3️⃣
Managerial decision making
Finished
1.Decision Making
1.1 Degree of structure
2.The phases of decision making
2.1 Identifying and diagnosing the problem
2.2 Generating Alternative solutions
2.3 Evaluating Alternatives
2.4 Making the choice
2.5 Implementing the decision
2.6 Evaluating the decisions
3.The barriers to effective decision making
3.1 Psychological biases
3.2 Time pressures
3.3 Social realities
3.4 Group decision-making
1.Decision Making
1.1 Degree of structure
Non-programmed decisions
new, unstructured, complex decisions having no proven answers
Uncertainty regarding cause-and-effect relationships
variety of possible solutions, all having merits and drawbacks
Programmed decisions
Decisions made before, with objectively correct answers, frequent, repetitive,
sufficient certainty regarding cause-and-effect relationships
clear procedure or structure
Uncertainty and Risk
⇒ Certainty is exceptional, when decision makers have accurate & comprehensive information to predict the outcome of their
actions
Uncertainty
→ occurs when decision makers lack info to predict outcome of their actions
e.g. effect of natural disaster, pandemic, disruptive business models
Risk
→ risk is
manageable, losses may occur
e.g. sales will depend on economic recovery
Conflict and its levels
Managerial decision making 1
, Conflict
exist when managers faces opposing pressures from different sources
Levels of conflict
1. Conflict between people or groups
→ divergent views, interest, goals,…
e.g. CFO wants to reduce clients’ payment term ↔ sales manager wants to increase the term
2. Psychological conflict by individual decision makers
→ several options are attractive or none of them is attractive
e.g. Manager has three promising job applicants for one position
2.The phases of decision making
2.1 Identifying and diagnosing the problem
⇒ is there a need?
⇒ recognize a gap between
current state and desired state
Gaps detected by comparing current performance against
Past performance
current performance of other organizations
future expected performance( based on goals, plans, forecasts)
⇒ info-gathering is used to identify causes of performance gap
2.2 Generating Alternative solutions
2 types
1. Ready-made solutions
→ Programmed decisions, solutions that have been tried before
→ reliance on the past
2. Custom-made solutions
→ Non-Programmed decisions, new, creative solutions designed specifically for the problems
→ More experimental
2.3 Evaluating Alternatives
⇒ what is the value of the alternatives generated? criteria and weights
Short term Long term
→ Which alternative will give best solution, based on criteria → how will you measure succes?
and weights? → improved communication, lower costs, higher sales, lower
employee turnover, higher profits,…
Contingency plans
= Alternative courses of action that can be implemented based on how the future unfolds
→ important for big, often long-term decisions
Managerial decision making 2
Managerial decision making
Finished
1.Decision Making
1.1 Degree of structure
2.The phases of decision making
2.1 Identifying and diagnosing the problem
2.2 Generating Alternative solutions
2.3 Evaluating Alternatives
2.4 Making the choice
2.5 Implementing the decision
2.6 Evaluating the decisions
3.The barriers to effective decision making
3.1 Psychological biases
3.2 Time pressures
3.3 Social realities
3.4 Group decision-making
1.Decision Making
1.1 Degree of structure
Non-programmed decisions
new, unstructured, complex decisions having no proven answers
Uncertainty regarding cause-and-effect relationships
variety of possible solutions, all having merits and drawbacks
Programmed decisions
Decisions made before, with objectively correct answers, frequent, repetitive,
sufficient certainty regarding cause-and-effect relationships
clear procedure or structure
Uncertainty and Risk
⇒ Certainty is exceptional, when decision makers have accurate & comprehensive information to predict the outcome of their
actions
Uncertainty
→ occurs when decision makers lack info to predict outcome of their actions
e.g. effect of natural disaster, pandemic, disruptive business models
Risk
→ risk is
manageable, losses may occur
e.g. sales will depend on economic recovery
Conflict and its levels
Managerial decision making 1
, Conflict
exist when managers faces opposing pressures from different sources
Levels of conflict
1. Conflict between people or groups
→ divergent views, interest, goals,…
e.g. CFO wants to reduce clients’ payment term ↔ sales manager wants to increase the term
2. Psychological conflict by individual decision makers
→ several options are attractive or none of them is attractive
e.g. Manager has three promising job applicants for one position
2.The phases of decision making
2.1 Identifying and diagnosing the problem
⇒ is there a need?
⇒ recognize a gap between
current state and desired state
Gaps detected by comparing current performance against
Past performance
current performance of other organizations
future expected performance( based on goals, plans, forecasts)
⇒ info-gathering is used to identify causes of performance gap
2.2 Generating Alternative solutions
2 types
1. Ready-made solutions
→ Programmed decisions, solutions that have been tried before
→ reliance on the past
2. Custom-made solutions
→ Non-Programmed decisions, new, creative solutions designed specifically for the problems
→ More experimental
2.3 Evaluating Alternatives
⇒ what is the value of the alternatives generated? criteria and weights
Short term Long term
→ Which alternative will give best solution, based on criteria → how will you measure succes?
and weights? → improved communication, lower costs, higher sales, lower
employee turnover, higher profits,…
Contingency plans
= Alternative courses of action that can be implemented based on how the future unfolds
→ important for big, often long-term decisions
Managerial decision making 2
