Decision Making in Management

Study Notes

Decision making is essential for addressing problems and identifying opportunities in management.
It's defined as the process of selecting from available alternatives to resolve issues effectively.

Programmed Decisions handle recurring problems that allow established decision rules to be applied.
Nonprogrammed Decisions address unique, poorly defined, and largely unstructured issues involving significant consequences.

Certainty involves complete information, allowing confident predictions (e.g., running out of stock and knowing the best supplier).
Risk offers clear goals but uncertain outcomes, necessitating informed alternatives (e.g., choosing between different locations for a new branch).
Uncertainty occurs when managers are aware of their goals but lack essential information about alternatives and outcomes.
Ambiguity makes problem definitions unclear, often leading to difficulty in understanding both the goals and options (e.g., the impacts of the COVID-19 pandemic).

Classical Model: Assumes clear-cut problems with full information in conditions of certainty.
Political Model: Characterized by pluralistic goals and conflicting interests, necessitating negotiation and coalition-building among stakeholders.
Administrative Model: Focuses on vague problems with limited information, leading to the selection of "good enough" solutions through intuition rather than optimal choices.

Recognition: Acknowledge the need for a decision based on a problem or opportunity.
Diagnosis and Analysis: Identify underlying causes of issues, such as low employee sales performance.
Development of Alternatives: Generate feasible options for addressing the identified problems.
Selection: Choose the alternative offering the most favorable outcome using either rational or satisficing choices.
Implementation: Execute the chosen alternative through effective management functions.
Evaluation and Feedback: Assess the effectiveness of the decision and gather insights for future improvements.

Directive Style: Prefers straightforward, clear solutions to problems.
Analytical Style: Emphasizes data-driven decision-making, evaluating extensive information.
Conceptual Style: Seeks a broad range of options and engages in creative problem-solving with broader input.
Behavioral Style: Focused on understanding the feelings and perspectives of others before deciding, fostering collaboration.

Managers may make poor decisions due to various biases, including:
- Over-reliance on initial impressions and past decisions
- Maintaining the status quo and resisting change
- Allowing emotions to influence decisions
- Overconfidence leading to misjudgments

Encourage brainstorming to promote open discussion of ideas.
Utilize hard evidence and thorough research to inform decisions.
Engage in rigorous debate to ensure solutions are well considered.
Avoid groupthink by encouraging diverse viewpoints and resisting superficial agreement.
Be willing to change direction if initial strategies prove ineffective.
Conduct postmortems to learn from past mistakes and improve future decision-making processes.