Agenda
Logistics
Reminder:
Quiz 2 closes on 9/30 at 11:59 EST
Introduction to Decision Making
Last part of planning process

Major Questions You Should Be Able
to Answer
7.1
How do people know when they’re being logical
or illogical?
7.2
How can I improve my decision making using
evidence-based management and business
analytics?
7.3
How do I decide to decide?
7.4
What guidelines can I follow to be sure that
decisions I make are not just lawful but ethical?
7.5
Trying to be rational isn’t always easy. What are
the barriers?
7.6
How do I work with others to make things
happen?

What is Decision Making?
Decision
Choice made from available alternatives
Decision Making
Process of identifying problems and
opportunities then
resolving
them
Choosing the appropriate course of action
Why is Decision Making Important
Every organization grows, prospers or fails as
result of decisions made by managers

Decision Making as a
Component of Problem
Solving
Intelligence
Design
Choice
Implementation
Monitoring
Problem
solving
Decisio
n
making

Decision Making in the Real
World
Why decision making is difficult
Two Systems of Decision Making
Rational, analytical and slow to act
Emotional, impulsive and prone to form/follow habits
Curse of Knowledge
(Better)informed people find it harder to
think about problems from the perspective of
lesser-informed people

Decisions in the Management
Functions

Two Approaches of Decision
Making
Rational ( Classical Model)
Assumes managers will make a logical
decisions that will be in the best interest of
the organization
•
Non-Rational
Assumes that decision making is nearly always
uncertain and risky, making it difficult for managers
to make optimal decisions

Rational Model
Rational economic assumptions drive
decisions
Operates to accomplish established goals,
problem is defined
Decision maker strives for information and
certainty, alternatives evaluated
Criteria for evaluating alternatives is known;
select alternative with maximum benefit
Decision maker is rationale and uses logic

Rational Decision Making
Figure 7.1

Hindrances to Perfectly Rational
Decision Making
Complexity
Time and Money
Differential cognitive capacity, values,
skills, etc.
Imperfect information
Information overload
Different priorities
Conflicting goals

Rational Decision Making
Model
Main Assumptions
Complete Information, no uncertainty
All alternative courses of actions and consequences are known
Logical, unemotional analysis
Rank order alternatives
Best decision for the organization
Choose course of action that will most benefit the organization
Drawbacks
Unrealistic view of the world
Condition of Certainty
Full Information
Rational Choice for ranking/choosing alternatives


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- Fall '07
- Lepine
- Management, Decision Making, Classical Model