Summary MNG2601 Learning Unit 5 Decision-making

5.1 Decision-making & the management process:

Decision-making skills = ability of managers to make better decisions than their competitors, make the decisions faster
than competitors & implement decisions effectively & efficiently

Decision = Implies managers faced with threat, problem or opportunity



Decisions in 4 fundamental management function:

 Planning = decisions about goals & when & where they will be realised
 Controlling = notice goals not realised
 Organising = decisions involving creation of org structure & deployment of resources enabling org to attain its
goals
 Leading = decide how to influence & direct behaviour of subordinates so they will work willingly to pursue goals of
org




5.2 Relationship between problems, problem-solving & decision-making:
 Problem = Whenever managers perceive a difference between what happened & what they planned to happen
 Problem-solving = Process of taking corrective action that will solve a problem
 Decision-making = process of selecting an alternative course of action that will solve a problem



5.3 Types of managerial decisions:

Programmed decisions:

 Repetitive & routine
 Have polices, standard operating procedures & rules
 Ex: processing of payroll vouchers, processing of graduation candidates, processing admission of athletes to a
sport club, buying stationary or procuring raw materials



Non-programmed decisions:

 Novel, unstructured & have not occurred before
 Complex, elusive & no established method for dealing with them
 Ex: org decide to merge with another for 1st time




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, 5.4 Decision-making conditions:

CERTAINTY RISK UNCERTAINTY
 Complete certainty  Some certainty  Complete uncertainty
 Available options &  Outcome of each  Outcome of each
benefits or costs of each alternative is not known in alternative is un
are known advance predictable
 No element of change  Probability can be assigned  Probability cannot be
intervenes between option to each alternative assigned to each
& its outcome outcome alternative outcome
 Decision is a sure thing  Decision is a gamble  Decision requires guts
 Programmed decisions  Most difficult, complex,
Objective probability: novel circumstances
EXAMPLE  based on historical
 purchase of government evidence  Non-programmed
treasury bill  likelihood that particular
 knowing income taxes are state of things will occur
due on 15 April based on hard facts &
figures

Subjective probability:
 rely on personal estimate
& belief



FACTORS OF UNCERTAINTY & HIGH RISK

 Economic recessions, stock market crashes, hostile takeovers
 Physical industrial accidents, supply breakdowns, product failure
 Personnel strikes, workplace violence
 Criminal theft of money & goods, product tampering
 Theft of info, tampering of company records, cyber attacks
 Reputation rumour mongering, defamation
 Natural disasters: fires, floods, earthquakes




5.5 Decision-making models:

Two primary decision-making models

1. Rational model {“optimising”}

= decision-maker selects the best possible solution to problem

2. Bounded-rationality model {“satisficing”}

= decision-maker selects 1st possible solution to problem

that meets the minimal criteria

SATISFICE (BOUNDED-RATIONAL MODEL)

 Programmed low-risk or certain decisions

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