7) Monitoring and evaluating feedback
 No decision-making process is complete until the impact
of the decision has been evaluated
 Managers must observe the impact of the decision and
take further action if it becomes necessary
 Group Decision Making
 Group decision making is becoming more
common as organizations focus on improving
customer service and push decision making to
lower levels
Techniques for Enhancing the Quality of
Participative Decision-Making
1) Brainstorming – A technique used to enhance
creativity that encourages group members to generate
as many novel ideas as possible on a given topic
without evaluating them
 Can enhance creativity by overcoming pressures for
conformity that can retard the development of
creative decision-making
 Focuses on generating ideas rather than on choosing
an alternative
 Cont’d…
2) Nominal group technique (NGT) – A structured
process designed to stimulate creative group decision-
making in which agreement is lacking or the members
have incomplete knowledge concerning the nature of
the problem
 Individual members list their ideas on the specific
problem and present the ideas at one time, without
discussion
 Members’ ideas are recorded so that everyone can see
them
 After all members’ ideas are presented, the group
discusses the ideas to clarify and evaluate them
 Cont’d…
2) Delphi technique – An approach that uses the
experts to make predictions and forecasts about future
events without meeting face-to-face
 Using survey instruments or questionnaires, a group
leader collects written expert opinions on a topic
Advantages and disadvantages of Group Decision-Making

Advantages Disadvantages

1. Helps to combine individual

1. More time consuming than
strengths of group members
the process of individual
2. Helps to gain a broader
decision-making.
perspective owing to
2. Takes longer to be finalized
differences of perceptions
since there are many
among group members
opinions to be considered
3. Enhanced collective
and valued.
understanding of the course
3. Members whose opinions are
of action to be taken after
not considered tend to be
the decision is made
left out from the process
4. Gains greater group
4. Responsibility and
commitment since every
accountability of decisions
member shares in the
are not shared equally in
decision –making process
some cases which leads to a
5. Helps the group to think
split in the group.
together in terms of success
as well as failure.
WALLAHUA’LAM