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Managerial Decision making is more than making a

choice from available alternatives. Discuss
showing you aware of what is involved in effective
managerial decision making.
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TABLE OF CONTENT :

1. NAME:
INTRODUCTION M.R.A.
(Page 3) Shanuka Ranavake
STUDENT ID :
2. PROGRAMMED AND NON–PROGRAMMED DECISIONS (Page
TITLE OF THE UNIT: Management
3) NAME OF THE LECTURER: Mr.

DAY & TIME OF CLASS:

3. THEORIES OF DECISION MAKING (Page 4)

3.1The classical theory of decision making

3.2 The behavioral theory of decision making

4. THE DECISION MAKING PROCESS (Page 5)

5. THE STEPS IN DECISION MAKING (Page 6)

5.1 The

criteria

for good

decision making (Page 7)

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6. ADVANTAGES AND DISADVANTAGES OF GROUP DECISION

MAKING (Page 8)

7. CONCLUSION(Page 9)

8. REFERENCES (Page 10)

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Managerial Decision making is more than making a choice from available

alternatives. Decision showing you are aware of what is involved in effective
managerial decision Making.

10INTRODUCTION

Decision Making – that process of thought and action that leads to a

decision lies at the Heart of management. Managers spend their time
choosing between alternatives courses of action on the basis of the
information available to them at the time, in other words, making
decisions.

Decision making is closely linked with the management process of

planning. Planning is all about taking decisions about future actions.
And “Planning is in fact a particular type of decision making, with three
distinguishing characteristics”: (Russell L.Ackoff 1970)
i. It is anticipatory decision making.
ii. Planning involves a set of interdependent decisions.
iii. Planning is directly towards making decisions which would not
otherwise be made.

10PROGRAMMED AND NON-PROGRAMMED DECISIONS

Programmed Decision making:

Just as in the planning process, different levels of management have
to make different types of decisions, with differing amount of risk and
uncertainty attached to them, and which are differing time spans.
Supervisors and junior levels of management have fairly clear-cut
decisions to make, where the problems and their solutions are routine.
Decisions made at this level normally have to be made quickly. The
time span is short, and there is usually little uncertainty associated
with this level of Decision Making.
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Non-programmed decision making:

However, as managers progress up the organizational hierarchy, the
decisions they have to make result in longer and longer gaps between
the problems being noted and the result of their decisions becoming
known. Decisions are also subject to more and more uncertainty and
risk, and the consequence of wrong decisions become more costly.

Programmed decisions . Programmed decisions are made in routine,

repetitive, well-structured situations with predetermined decision rules.
These may be based on habit, or established policies, rules and procedures
and stem from prior experience or technical knowledge about what works or
does not work in a given situation.
(http://www.marcbowles.com/courses/adv_dip/module3/chapter4/amc3_ch4t
wo1.htm)

Non-programmed decisions. Non-programmed decisions are unique

decisions that require a 'custom made' solution. This is when a manager is
confronted with an ill-structured or novel problem and there is no 'cut and
dried solution'
(http://www.marcbowles.com/courses/adv_dip/module3/chapter4/amc3
_ch4two1.htm)

20 THEORIES OF DECISION MAKING

There are two main schools of thought underlying the decision making
process, the classical theory and the behavioral theories of writers
such as Simon and Cyert and March (1958)

3.1 The classical theory of decision making

The classical theory or rational, economic decision making assumes that the
decision maker:

i. Has complete knowledge of all possible alternative courses of action.

ii. Has complete knowledge of the consequence of taking every
alternative.
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iii. Can attach definite payoff to each possible outcome.

iv. Can put each payoff in order, from the highest to the lowest payoff.

Obviously these assumptions are fairly unrealistic and rarely valid because
of various factors, such as the following:

i. Uncertainty – possible alternative courses of action may not be known

or identifiable; and the outcomes and payoffs of any individual course
of action may also be uncertain.
ii. The decision maker may have many criteria; both quantifiable and
unquantifiable, by which he wishes to value a possible course of
action, and not merely monetary payoff.
iii. There may be practical limitations on the analysis of the courses of
action, the decision maker may lack the mental capacity to evaluate
and compare all the possible alternatives.

3.2 The behavioral theory of decision making

It was ‘Simon (1957)’ who put forward the idea of “Administrative man” as a
more realistic alternative to the rational, economic man of the classical
theorist. “Administrative Man” is a satisfier rather than a perfectionist, and
his decision making behavior can be summed up as follows:

i. When choosing between alternatives, decision makers looks for a

scheme which provides a satisfactory payoff, not the best possible
payoff.
ii. Decision makers recognize that their perception of the world is only a
very simplified model of the real word.
iii. A satisfier can make a choice without first determining all the possible
alternatives and without ascertaining that these are actually all the
alternatives.

10 THE DECISION MAKING PROCESS

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There are six steps in the decision making process:

i. The problem must be defined – this involves diagnosing the real

problem and not just the symptoms of it, as well as
distinguishing between conditions which are ‘ musts ‘ and
conditions which are ‘ shoulds ’ For example, a staffing problem
can be analyzed as ‘We must employ someone who can do the
job at the given salary, and they should fit in well with the others
in the organization’.
ii. The relevant facts have to gather together and analyzed.
iii. Develop alternative solutions – this is a natural extension to the
previous stage of fact gathering, and many possible solutions
will arise naturally form it.
iv. Evaluate the alternative solutions – in terms of solving the
original problem and meeting the organization`s overall
objectives.
v. Select the best alternative – the choice will be based on the
available information and will usually be compromise solution.
Drucker (1955) suggests four factors which should be used to
judge potential solution.

a) The risk involved compared to the expected gain.

b) The amount of effort that each involves.
c) The time span involved with each alternative, this is
specially important if dramatic change are needed
immediately
d) The availability of any additional resources which may be
required
i. Analyze the possible consequence of the decision – this is
important so that any anticipated problems can be delt with
successfully.
ii. Implement the decision – this will involve setting up a budget
and defining responsibilities to ensure the project completion.
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There will also need to be a system of checking and control to

ensure that the decision is implemented correctly.( Feedback)

 Managerial decision-making is the process through which mangers in

an organization arrive at a suitable alternative solution to a given
problem. This entails a detailed analysis of the pros and cons of each
available solution. The factors affecting managerial decision-making
include risk, uncertainty, and conflict. The paper examines issues
involved in managerial decision-making.
(http://jobfunctions.bnet.com/abstract.aspx?
docid=90416&tag=content;col1)

10THE STEPS IN DECISION MAKING

i. Statement of aims. It is very necessary to have a clear

understanding of what needs to be achieved, or what the real
underlying problem is, particularly when a number of managers
are involved in the decision making.
ii. Examination of resources. Any consideration of the available
resources should cover the three critical area of:
a) People – who is available to help, who has experience and
training which could help, how many people are
available?
b) Finances – what can be spent on the project, and the
limits of financial authority?
c) Materials and equipment – where can the work be done,
the availability of raw materials, does any specialized
equipment need to be used and if so is such equipment
available?
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i. Searching for alternatives. Some guidelines are suggested

below which may help when alternative courses the action are
being looked for;
a) Make use of any knowledge and experience which is
already available.
b) Ask penetrating questions, don’t just accept things at
their face value.
c) Apply creative, lateral thinking.
i. Evaluation of alternatives. Evaluating the alternative solution
involves, to begin with, assessing how well each meets the
desired end.
ii. Selecting the best course of action. Although we can trace a
sequence of logical thought process through each stage of
decision making, at the moment of decision the logic may not be
clear. The manager will, in effect, be putting a value on those
factors which cannot be formally evaluated.
iii. Implementation. The true test of confidence in the decision
making process comes when the decision has to be converted
into a plan of action. A systematic approach to the whole
process of problem analysis and decision making is essential if
only for this purpose to give managers enough confidence in thr
decision to initiate action.

Decision Making Model In Five Steps(http://www.business-

analysis-made-easy.com/Decision-Making-Model-In-Five-
Steps.html)

1. State The Problem

2. Identify Alternatives
3. Evaluate The Alternatives
4. Make A Decision
5. Implement Your Decision

5.1 Criteria for good decision making.

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There are seven steps involved in this process.

i. The identification of a wide range of alternative courses of

action.
ii. Consideration of full range of objectives used and the values
implied by choices.
iii. A careful consideration of the costs and risk of both the
positive and negative consequences of each alternative.
iv. A diligent search for new information for the future evaluation
of possible solutions.
v. The acceptance of any new information, even when it does
not support the course of action initially proffered.
vi. The re-examination of the positive and negative
consequences of all known alternatives, before making final
choice.
vii.Making detailed plans for implementing the chosen courses of
action, including contingency plans in the event of various
known risks actually occurring.

10 ADVANTAGES AND DISADVANTAGES OF GROUP

DECISION MAKING

Group decision making has numerous advantages over individual

decision making. The following advantages accme as a result of group
decision making:
i. Greater understanding and acceptance of the final
decision.
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ii. Increased number and diversity of alternatives can be

developed.
iii. Greater focus with more information and knowledge.
iv. Members develop knowledge and skills for further use.

The disadvantages of group decision making are:

i. It is more time consuming.

ii. Domination by a group or a person may hamper the
process.
iii. Disagreements may delay decisions and cause hard
feelings.

GROUP DECISION-MAKING
(http://managementconsultingcourses.com/Lesson26GroupDecisionMaking.p
df)

‘The most common form of group decision making takes place in interacting
groups. In these groups, members meet face-to-face and rely on both verbal
and nonverbal interaction to communicate with each other. But as our
discussion of groupthink demonstrated, interacting groups often censor
themselves and pressure individual members toward conformity of opinion.
Brainstorming, the nominal group technique, and electronic meetings have
been proposed as ways to reduce many of the problems inherent in the
traditional interacting group.
Brainstorming is meant to overcome pressures for conformity in the
interacting group that retard the development of creative alternatives.73 It
doe~ this by utilizing an idea-generation process that specifically
encourages any and all alternatives, while withholding any criticism of those
alternatives. ‘

10 CONCLUSION
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Decision making is fundamental to the whole task of

management, and is closely linked to the management
process of planning and problem solving.
Most decisions, specially those taken by lower levels of
management, are fairly routine once, and are
encountered many, many times. Some of these routine
decisions can be programmed into computer systems.
However, the decisions taken by senior managers are of
a different nature. These involve choosing between
different, often risky, strategies in order solve ill-defined
and unclear problems.
There is a variety of decision analysis techniques, and
together with a systematic approach to decision making ,
they can help managers to make these second type of
decisions, or at least to reduce the risk of making costly
mistakes.
Good decisions are based on good information an
effective and efficient management information system
should improve the quality of decisions at all levels of the
organization.
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20 REFERENCES

1. http://www.marcbowles.com/courses/adv_dip/module3/chapter4/a

mc3_ch4two1.htm

2. http://jobfunctions.bnet.com/abstract.aspx?

docid=90416&tag=content;col1

3. http://www.business-analysis-made-easy.com/Decision-Making-

Model-In-Five-Steps.html

4. http://managementconsultingcourses.com/Lesson26GroupDecisio

nMaking.pdf

5. www.csupomona.edu/~rsingh/MHR 301/Managerial Decision

making.ppt

6.
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Word count: 1998