Chapter 6
Decision Making
6.1
6.2
6.3
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The Nature of Management decisions
The decision making process
Decision-making Techniques
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6.1 – The Nature of Management
Decisions
 There are differences between management and
scientific decisions
 Management decisions usually affect many
more people and need to be made in a changing
and uncertain environment
 Anyhow, the process used for scientific decision
making is similar to management decision
making
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Management Decision
 the steps are:
– definition of the problem
– gathering facts related to the problem
– comparing these with right and wrong criteria based
on knowledge and experience
– and then taking the best course of action
 Management decision making, however, is often
an art rather than a science. The conventional
theories of decision making do not always apply
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Main characteristics of
management decision making
 The problem is often ill defined or unpredictable because
of being related to human behaviour
 Management problems are usually much wider in scope
than technical problems, and affect many more people
and functions
 Gathering information on which to base a management
decision is often a hazardous process. The problem is
continually changing, due to market or people
considerations
 The management decision, like the scientific one, is
essentially one of choosing between several alternatives.
This may not be easy to do as the consequences of
each alternative are often difficult to predict
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Main characteristics of management decision making (contd)
 There is rarely a ‘best’ solution in management
problems
 It is highly probable that what is considered to be the
best solution today may turn out to be the worst choice in
the future
 Once a decision has been made it requires consensus
and commitment from the people who are affected and
who are to implement the solutions
 Following implementation the decision must be
continually monitored to see whether it is still valid in a
changing environment.
 The process of managements decision making cannot
be learned, except the experience and judgment
 Decision making styles are often affected by the
organization in which a manager operates
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Two categories of Decisions
 Routine decisions:
– Examples of routine decisions are the
purchase of materials. These can usually be
defined by a set of rules and are often
automated, for example by computers
– it can be delegated
 which occur infrequently.
– which also usually have a major impact on the
organization
– usually needs the involvement of senior
management
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6.2 – The decision making process
 Is this decision necessary? The first task is to
identify whether a decision is really required
 No decision should normally be taken if the
problem is likely to go away on its own
 It is important, however, to make the decision on
whether to act or not to act
 Half a decision is much worse than no decision
at all
 Having decided that a decision is needed, the
next step is to define the problem
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The decision making process (contd)
 The problem needs to be broken down into
understandable terms and small units
 The true cause of the problem should be sought
 whether corrective action or a new strategy is
needed
 Problems are usually of two types, routine or
unique
 Managers must see things from other’s
perspective, not just assume that their own
solution is right
 Management styles can vary between
perceptive (sensitive) and receptive (accessible)
information gathering, and between systematic
and inquire information analysis
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The decision making process (contd)
 There is no one best cognitive style, and usually
if a team is working on a problem it is better to
have members with a mix of styles
 It is important to know what the best solution is
so that the impacts of any compromises,
introduced at the next stage, are known
 The implementation factors now need to be built
into the decision
 The final stage in the decision-making process is
carrying out the actions
 Once a decision is implemented the results from
it must be constantly monitored. This will provide
feedback on the original problem, which may
need to be redefined
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6.3 – Decision-Making Techniques
 Decision trees and tables
 Decision-making techniques usually adopt
a two stage process:
– Determine the method to arrive at a decision,
such as whether to involve others or not
– Arrive at the decision
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The Vroom-Yetton Model
 Vroom and Yetton proposed a set of
possible management decision-making
styles
 These styles range from very autocratic
(dictatorial) to democratic
 If several alternatives are equally good
then the choice is usually made on the
basis of the least amount of effort
(person-hours) involved
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7 questions of Vroom-Yetton model
1.
2.
3.
4.
5.
6.
7.
Is one solution likely to be much better than any other:
Quality solution?
Have enough information to make a quality solution?
Know what info is missing & where to find it?
Is commitment to the decision important for its
implementation?
Will others accept the solution if not involved in
decision-making process?
Do all the other people share in the same goal?
Will there be a conflict between the affected people
regarding alternative solutions?
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The Kepner-Tregoe Method
A series of steps to be followed when analyzing a problem
 Specify the problem both in terms of what it is and what
it is not. For example, if the problem is only found to
occur between certain hours
 Identify the differences (distinctions) between what the
problem is and what it is not. For example, what
happens between that time and does not occur at other
times?
 Look for the causes (solutions) that explain these
differences
 Test the cause (solution). Compare what actually
happened with what was expected to happen
 If the proposed cause (solution) explains what actually
happened and what did not happen, without requiring too
many assumptions, then it is correct
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