The Decision-Making Process

The Decision-Making Process

• Managers at all levels and in all areas of organizations
make decisions.
• That is, they make choices.
• For instance, top-level managers make decisions about
their organization’s goals, where to locate manufacturing
facilities, or what new markets to move into.
• Middle- and lower-level managers make decisions about
production schedules, product quality problems, pay
raises, and employee discipline.
• making decisions isn’t something that just managers do.
• All organizational members make decisions that affect
their jobs and the organization they work for.
• decision making is (and should be) a process, not just a simple act
of choosing among alternatives.
• Even for something as straightforward as deciding where to go for
lunch, you do more than just choose burgers or pizza or hot dogs.
• Granted, you may not spend a lot of time contemplating your
lunch decision, but you still go through the process when making
that decision.
• This process is as relevant to personal decisions as it is to
corporate decisions.
• example—a manager deciding what laptop computers to
purchase—to illustrate the steps in the process.
Decision-Making Process
 Step 1: Identify a Problem
• Your team is dysfunctional, your customers are leaving, or your plans are no
longer relevant.
• Every decision starts with a problem, a discrepancy between an existing and
a desired condition.
• Let’s work through an example. Amanda is a sales manager whose reps need
new laptops because their old ones are outdated and inadequate for doing
their job.
• To make it simple, assume it’s not economical to add memory to the old
computers and it’s the company’s policy to purchase, not lease.
• Now we have a problem—a disparity between the sales reps’ current
computers (existing condition) and their need to have more efficient ones
(desired condition).
• Amanda has a decision to make.
• How do managers identify problems?
• In the real world, most problems don’t come with neon signs flashing
“problem.”
• When her reps started complaining about their computers, it was
pretty clear to Amanda that something needed to be done, but few
problems are that obvious.
• Managers also have to be cautious not to confuse problems with
symptoms of the problem.
• Is a 5 percent drop in sales a problem?
• Or are declining sales merely a symptom of the real problem, such
as poor-quality products, high prices, or bad advertising?
• Also, keep in mind that problem identification is subjective.
• What one manager considers a problem might not be considered a
problem by another manager.
• In addition, a manager who resolves the wrong problem perfectly is
likely to perform just as poorly as the manager who doesn’t even
recognize a problem and does nothing.
• As you can see, effectively identifying problems is important, but
not easy
 Step 2: Identify Decision Criteria
• Once a manager has identified a problem, he or she
must identify the decision criteria important or
relevant to resolving the problem.
• Every decision maker has criteria guiding his or her
decisions even if they’re not explicitly stated.
• In our example, Amanda decides after careful
consideration that memory and storage capabilities,
display quality, battery life, warranty, and carrying
weight are the relevant criteria in her decision.
 Step 3: Allocate Weights to the Criteria
• If the relevant criteria aren’t equally
important, the decision maker must
weight the items in order to give them
the correct priority in the decision. How?
• A simple way is to give the most
important criterion a weight of 10 and
then assign weights to the rest using that
standard.
• Of course, you could use any number as
the highest weight. The weighted criteria
for our example are
 Step 4: Develop Alternatives
• The fourth step in the decision-making process
requires the decision maker to list viable
alternatives that could resolve the problem. In
this step, a decision maker needs to be
creative, and the alternatives are only listed—
not evaluated just yet. Our sales manager,
Amanda, identifies eight laptops as possible
choices.
Possible Alternatives
 Step 5: Analyze Alternatives
• Once alternatives have been identified, a decision maker must
evaluate each one. How?
• By using the criteria established in Step 2. shows the assessed
values that Amanda gave each alternative after doing some
research on them.
• Keep in mind that these data represent an assessment of the eight
alternatives using the decision criteria, but not the weighting.
• When you multiply each alternative by the assigned weight, you
get the weighted alternatives .
• The total score for each alternative, then, is the sum of its
weighted criteria.
• Sometimes a decision maker might be able to skip this
step.
• If one alternative scores highest on every criterion, you
wouldn’t need to consider the weights because that
alternative would already be the top choice.
• Or if the weights were all equal, you could evaluate an
alternative merely by summing up the assessed values for
each one.
• (Look again at Exhibit 2-3.) For example, the score for the
HP ProBook would be 36, and the score for the Sony NW
would be 35.
Evaluation of Alternatives
 Step 6: Select an Alternative

• The sixth step in the decision-making process

is choosing the best alternative or the one
that generated the highest total in Step 5.
• In our example (Exhibit 2-4), Amanda would
choose the Dell Inspiron because it scored
higher than all other alternatives (249 total)
 Step 7: Implement the Alternative
• In Step 7 in the decision-making process, you put the decision
into action by conveying it to those affected and getting their
commitment to it.
• We know that if the people who must implement a decision
participate in the process, they’re more likely to support it than if
you just tell them what to do.
• Another thing managers may need to do during implementation
is reassess the environment for any changes, especially if it’s a
long-term decision.
• Are the criteria, alternatives, and choices still the best ones, or
has the environment changed in such a way that we need to
reevaluate?
 Step 8: Evaluate Decision Effectiveness
• The last step in the decision-making process involves
evaluating the outcome or result of the decision to see
whether the problem was resolved.
• If the evaluation shows that the problem still exists, then the
manager needs to assess what went wrong.
• Was the problem incorrectly defined?
• Were errors made when evaluating alternatives?
• Was the right alternative selected but poorly implemented?
• The answers might lead you to redo an earlier step or might
even require starting the whole process over