SHR 247 (8) - Decision Making Understanding Decision Making...

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Decision Making
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Understanding Decision Making Decision making: the process of developing and analysing alternatives and making a choice Can be prompted by problems Decisions don’t always involve problems but problem solving always involves making decisions Decisions and the Management Process: Planning Organising Leading
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Understanding Decision Making Two main types of decision made by managers: programmed and non-programmed (Huber 1980) Programmed decisions: Well-structured Routine Repetitive, occurring on a regular basis Can be solved through mechanical procedures Usually take place at lower levels in the organisation, have short-term consequences, based on readily
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Understanding Decision Making Nonprogrammed decisions: Unique Novel Unstructured As a result – no previously established decision rule Generally, they rely heavily on judgement and focus on the firm’s strategic development and survival Taken at higher levels Long time frame
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Understanding Decision Making The “Rational” Decision-Making Process: Economics: Rational Choice Theory – assumes human behaviour is guided by instrumental reason. For a decision to be rational the decision-maker: is able to compare all the alternatives and comparisons are consistent always chooses the item he/she prefers has precise information has the cognitive ability to weigh choices is aware of all possible choices Why rational choice theory? Allows for an easier understanding of complex
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Understanding Decision Making The “Rational” Decision-Making Process: 1. Define the Problem 2. Identify and weight the criteria 3. Develop alternatives 4. Analyse the alternatives 5. Make a choice and then implement and evaluate the decision
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How managers make decisions Most managers will try to make rational analyses But “the barriers to rationality can trip up the decision-maker” 1. Individual differences Ability to absorb, analyse and process information varies from person to person Perception: selection and interpretation of information we receive through our senses and the meaning we give the information
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How managers make decisions 1. Individual differences (cont’d) n
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SHR 247 (8) - Decision Making Understanding Decision Making...

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