Managerial Decision-making

Questions and Answers

The availability of predetermined decision rules

Well-structured problem

A guide that establishes parameters for making decisions

Programmed decisions Signup and view all the answers

Higher levels Signup and view all the answers

Decisions are made in the best economic interests of the organization Signup and view all the answers

When the problem is simple and goals are clear Signup and view all the answers

Rational and intuitive thinking, and problem-solving styles Signup and view all the answers

Because perfect information is not available and manager's values influence decisions Signup and view all the answers

To evaluate the effectiveness of actual decision-making Signup and view all the answers

Study Notes

Made in routine, repetitive, well-structured situations using predetermined decision rules.
Often derived from established practices, procedures, or habits.
Ideal for computers to deal with complex programmed decisions.
Most decisions made by first-line managers and many by middle managers are programmed decisions.

Made for novel and/or ill-structured situations where predetermined decision rules are impractical.

Problems can be well-structured or poorly structured.
Well-structured problems:
- Straightforward, familiar, and easily defined.
- Handled using programmed decisions and routine approaches.
- Three types of plans for programmed decisions:
  - Procedures: series of interrelated sequential steps.
  - Rules: explicit statements guiding manager actions.
  - Policies: guides establishing parameters for decision-making.
Poorly structured problems:
- New, unusual, with ambiguous or incomplete information.
- Handled using non-programmed decisions requiring custom-made solutions.

Higher levels of the organization: dealing with poorly structured problems and using non-programmed decisions.
Lower levels: dealing with well-structured problems using programmed decisions.

Managers can make decisions based on rationality, bounded rationality, or intuition.

Managerial decision making is assumed to be rational and value-maximizing within specified constraints.
Assumptions of rationality:
- Problem clarity
- Goal orientation
- Known options
- Clear preferences
- Constant preferences
- No time or cost constraints
- Maximum pay off
The rational model is flawed, as perfect information is not available, and managers' values and personality factors influence decisions.

Managers have different styles when making decisions and solving problems, differing in:
- Way of thinking (rational or intuitive)
- Approach to decision-making