© Prentice Hall, Modern Management 9 th edition.

© Prentice Hall,  Objectives A fundamental understanding of the term decision An understanding of each element of the decision situation An ability to use the decision-making process An appreciation for the various situations in which decisions are made An understanding of probability theory and decision trees as decision-making tools Insights into groups as decision makers.

© Prentice Hall, F UNDAMENTALS O F D ECISIONS Definition of a Decision Types of Decisions Programmed Nonprogrammed.

© Prentice Hall, F UNDAMENTALS O F D ECISIONS Table 7.1 Traditional and Modern Ways of Handling Programmed and Nonprogrammed Decisions Decision-Making Techniques Types of DecisionsTraditionalModern Programmed: Routine, repetitive decisions1.Habit1.Operations research: Organization develops specific 2.Clerical routine: Mathematical analysis models processes for handling them Standard operating procedures Computer simulation 3.Organization structure:2.Electronic data processing Common expectations A system of subgoals Well-defined information channels Nonprogrammed: One-shot, ill-structured,1.Judgment, intuition,1.Heuristic problem-solving novel policy decisions and creativity techniques applied to: Handled by general makers 2.Rules of thumb Training human decision problem-solving processes 3.Selection and training Constructing heuristic of executives computer programs.

© Prentice Hall, F UNDAMENTALS O F D ECISIONS Figure 7.1 Decision programming continuum.

© Prentice Hall, F UNDAMENTALS O F D ECISIONS The Responsibility for Making Organizational Decisions Scope of the decision Broader scope Consensus.

© Prentice Hall, F UNDAMENTALS O F D ECISIONS Figure 7.2 Level of managers responsible for making decisions as decision scope increases from A to B to C.

© Prentice Hall, F UNDAMENTALS O F D ECISIONS Figure 7.3 How scope of decision affects management level making decision at DuPont.

© Prentice Hall, F UNDAMENTALS O F D ECISIONS Elements of the Decision Situation The Decision Makers Goals To Be Served Relevant Alternatives Ordering of Alternatives Choice of Alternatives.

© Prentice Hall, T HE D ECISION- M AKING P ROCESS Figure 7.4 Model of the decision-making process.

© Prentice Hall, T HE D ECISION- M AKING P ROCESS Identifying an Existing Problem Managers learn of problems by: Orders from superiors Situations relayed by subordinates Normal activity Listing Alternative Solutions Authority factors Biological or human factors Physical factors Technological factors Economic factors.

© Prentice Hall, T HE D ECISION- M AKING P ROCESS Figure 7.5 Additional factors that limit a manager’s number of acceptable alternatives.

© Prentice Hall, T HE D ECISION- M AKING P ROCESS Selecting the Most Beneficial Alternative Implementing the Chosen Alternative Gathering Problem-Related Feedback.

© Prentice Hall, D ECISION- M AKING C ONDITIONS Complete Certainty Condition Complete Uncertainty Condition Risk Condition.

© Prentice Hall, D ECISION- M AKING T OOLS Probability Theory Expected value (EV = I × P) Decision Trees.

© Prentice Hall, D ECISION- M AKING T OOLS Figure 7.6 Expected values from locating surfboard rental store in each of three possible locations.

© Prentice Hall, D ECISION- M AKING T OOLS Figure 7.7 A basic decision tree illustrating the decision facing Stygian management.

© Prentice Hall, G ROUP D ECISION M AKING Advantages and Disadvantages of Using Groups to Make Decisions Advantages: More and better alternatives than individual Implementation supported more fervently Disadvantages: Takes longer Costs the organization more Lower quality if contaminated (Groupthink).

© Prentice Hall, G ROUP D ECISION M AKING Processes for Making Group Decisions Brainstorming Nominal Group Technique 1. Writes down individual ideas 2. Presents individual ideas orally 3. Entire group discusses ideas 4. Secret ballot is taken.

© Prentice Hall, G ROUP D ECISION M AKING Processes for Making Group Decisions (con’t) Delphi Technique 1. Identify problem 2. Offer solutions anonymously 3. Compile and send responses 4. Generate new solutions 5. Repeat 3 and 4 until consensus reached Evaluating Group Decision-Making Processes.

© Prentice Hall, G ROUP D ECISION M AKING Figure 7.8 The brainstorming process.

© Prentice Hall, Chapter Seven Questions