Transcript The Decision Making Process
MGT 101 - Principles of Management and Business
The Decision Making Process
Week 4
Objectives ✤ To describe the decision making process ✤ To practice decision making
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.
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
Step 1: Identification of a Problem ✤
A Problem:
affairs a discrepancy between an existing and a desired state of ✤ 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!
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
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
decision (single is criterion): factors that are relevant in a ✤ Every decision making has a criteria whether explicitly stated or not ✤ If a factor is not included, it’s considered irrelevant
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
Important Criteria and Weights in a Car-Buying Decision Criterion Price Interior Comfort Durability Repair Record Performance Handling Weight 10 3 1 8 5 5
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
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
Assessment of Possible Car Alternatives
Alternative
Mazda C230 Isuzu Ascender Initial Price 5 7 Interior Comfort Durability Repair Record Performance Handling
Total
6 9 10 7 7
44
6 8 6 5 6
38
9 7 6 4 4 7
37
BMW 335 Toyota Camry VW Passat 6 8 5 6 10 6 10 5 6 7 6 8
43 40
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
Evaluation of Car Alternatives: Assessment Criteria x Criteria Weight
Alternative
Initial Price [10] Mazda C230 5
50
Isuzu Ascender 7
70
Interior Comfort [8] 6
48
6
48
BMW 335 9
90
7
56
Toyota Camry 6
60
VW Passat 8
80
5 6
40 48
Durability [5] Repair Record [5] 9
45
10
50
8 6 6
40 30
10
50
10
50 30
6 4 5
30 20 25
Performance [3] 7
21
5 4 6 7
15 12 18 21
Handling [1]
Total
7
7 221
6 7 6 8
6 7 6 8 209 215 224 212
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
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
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?
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