The Decision Making Process

1. MGT 101 - Principles of Management and Business The Decision Making Process • Faisal AlSager Week 4

2. Objectives • To describe the decision making process • To practice decision making

3. The Decision Making Process • Definition: • A set of eight steps that begins with identifying a problem; it moves through selecting an alternative that can alleviate the problem and concludes with evaluating the decision’s effectiveness • This process can be used to describe both individual and group decisions.

4. The Decision Making Process Identification of a Problem Identification of Decision Criteria Allocation of Weights to Criteria Development of Alternatives Analysis of Alternatives Selection of an Alternative Implementation of the Alternative Evaluation of Decision Effectiveness

5. Step 1: Identification of a Problem • A Problem: a discrepancy between an existing and a desired state of affairs • In real world, most problems are not clear.. Thus, problem identification is not simple • Also, problem identification is subjective • Furthermore, managers who mistakenly solve the wrong problem are not different from those who don’t solve it!

6. How Can Managers Identify Problems? • They need to make comparisons between current state of affairs AND some standard • The standard can be: • past performance • previously set goals • the performance of some other unit within the organization or some other organization

7. Step 2: Identification of Decision Criteria • Here, we select specific criteria that we will use in making the decision. The criteria include: price, weight, size, number of employees, hours needed ... etc. • Decision Criteria (single is criterion): factors that are relevant in a decision • Every decision making has a criteria whether explicitly stated or not • If a factor is not included, it’s considered irrelevant

8. Step 3: Allocation of Weights to Criteria • In this step, we give weights to the criteria identified in the previous step • A simple approach: Give 10 to the highest important factor, and then assign weight the rest against that standard • For example: if you give another criterion 5, the standard is twice as important • Mainly, you use your personal preferences. In a more studied decisions, you will use data, statistics, studies, analysis, and research

9. Important Criteria and Weights in a Car-Buying Decision

10. Step 4: Development of Alternatives • Here, we list all the alternatives that could succeed in solving the problem • We only list them, without evaluating them

11. Step 5: Analysis of Alternatives • Each alternative is evaluated by appraising it against the criteria • The strengths and weaknesses of each alternative become both evident as we compare them to the criteria and weights established in step 2 and step 3 • The assessment is clearly a personal judgement

12. Assessment of Possible Car Alternatives

13. What if? • If one alternative scored 10 on every criterion, we wouldn’t need to consider the weights • Similarly, if the weights were all equal, you could evaluate each alternative merely by summing up the appropriate lines

14. Evaluation of Car Alternatives:Assessment Criteria x Criteria Weight

15. Step 6: Selection of an Alternative • Here, we choose the best alternative among those assessed • We merely choose the alternative that scored the highest score in step 5 • In our example: Toyota Camry

16. Step 7: Implementation of the Alternative • Decision implementation: putting a decision into action • This includes conveying the decision to those affected and getting their commitment to it

17. Step 8: Evaluation of Decision Effictiveness • Managers appraise the result of the decision to see whether it has corrected the problem; did the alternative chosen in step 6 and implemented in step 7 accomplish the desired result?

18. Learning Outcomes • Decision making is a process of eight steps • Managers use criteria to make decisions, whether they mention them or not • Managers should make alternatives and evaluate them based on the criteria • Managers need to evaluate their decisions to make sure they are solving the right problem