DECISION-MAKING

CHAPTER 2

DECISION MAKING AS A
MANAGEMENT RESPONSIBILITY
Decision-making is a responsibility of the engineer
manager.
It is understandable for managers to make wrong
decisions a times.
The wise manager will correct them as soon as
they are identified.
The bigger issue is the manager who cannot or do
not want to make decisions.
Management must strive to choose a decision
option as correctly as possible.
Since they have that power, they are responsible
for whatever outcome their decisions bring.

WHAT IS DECISIONMAKING?
Decision-making may be defined as the process of
identifying and choosing alternative courses of action
in a manner appropriate to the demands of the
situation.
Decisions are made at various management levels
and at various management functions.
Decision-making, according to William G. Nickels and
others, is the heart of all the management functions

THE DECISION MAKING PROCESS

Rational decision-making, according to David H. Holt,
is a process involving the following steps:
Diagnose Problem
If the manager wants to make an intelligent
decision, his first move must be to identify the
problem.

Analyze the Environment

The objective of environmental analysis is the
identification of constraints, which may be spelled
out as either internal or external limitations.
Examples of internal limitations are as follows:
1. Limited funds available for the purchase of equipment.
2. Limited training on the part of employees.
3. Ill-designed facilities.

Examples of external limitations are as follows:

1. Patents are controlled by other organizations.
2. A very limited market for the companys products and
services exists.
3. Strict enforcement of local zoning regulations.

The environment consists of two major concerns:

1. Internal environment
a.
b.
c.
d.
e.

Organizational Aspects
Marketing Aspects
Personnel Aspects
Production Aspects
Financial Aspects

2. External environment
a. Government
b. Labor Unions
c. Suppliers
d. Banks
e. Public

f. Competitors
g. Clients
h. Engineers

 Articulate Problem

Discuss the problem with the member of the

organization and gather data and information for
future references

Develop Viable alternatives

This is made possible by using a procedure with

the following steps:
1. Prepare a list of alternative solutions.
2. Determine the viability of each solution.
3. Revise the list by striking out those which are not viable.

Evaluate Alternatives

Proper evaluation makes choosing the right

solution less difficult.
Each alternative must be analyzed and evaluated
in terms of its value, cost, and risk characteristics.
The value of the alternatives refers to benefits that
can be expected.

 Make a Choice
This is the point that the decision-maker must be
convinced that all the previous steps were correctly
undertaken.
Choice-making refers to the process of selecting
among alternatives representing potential solutions
to a problem.
particular effort should be made to identify all
significant consequences of each choice.

Implement Decision
Implementation refers to carrying out the decision
so that the objectives sought will be achieved.
At this stage, the resources must be made available
so that the decision may be properly implemented.
those who will be involved in implementation must
understand and accept the solution.

Evaluate and Adapt Decision Results

Feedback
Control
If the desired result is achieved, one may assume
that the decision made was good. If it was not
achieved, O.C. Ferrel and Geofrey Hirt suggests
that further analysis is necessary.

APPROACHES IN SOLVING PROBLEMS

Approaches:
Qualitative evaluation
Qualitative approach when:
a. The problem is fairly simple.
b. The problem is familiar.
c. The costs involved are not great
d. Immediate decisions are needed.
Quantitative evaluation refers to the evaluation of
alternatives using any technique in a group classified as
rational and analytical.

QUANTITATIVE MODELS FOR

DECISION MAKING
The types of quantitative techniques which may be useful in
decision-making are as follows:
Inventory Models

Economic order quantity model

Production order quantity model
Back order inventory model
Quantity discount model

Queuing Theory
Network Models

The Program Evaluation Review Technique (PERT)

The Critical Path Method (CPM)

Forecasting
Regression Analysis
Simulation
Linear Programming
Sampling Theory
Statistical Decision-Theory

DECISION-MAKING
CHAPTER 2