Department of Human Resource Management
Faculty of Management studies and Commerce
University of Jaffna
Course Title: MC9010 - Management Practices & Case Studies
Chapter Title: Managerial Decision Making Hand out No: 03
Prepared by: Ms.N.Jasintha Issued on: 13.03.2020
Intended Learning Outcome
After completing this chapter successfully, you should be able to:
Describe the importance of Decision-making and Problem-solving in Management
Define Problem, problem solving, decision and decision making
Explain the types of decisions and decision making styles
Describe the decision making conditions
MANAGERIAL DECISION MAKING
1.1.INTRODUCTION
Management can be considered as a process of successful decision-making and problem-solving
aimed at enhancing performance. Decision making is involved in every level of management,
functions of management and even the process of management. From acquiring the resource to
achieve the end results of the organizations it’s very crucial. A decision is one when there are
different things we can do and we pick one of them. We make lots of decisions everyday like;
what to eat in breakfast, what to wear, choose our career, choosing our friends and etc. In every
situation we have to search for how to make right decision. This chapter guides you to having
better understanding of decision making.
1.2.UNDERSTANDING RELATED TERMS
1.2.1. Problem
The unfavorable difference between the actual state of affairs and desired/expected state of
affairs
Actual Desired
State of affairs State of affairs
This problem can be categorized into two:
Technical problem
Human problem
1.2.2. Problem-Solving
Problem solving is the process of identifying & implementing best solutions to problems by
correctly diagnosing the route cause/s with right decisions.
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1.2.3. Decision
Decision means that selection or the choice for a particular problem. It can be defined as
“Selection of the best alternative solution for a problem.”
1.2.4. Decision Making
Decision making is the act or process of identifying problems, identifying possible solutions for
the problems/ opportunities and then choosing one alternative among a set of solutions.
1.3.TYPES OF DECISIONS
1.3.1. Programmed Decisions
A decision that is fairly structured solution to routine problems determined by rules,
procedures and habits.
1.3.2. Non-programmed Decisions
Specific solutions created through unstructured process to deal with non- routine
problems.
Content Programmed Non-programmed
Situation Routine & Repetitive Non-routine & Novel
Nature Structured unstructured
Degree of knowledge Familiar Unfamiliar
Made by Mostly Lower level managers Mostly Top level managers
1.4.DECISION MAKING CONDITIONS
Certainty: All of the information the decision maker needs is fully available.
Risk: A decision has clear goals and good information is available, but the future
outcomes associated with each alternative are subject to change.
Uncertainty: Managers know which goals they wish to achieve, but information about
alternatives and future events is incomplete and managers may have to come up with
creative approaches to alternatives.
Ambiguity and Conflict: The goals and/or problem are unclear and difficult to define.
1.5.PROCESS OF DECISION MAKING
a) Recognition of decision requirement
Awareness of a problem or opportunity is the first step in the decision sequence. Managers
confront a decision requirement in the form of either a problem or an opportunity.
b) Diagnosis and Analysis of causes
Diagnosis and analysis of cause step in the decision making process in which managers
analyze underlying causal factors associated with the decision situation.
c) Development of alternatives
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The next stage is to generate possible alternative solutions that will respond to the needs of
the situation and correct the underlying causes.
d) Selection of the desired alternative
The best alternative is one in which the solution best fits the overall goals and values of the
organization and achieves the desired results using the fewest resources. Therefore the next
step of the decision making is select most appropriate alternative for the particular problem.
e) Implementation of the chosen alternative
The next step in the decision making process, that involves using managerial, administrative,
and persuasive abilities to translate the chose alternative into action.
f) Evaluation and Feedback
The last step of section is evaluation and feedback. In the evaluation stage of the decision
process, decision makers gather information that tells them how well the decision was
implemented and whether it was effective in achieving its goals.
1.6. DECISION MAKING STYLES
Individual Decision Making: Made by a single person, Obvious in autocratic and
centralized environments.
Group (Collective) Decision Making: Made by a group/team, Obvious in democratic
and de-centralized environments.
1.6.1. Advantages of Group Decision Making
More background knowledge
More alternatives generated
More understanding of the decision
More support for decision
Helps fulfill social needs
1.6.2. Disadvantages of Group Decision Making
Time consuming, inefficient
Ineffective Compromise decisions
Groupthink, social pressure, conflicts
Lack of clear responsibility
1.6.3. Group Decision Making Techniques
Brainstorming
Brainstorming uses a face to face interactive group to spontaneously suggest a wide
range of alternatives freely for decision making.
Nominal Group Technique
This technique is used most often to generate creative and innovative alternatives or
ideas. Once alternative solutions are listed, group members vote by usually rank ordering
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the various alternatives. The highest ranked alternative represents the decision of the
group.
Delphi Technique
It is unique because it is a group process using written responses to a series of
questionnaires instead of physically bringing individuals together to make a decision.
Majority Rule
This refers to a decision-making rule where each member of the group is given a single
vote, and the option that receives the greatest number of votes is selected.
Group Decision Support Systems (GDSS)
GDSS are interactive computer-based systems that are able to combine communication
and decision technologies to help groups to make a better decision.
1.7.WHY MANAGERS MAKE BAD DECISIONS?
Being influenced by initial impression
When considering decisions, the mind often gives disproportionate weight to the fi rst
information it receives. These initial impressions, statistics, or estimates act as an anchor
to our subsequent thoughts and judgments.
Justifying past decisions
Many managers fall into the trap of making choices that justify their past decisions, even
if those decisions no longer seem valid.
Seeing what you want to see
People frequently look for information that supports their existing instinct or point of
view and avoid information that contradicts it.
Perpetuating the status quo
Managers may base decisions on what has worked in the past and fail to explore new
options, dig for additional information, or investigate new technologies.
Being influenced by emotions
The decision response of a manager can be influenced by the mere wording of a problem.
Overconfidence
Most people overestimate their ability to predict uncertain outcomes. Before making a
decision, managers have unrealistic expectations of their ability to understand the risk
and make the right choice.
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