Managerial

Decision
Making
Decision Making is not Easy
Unclear information.
Often conflicting points of view.
EIt must be done amid ever-changing factors:
Types of Decisions
Programmed decisions:
situations that occur often enough to enable decision
rules to be developed.
Nonprogrammed decisions:
are made in response to situations that are unique, are
poorly defined and largely unstructured.
many involve strategic planning.
Decision making the process of identifying problems and opportunities, then resolving them.
Programmed and
Nonprogrammed Decision
Differences
E Certainty
all the information the decision maker needs is fully available.
E Risk
decision has clear-cut goals.
good information is available.
future outcomes associated with each alternative are subject to chance.
E Uncertainty
managers know which goals they with to achieve.
information about alternatives and future events is incomplete.
managers may have to come up with creative approaches to alternatives.
E Ambiguity
by far the most difficult decision situation.
goals to be achieved or the problem to be solved is unclear.
alternatives are difficult to define.
information about outcomes is unavailable.
Conditions that Affect the
Possibility of Decision Failure
Organizational
Problem
Problem
Solution
Low High Possibility of Failure
Certainty Risk Uncertainty Ambiguity
Programmed
Decisions
Nonprogrammed
Decisions
Selecting a
Decision Making Model
Depends on the managers personal preference.
Whether the decision is programmed or non-
programmed.
Extent to which the decision is characterized by
risk, uncertainty, or ambiguity.
Three Decision Making Models
CClassical Model
CAdministrative Model
CPolitical Model

Classical Model
+Based on economic conditions
+Is considered to be normative
Classical Model
+Accomplishes goals that are known and agreed upon.
+Strives for certainty by gathering complete information.
+Criteria for evaluating alternatives are known.
+Decision maker is rational and uses logic.
Administrative Model
= How managers actually make decisions in situations characterized by
non-programmed decisions, uncertainty, and ambiguity.
= Focuses on organizational, rather than economic.
= Two concepts are instrumental in shaping the administrative model.
bounded rationality: means that people have limits or boundaries on
how rational they can be.
satisficing: means that decision makers choose the first solution
alternative that satisfies minimal decision criteria.
= Is considered to be descriptive.
= It is considered intuitive.
Political Model
EClosely resembles the real environment in which
most managers and decision makers operate.
EDecisions are complex.
EDisagreement and conflict over problems and
solutions are normal.
ECoalition building is important.
Comparisons of:
Classical, Political, &
Administrative Models
Classical Model Administrative Model Political Model
Clear-cut problem and goals.
Condition of certainty.
Full information about
alternatives and their outcomes.
Rational choice by individual
for maximizing outcomes.
Vague problem and goals.
Condition of uncertainty.
Limited information about
alternatives and their outcomes.
Satisfying choice for resolving
problem using intuition.
Pluralistic; conflicting goals.
Condition of uncertainty/ambiguity.
Inconsistent viewpoints; ambiguous
information.
Bargaining and discussion among
coalition members.
Six Steps in the Managerial
Decision Making Process
Diagnosis Questions
(Kepner & Tregoe)
EWhat is the state of disequilibrium affecting us?
EWhen did it occur?
EWhere did it occur?
EHow did it occur?
ETo whom did it occur?
EWhat is the urgency of the problem?
EWhat is the interconnectedness of events?
EWhat result came from what activity?
Personal Decision Framework
Directive Style: used by people who prefer simple, clear-cut solutions.
Analytical Style: used by managers who like to consider complex solutions
based on as much data as they can gather.
Conceptual Style: used by people who like to consider a broad amount of
information, more socially oriented.
Behavioral Style:often the style adopted by managers having a deep concern
for others.
Situation:
Programmed/non-programmed
Classical, administrative,
political
Decision steps
Decision Choice:
Best Solution to Problem
Personal Decision Style:
Directive
Analytical
Conceptual
Behavioral
Participation in
Decision Making
Vroom-Jago Model
C Helps gauge the appropriate amount of participation for subordinates.
Leader Participation Styles
C Five styles available, depending on the situation.
C Participation in decision making ranging from highly autocratic to highly
democratic.
Diagnostic Questions
C Decision participation depends on a number of situational factors.
C Questions deal with the problem, the required level of decision quality, and
the importance of having subordinates commit to the decision.
Participation in Decision Making
Diagnostic Questions
ODecision significance
OImportance of commitment
OLeader expertise
OLikelihood of commitment
OGroup support for goals
OGroup expertise
OTeam competence
New Decision Making Approaches
.Lean, Dont Punish
.Know When to Bail
.Practice the Five Whys
.Build Collective Intuition
.Engage in Constructive Conflict
Information Technology
The hardware, software, telecommunications, database
management, and other technologies used to store,
process, and distribute information.
Characteristics of
High-Quality Information
Time
Timeliness
Currency
Frequency
Time Period

Content
Accuracy
Relevance
Completeness
Conciseness
Scope
Performance
Form
Clarity
Detail
Order
Presentation
Media
Source: Adapted from James A. OBrien,
Introduction to Information Systems, 8th ed. (Burr
Ridge, Ill, Irwin, 1997),284-285.
Types of Information Systems
Operations Information Systems
Transaction-processing systems.
Process control systems.
Office automation systems.
Management Information Systems
Information-reporting systems.
Decision support systems.
Group decision support systems.
Executive information systems.
Basic Elements of
Management Information Systems
Operations
Information
Systems
Management
Information
Systems
Reporting
Systems
Decision
Support
Systems
Executive
Information
Systems
Group
Decision
Support
System
Corporate
and
External
Databases
SOURCE: Adapted from Ralph M. Stair and George W. Reynolds, Principles
of Information Systems: A Managerial Approach, 4
th
ed. (Cambridge, Mass.:
Course Technology, 1999), 391.
Strategies for Integrating
Bricks and Clicks
In-House
Division
Partnership
Spin-Off
Company
Integration Separation
Brand recognition
Purchasing leverage
Shared information
Distribution efficiencies
Focus
Flexibility
Responsiveness
Entrepreneurial culture
SOURCE: Based on Ranjay Gulati and Jason Garino, Get the Right Mix of Bricks and Clicks, Harvard Business Review (May-June 2000), 107-114.
Management and
Technology Implications
Improved employee effectiveness.
Increased efficiency.
Empowered employees.
Information overload.
Enhanced collaboration.
Organizational learning.