Managerial Decision Making

Topics: Decision making, Decision theory, Decision engineering Pages: 17 (4708 words) Published: May 11, 2011

The business executive is by profession a decision maker.
Uncertainty is his opponent. Overcoming it is his mission.

John McDonald


* Characteristics of Managerial Decisions
* The Stages of Decision Making
* The Best Decision
* Barriers to Effective Decision Making
* Decision Making in Groups
* Managing Group Decision Making
* Organizational Decision Making
* Techniques in Decision Making


* Planning for Decision Making
* Decision Levels
* Some Techniques in Decision Making


Managers face problems constantly. Some problems that require a decision a relatively simple; others seem overwhelming. Some demand immediate action, while others take months or even years to unfold.

Actually managers often ignore problems. For several reasons, they avoid taking action. First, managers can’t be sure how much time, energy, or trouble lies ahead once they start working on a problem. Second, getting involved is risky; tackling a problem but failing to solve it successfully can hurt a manager’s track record. Third, because problems can be so perplexing, it is easier to procrastinate or to get busy with less demanding activities.

It is important to understand why decision making can be so challenging, there are several characteristics of managerial decisions that contribute to their difficulty and pressure. Most managerial decisions lack structure and entail risk, uncertainty, and conflict.

1. Lack of Structure
* programmed decisions - decisions encountered and made in the past * have objectively correct answers
* are solvable by using simple rules, policies, or numerical computations * nonprogrammed decisions - new, novel, complex decisions having no proven answers * a variety of solutions exist, all of which have merits and drawbacks * demand creative responses, intuition, and tolerance for ambiguity

2. Uncertainty and Risk
* certainty - have sufficient information to predict precisely the consequences of one’s actions * uncertainty - have insufficient information to know the consequences of different actions * cannot estimate the likelihood of various consequences of their actions * risk - available information permits estimation of the likelihood of various consequences * probability of an action being successful is less than 100 percent * good managers prefer to avoid or manage risk

3. Conflict
* opposing pressures from different sources
* occurs at two levels
* psychological conflict - individual decision makers: * perceive several attractive options
* perceive no attractive options
* conflict between individuals or groups


Faced with these challenges, how can you make good decisions? The ideal decision-making process moves through six stages. At companies that have institutionalized the process, these stages are intended to answer the following question: What do we want to change? What’s preventing us from reaching the “desired state”? How could we make the change? What’s the best way to do it? Are we following the plan? and How well did it work out?

More formally, decision makers should (1) identify and diagnose the problem, (2) generate alternative solutions, (3) evaluate alternatives, (4) make the choice, (5) implement the decision, and (6) evaluate the decision.

1. Identifying and Diagnosing the Problem
* recognize that a problem exists and must be solved
* problem - discrepancy between current state and past performance, current performance of other organizations, or future expected performance * decision maker must want to resolve the problem and have the resources to do so

1. Generating Alternative Solutions...
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