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Objectives
1. A fundamental understanding of the term decision
2. An understanding of each element of the decision situation
3. An ability to use the decision-making process
4. An appreciation for the various situations in which decisions are made
5. An understanding of probability theory and decision trees as decisionmaking tools
6. Insights into groups as decision makers
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Fundamentals of Decisions
 Definition
 Types
of a Decision
of Decisions
Programmed
Nonprogrammed
 The
Responsibility for Making Organizational Decisions
 Elements
of the Decision Situation
 The
Decision Makers
 Goals to Be Served
 Relevant Alternatives
 Ordering of Alternatives
 Choice of Alternatives
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Fundamentals of Decisions
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Fundamentals of Decisions
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Fundamentals of Decisions
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The Decision-Making Process
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The Decision-Making Process
 Identifying
an Existing Problem
Problems are brought to the attention of managers by:
1. Orders issued by managers’ supervisors
2. Situations relayed to managers by their subordinates
3. The normal activity of the managers themselves
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The Decision-Making Process
 Listing Alternative
Solutions
Limitations on the number of problem-solving alternatives available:
1. Authority factors
2. Biological or human factors
3. Physical factors
4. Technological factors
5. Economic factors
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The Decision-Making Process
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The Decision-Making Process
 Selecting
the Most Beneficial Alternative
1) List the potential effects of each alternative
2) Assign a probability factor to each of the potential effects
3) Compare each alternative’s expected effects
and the respective probabilities of those effects
 Implementing
 Gathering
the Chosen Alternative
Problem-Related Feedback
Feedback determines implemented alternative’s effect on problem
If problem is not solved, seek out and implement another alternative
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Decision-Making Conditions
 Complete
Certainty Condition
 Complete
Uncertainty Condition
 Risk
Condition
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Decision-Making Tools
 Probability
 Decision
Theory
Trees
To compare financial consequences, management must:
1. Study estimates of investment amounts necessary for:
Building a large plant
Building a small plant
Expanding a small plant
2. Weigh the probabilities of facing different product demand levels
3. Consider projected income yields for each decision alternative
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Decision-Making Tools
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Decision-Making Tools
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Group Decision Making
 Advantages
and Disadvantages of Using Groups to Make
Decisions
 Processes
for Making Group Decisions
 Brainstorming
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Group Decision Making
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Group Decision Making
 Processes
 Nominal
for Making Group Decisions (continued)
Group Technique
Step 1—Each group member writes down individual ideas
Step 2—Each member presents individual ideas orally
Step 3—After members present ideas, entire group discusses ideas
Step 4—When discussion completed, a secret ballot is taken
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Group Decision Making
 Processes
for Making Group Decisions (continued)
 Delphi Technique

Step 1—A problem is identified

Step 2—Group members are asked to offer solutions to the problem

Step 3—Responses of all group members are compiled and sent out

Step 4—Members are asked to generate a new individual solution
 Evaluating
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Group Decision-Making Processes
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Questions
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