Seven Steps in the DecisionMaking Process

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Seven Steps in the Decision-Making Process
Identifying opportunities and diagnosing problems
Identifying objectives
Generating alternatives
Evaluating alternatives
Reaching decisions
Choosing implementation strategies
Monitoring and evaluating
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Models of Decision Making

• Rational-Economic Model

• Behavioral Decision Model

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Rational-Economic Model

• A framework that assumes managers have completely
  accurate information.
• Concentrates on how decisions should be made, not
  on how they are actually made

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Assumptions of Rational-Economic Model

• Managers have perfect information.
• Objectives are known and agreed to.
• Managers are rational, systematic, and logical.
• Managers work in the best interests of their
  organizations.
• Ethical decisions do not arise in the
  decision-making process.

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Drawbacks of the Rational-Economic Model slide 1
of 2

• In practice, the model may not always be
  realistic.
• Leaders rarely have access to perfect
  information.
• Even if available, decision makers are limited
  in their ability to comprehend vast amounts of
  information.

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Drawbacks of the Rational-Economic Model slide 2
of 2

• Decision makers seldom can accurately forecast
  future consequences.
• Fatigue, emotions, attitudes, motives of
  behaviors all intervene to prevent a rational
  decision making.
• Individual culture and ethical values influence
  the decision process.

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Models of Decision Making

• Rational-Economic Model

• Behavioral Decision Model

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Behavioral Decision Model slide 1 of 2

• The behavioral model acknowledges human
  limitations that make rational decisions
  difficult.
• The behavioral model suggests that cognitive
  ability to process information is limited.

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Behavioral Decision Model slide 2 of 2

• Managers usually attempt to behave rationally
  within their limited perception of a situation.
• Most organizational situations are so complex
  that managers view problems within sharply
  restricted bounds.
• Managers behavior can be considered rational, in
  terms of their simplified view of the problem.

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Concepts Important to the Decision Model slide 1
of 2

• Bounded Rationality
• Managers are limited by time, information
  resources, and their own mental capabilities.
• Intuition
• An unconscious analysis based on past experience.

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Concepts Important to the Decision Model slide 2
of 2

• Satisficing
• Acceptance of something that is satisfactory
  rather than perfect or optimal.
• Escalation of Commitment
• Tendency to increase commitment to a course of
  action beyond what would be expected if the
  manager followed an effective decision-making
  process.

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Group Considerations in Decision Making

• Group decision making is becoming more common as
  organizations focus on improving customer service
  and push decision making to lower levels.

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Participative Models

• Vroom and Jago Model
• The type of decision itself determines the
  appropriate degree of participation.
• A participative decision style is desirable when
• Subordinates have useful information and share
  the organizations goals.
• Subordinates commitment to the decision is
  essential.
• Timeliness is not crucial.
• Conflict is unlikely.

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Brainstorming

• Brainstorming
• A technique encouraging group members to generate
  as many ideas as possible.
• Rules of Brainstorming
• Freewheeling is encouraged.
• Ideas are not criticized
• The wilder the ideas, the better.
• Piggyback on previously stated ideas.
• Ideas are evaluated after alternatives are
  generated.

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Other Decision-Making Techniques

• Nominal Group Technique (NGT)
• A structured process designed to stimulate
  creative group decision making where agreement or
  complete knowledge is lacking.
• Delphi Technique
• Uses experts to make predictions and forecasts
  about future events without meeting face-to-face.

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Other Decision-Making Techniques (contd)

• Devils Advocacy
• A critique of a proposed course of action in
  order to identify problems before a decision is
  final.
• Dialectical Inquiry
• Approaches a decision from two opposite points
  and structures a debate between conflicting views.

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Classifying Decision Situations

• Programmed decision
• A decision made in response to a situation that
  is routine or recurring.
• Example starting your automobile
• Nonprogrammed decision
• A decision made in response to a situation that
  is unique, unstructured, or poorly defined.
• Example deciding to get a tattoo