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SEVEN-STEP DECISION-MAKING PROCES

A. Defining the Problem or Opportunity


Defining the problem is the critical step. The accurate definition of a problem affects all the steps
that follow; if a problem is inaccurately defined, every other step in the decision-making process
will be based on that incorrect point. A manager needs to focus on the problem and its causes, not
the symptoms. A tool a manager can use is the funnel approach. The consequences of not
properly defining the problem are wasted time and energy.
B. Identifying Limiting Factors
1. Limiting factors are those constraints that rule out certain alternative solutions.
2. Limitations include the following resources: personnel, money, facilities, equipment, and time.
C. Developing Potential Alternatives
1. Alternatives are solutions to the problem.
2. The alternatives should eliminate, correct, or neutralize the problem.
3. While building the list of alternatives, it is wise to avoid being critical or judgmental about any
alternative that occurs to you or those assisting you.
4. Initially, the alternatives should be separate and distinct solutions to the problem.
5. After the initial list is developed, variations will develop and combinations will emerge.
6. Sources for alternatives include past experience; other persons whose opinions and judgments
are respected; the practice of successful managers; group opinions through the use of task forces
and committees; and the use of outside resources, including managers in other organizations.
D. Analyzing the Alternatives
1. The purpose of this step is to decide the relative merits of each alternative.
2. Depending on the type of problem and the potential solutions developed, the manager might
need to make a more thorough analysis by applying specific decision-making aids.
E. Selecting the Best Alternative
1. Sometimes the optimal solution is a combination of several of the alternatives.
2. Find a solution that appears to offer the fewest serious disadvantages and the most advantages.
F. Implementing the Decision
1. Managers are paid to make decisions, but they are also paid to get results from these decisions.
Results must follow decisions.

2. Everyone involved with the decision must know what he or she must do, how to do it, why to
do it, and when to do it.
3. Programs, procedures, rules, or policies must be thoughtfully put into effect. Carelessness at
this stage causes problems.
G. Establishing a Control and Evaluation System
1. Ongoing actions need to be monitored. They cannot be forgotten.
2. The system should provide feedback on how well the decision is being implemented, what the
results are, and what adjustments are necessary to get results that were wanted when the solution
was chosen.
ENVIRONMENTAL INFLUENCES ON DECISION MAKING (CHAPTER OUTLINE:
SECTION V)
A. Degree of Certainty
1. Decisions are made within conditional aspects that surround certainty, risk, and uncertainty.
2. Low risk, high certainty allows for more decision-making confidence.
3. A managers confidence is lower with uncertainty and/or a high element of risk. The amount
of confidence correlates with the amount of certainty.
4. The degree of certainty in decision making affects the process and the decision-making.
a. Decisions made under conditions of certainty mean that the manager has perfect knowledge.
1. The manager has had to make similar decisions, the alternatives are known, and the
consequences of each alternative are fully understood.
2. In this situation, the manager chooses the alternative known to get the best results.
3. Decisions made under conditions of certainty can mean that a manager can rely on a policy or
standing plan; the decision will be made routinely.
b. Decision making under conditions of risk provides a more difficult decision-making
environment.
1. The manager knows what the problem is, knows what the alternatives are, but does not know
how each alternative will work out even though the manager knows the odds (probabilities) of
possible outcomes.
2. The manager must choose the best alternative available.
c. Decision making under conditions of uncertainty is like being a pioneer.

1. In this situation, the manager is not able to determine the exact odds (probabilities) of the
potential alternatives available.
2. The manager is unable to predict with any accuracy the probable results of choosing any one
alternative.
B. Imperfect Resources
1. All managers would ideally like to maximize their decisions; they want to make the best
decisions.
2. To accomplish this, managers need to have the ideal resourcesinformation, time, personnel,
equipment, and supplies.
3. Realistically, managers operate in an environment that normally does not provide ideal
resourcesthey may lack the proper budget or the desired quantity or quality of information.
4. Managers do not always have perfect information or the maximum amount of time.
5. They choose to satisficeto make the best decision possible with the information, resources,
and time available.
C. Internal Environment
1. Superiors
2. Subordinates
3. Different decision-making environments dictate different responses from managers.
4. Decisions will never have a chance to affect the organization and solve problems unless they
receive acceptance and support.
5. A managers decision-making environment is greatly structured by superiors, subordinates,
and organizational systems.
6. The managers boss is a major factor in the operating environment.
7. Subordinates also are a major factor in a managers decision-making environment.
a. A manager must evaluate the level of the subordinates involvement which can range from no
input to full responsibility for a decision that the manager must then accept.
b. The possible degrees of involvement as outlined by Victor Vroom are:
1. The manager solves the problem or makes the decision by using information available at that
time.
2. The manager obtains the necessary information from subordinates, then decides on the
solution to the problem.

3. The manager shares the problem with relevant subordinates individually, getting their ideas
and suggestions without bringing them together as a group. The manager then makes the
decision.
4. The manager shares the problem with the subordinates collectively, obtaining their inputs. The
manager then makes the decision.
5. The manager shares the problem with the subordinates as a group, and together they make the
decision.
c. Two factors influence the option a manager will usethe objective quality of the decision
needed and the degree of acceptance by the subordinates.
1. A decision is considered to have a high degree of objective quality if it is made with a logical,
rational, step-by-step approach.
2. A decision is considered to have a high degree of acceptance if it has been made with the input
of those affected by it.
3. A manager can utilize the Vroom and Yetton model to determine the appropriate style. This
model is known as a decision tree.
8. Organizational systems influence decision making.
a. Every organization has policies, procedures, programs, and rules that serve as boundaries for a
managers decision making.
b. If they pose major barriers, it may be a wise strategy to delay a decision and attempt instead to
get the system modified.
D. External Environment
1. A manager must consider external forces, or the external environment, when using the
decision-making process.
1. Customer, competitors, and government agencies are examples of external forces that cannot
be controlled, yet they can influence decisions.
INFLUENCE OF MANAGERIAL STYLE ON DECISION MAKING (CHAPTER OUTLINE:
SECTION VI)
A. Personal Decision-Making Approaches
1. Three influences are personal attributes (the managers personal decision-making approach),
the ability to set priorities, and the timing of decisions.
2. Personal decision-making approaches:

a. Rational/logical decision model. The manager who uses this model employs a step-by-step
process. Decisions are made on facts and logic using payback analysis, decision trees, and
research.
b. Intuitive decision model. Managers who rely on gut decisions rely on their feelings. The
manager who relies on intuition from long-range decision making courts disaster. The best
decisions are a result of a blend of the decision makers intuition and the rational step-by-step
approach.
c. Predisposed decision model. This approach is evidenced by a manager who decides on a
solution, then gathers the material to support the decision.
3. Regardless of the model favored by the manager, a critical element is for the manager to know
what his or her tendencies are in decision making and to move toward the rational model. A
problem can be created when a manager believes he or she is using one approach when in reality
it is a different model.
B. Ability to Set Priorities
1. A factor that can influence a managers success is the ability to establish priorities for
decision-making.
2. Each manager may have a different and unique set of criteria.
C. Timing of Decisions
1. After a decision is made, it must be translated into action.
2. Good timing plays an important part in successfully implementing a decision; improper timing
can harm the best decision.
D. Tunnel Vision
1. Many causes lead to tunnel vision
2. The glass ceiling of promotability is a prime example of this phenomenon.
3. Lack of maturity, inadequate education, or personal hang ups are indicative of near-sighted
thought and behavior.
E. Commitment to Previous Decisions
1. Decisions often build upon other decisions.
2. Commitments from previous decisions can influence subsequent decisions.
3. Many decisions do not stand alone. One decision may create another.

F. Creativity
1. Imagination and innovation benefit decision making.
2. Frequently, organizational circumstances curtail creative thought and action. Bureaucratic,
traditional organizations discourage thought.
VII. GROUP DECISION MAKING (CHAPTER OUTLINE: SECTION VII)
A. Brainstorming
1. Maximizing group inputs without interruptions is very important.
2. Freedom of expression and a mutual sense of contribution and sharing is key to effective
brainstorming. Everyone jumps on this bandwagon!
B. Nominal Group Technique
1. Equal participation is an absolute. Shared responses prevail.
2. Individuals must be encouraged to exercise creativity.
3. This technique operates within a structured venue of organization.
C. Delphi Technique
1. This technique was developed by the RAND Corporation to forecast the potential effects of
nuclear attacks upon this country.
2. Equal participation of group consensus making aligns individual experts by repeatedly
contributing and corresponding from dispersed locations.
D. Advantages and Disadvantages of Group Decision Making
1. Advantages
2. Disadvantages
3. Are two heads always better than one? Maybe but not always!
4. Are more perspectives and perceptions always welcome? If time permits!
5. Does the concept of groupthink minimize the power and opportunity of collective thought?
Yes, often it does!
6. These and many more questions must be addressed to size up the pros and cons of individual
versus group decision making. (Ask the students!)
. Decision Making Process
Decision making is the study of identifying and choosing alternatives based on the values and
preferences of the decision maker. Making a decision implies that there are alternative choices to be
considered, and in such a case we want not only to identify as many of these alternatives as possible
but to choose the one that best fits with our goal
s, objectives, desires, values, and so on. (Harris

(1980))
According to Baker et al. (2001), decision maki
ng should start with the identification of the
decision maker(s) and stakeholder(s) in the decisi
on, reducing the possible disagreement about
problem definition, requirements, goals and crit
eria. Then, a general decision making process can
be divided into the following steps:
Step 1. Define the problem
This process must, as a minimum, identify root causes, limiting assumptions, system and
organizational boundaries and interfaces, and any st
akeholder issues. The goal is to express the
issue in a clear, one-sentence
problem statement
that describes both the initial conditions and the
desired conditions. Of course, the one-sentence lim
it is often exceeded in the practice in case of
complex decision problems. The problem statement must however be a concise and unambiguous
written
material agreed by all decision makers and stakeholders. Even if it can be sometimes a long
iterative process to come to such an agreement, it is a crucial and necessary point before proceeding
to the next step.
Step 2. Determine requirements
Requirements are conditions that an
y acceptable solution to the problem
must
meet. Requirements
spell out what the solution to the problem
must
do. In mathematical form, these requirements are
the constraints describing the set of the feasible (a
dmissible) solutions of the decision problem. It is
very important that even if subjective or judgme
ntal evaluations may occur in the following steps,
the requirements must be stated in exact quantitative form, i.e. for any possible solution it has to be
decided unambiguously whether it meets the requirements or not. We can prevent the ensuing
debates by putting down the requirements and how to check them in a written material.
Step 3. Establish goals
Goals are broad statements of intent and desi
rable programmatic values.... Goals go beyond the
minimum essential
must haves
(i.e. requirements) to
wants
and
desires
. In mathematical form, the
goals are objectives contrary to the requirements that are constraints. The goals may be conflicting
but this is a natural concomitant of practical decision situations.
Step 4. Identify alternatives
Alternatives offer different approaches for changing the initial condition into the desired
condition. Be it an existing one or only constructed in mind, any alternative must meet the
requirements. If the number of the possible alternatives is finite, we can check one by one if it

meets the requirements. The infeasible ones must be deleted (screened out) from the further
consideration, and we obtain the explicit list of
the alternatives. If the number of the possible
alternatives is infinite, the set of alternatives is considered as the set of the solutions fulfilling the
constraints in the mathematical form of the requirements.
Step 5. Define criteria
Decision criteria, which will discriminate among alternatives, must be based on the goals. It is
necessary to define discriminating criteria as objec
tive measures of the goals to measure how well
each alternative achieves the goals. Since the goals will be represented in the form of criteria,
every goal must generate at least one criterion
but complex goals may be represented only by
several criteria.
It can be helpful to group together criteria into
a series of sets that relate to separate and
distinguishable components of the overall objective
for the decision. This is particularly helpful if
the emerging decision structure cont
ains a relatively large number
of criteria. Grouping criteria can
help the process of checking whether the set of crit
eria selected is appropriate to the problem, can
ease the process of calculating criteria weights in
some methods, and can facilitate the emergence
of higher level views of the issues. It is a usual
way to arrange the groups of
criteria, subcriteria,
and sub-subcriteria in a treestructure (UK DTLR (2001)).
According to Baker et al. (2001), criteria should be

able to discriminate among the alternatives and to support the comparison of the performance of
the alternatives,

complete to include all goals,

operational and meaningful,

non-redundant,

few in number.
In some methods, see Keeney and Raiffa (1976), non-redundancy is required in the form of
independency.
We mention that some authors use the word attr
ibute instead of criterion. Attribute is also
sometimes used to refer to a measurable criterion.
Step 6. Select a decision making tool
There are several tools for solving a decision problem. Some of them will be briefly described here,
and references of further readings will also be pr
oposed. The selection of an appropriate tool is not
an easy task and depends on the concrete decision problem, as well as on the objectives of the

decision makers. Sometimes the simpler the method, the better but complex decision problems
may require complex methods, as well.
Step 7. Evaluate alternatives against criteria
Every correct method for decision making needs, as input data, the evaluation of the alternatives
against the criteria. Depending on the criterion, the assessment may be objective (factual), with
respect to some commonly shared and understood sc
ale of measurement (e.g. money) or can be
subjective
(
judgmental),
reflecting the subjective assessment of the evaluator. After the evaluations
the selected decision making tool can be applied to
rank the alternatives or to choose a subset of the
most promising alternatives.
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Step 8. Validate solutions against problem statement


The alternatives selected by the applied decision
making tools have always to be validated against
the requirements and goals of the decision problem. It may happen that the decision making tool
was misapplied. In complex problems the selected alternatives may also call the attention of the
decision