Chap02

Copyright © 1999 Houghton Mifflin Company. All rights reserved. 2 - 1

E. FRANK HARRISON

Fifth Edition

The Managerial Decision-Making Process


The Managerial Decision-Making ProcessThe Managerial Decision-Making ProcessFifth EditionFifth Edition

The Managerial Decision-Making ProcessThe Managerial Decision-Making ProcessFifth EditionFifth Edition

Author: E. Frank Harrison, Ph.D.Author: E. Frank Harrison, Ph.D.

Slides by Monique A. Pelletier, Ph.D.Slides by Monique A. Pelletier, Ph.D.

Author: E. Frank Harrison, Ph.D.Author: E. Frank Harrison, Ph.D.

Slides by Monique A. Pelletier, Ph.D.Slides by Monique A. Pelletier, Ph.D.


The Managerial The Managerial Decision-MakingDecision-Making

Process Process

Chapter 2Chapter 2


The Managerial The Managerial Decision-Making ProcessDecision-Making Process

Process components are decision-Process components are decision-making functions.making functions.

Decision-making functions are highly Decision-making functions are highly interrelated and interdependent.interrelated and interdependent.

The process is highly dynamic with The process is highly dynamic with several subprocesses.several subprocesses.

The process can accommodate several The process can accommodate several concurrent Category II decisions.concurrent Category II decisions.


Figure 2.1 The Decision-Making ProcessFigure 2.1 The Decision-Making Process

SearchingSearchingforfor

alternativesalternatives

ImplementingImplementingdecisionsdecisions

Follow-upFollow-upandand

controlcontrol

SettingSettingmanagerialmanagerialobjectivesobjectives

Comparing &Comparing &evaluatingevaluating

alternativesalternatives

The actThe actof choiceof choiceTake Take

correctivecorrectiveaction as action as necessarynecessary

RenewRenewsearchsearch

ReviseReviseobjectivesobjectives

Revise or Revise or update update objectivesobjectives


Decision-Making Function No. 1Decision-Making Function No. 1

Objectives constitute the foundation Objectives constitute the foundation for rational decision making.for rational decision making.

Objectives are the ends for the means Objectives are the ends for the means of managerial decision making.of managerial decision making.

Attainment of the objective is the Attainment of the objective is the ultimate measure of decision success.ultimate measure of decision success.

Setting Managerial Objectives:Setting Managerial Objectives:



The limitations of time and moneyThe limitations of time and money The declining value of additional The declining value of additional

informationinformation The rising cost of additional The rising cost of additional

informationinformation Abort the search in the zone of cost Abort the search in the zone of cost

effectivenesseffectiveness

Searching for Alternatives:Searching for Alternatives:


Figure 2.2 The Cost of Additional InformationFigure 2.2 The Cost of Additional Information

Cost

Averagevalue

Marginalvalue

Point ofoptimality

Zone ofcosteffectiveness

Perfection of informationPerfection of information00 100%100%

Val

ue

and

V

alu

e an

d

cost

of

add

itio

nal

info

rmat

ion

cost

of

add

itio

nal

info

rmat

ion



Alternatives result from the search.Alternatives result from the search. There are usually three to five There are usually three to five

alternatives.alternatives. One alternative is to do nothing.One alternative is to do nothing. Alternatives are evaluated using Alternatives are evaluated using

criteria derived from the objective.criteria derived from the objective.

Comparing and Evaluating Comparing and Evaluating Alternatives:Alternatives:


Decision-Making Function No. 3 Decision-Making Function No. 3 (cont’d)(cont’d)

Evaluation should include an Evaluation should include an anticipation of the likely outcome for anticipation of the likely outcome for each alternative.each alternative.

Evaluation should also anticipate Evaluation should also anticipate obstacles or difficulties at the time of obstacles or difficulties at the time of implementation.implementation.

Also:Also:



The choice is the culmination of the The choice is the culmination of the process, not all of it.process, not all of it.

The choice confronts the decision The choice confronts the decision maker with discernible constraints.maker with discernible constraints.

The best alternative may not be readily The best alternative may not be readily apparent to the decision maker.apparent to the decision maker.

The Act of Choice:The Act of Choice:



The best choice is likely to ensue The best choice is likely to ensue from the right approach.from the right approach.

The choice should be the alternative The choice should be the alternative most likely to result in the most likely to result in the attainment of the objective.attainment of the objective.

Also:Also:



Implementing Decisions:Implementing Decisions:

Decision success is a function Decision success is a function

of decision quality of decision quality

and and

decision implementation.decision implementation.



Observance of operating constraintsObservance of operating constraints Influence of the decision makerInfluence of the decision maker Involvement of decision Involvement of decision

implementersimplementers Absence of conflict of interestAbsence of conflict of interest

Areas contributing to decision Areas contributing to decision success:success:



Disregard of timelinessDisregard of timeliness Unlimited additional informationUnlimited additional information Disregard of risk/reward Disregard of risk/reward

relationshipsrelationships

Areas detracting from decision Areas detracting from decision success:success:


StrategicStrategicDecisionDecisionQualityQuality

1.1. Compatibility withCompatibility with 1.1. Conflict of Conflict of interest.interest.operating constraints.operating constraints.

2.2. Timeliness.Timeliness. 2.2. Risk-reward Risk-reward factor.factor.

3.3. Optimum amount ofOptimum amount of 3.3. Understanding Understanding thetheinformation.information. decision.decision.

4.4. Influence of theInfluence of thedecision maker.decision maker.

Figure 2.3 Evaluation of Strategic Figure 2.3 Evaluation of Strategic Decision SuccessDecision Success

StrategicStrategicDecisionDecisionSuccessSuccess

= = ff + + ff Strategic DecisionStrategic DecisionImplementationImplementation



Follow-up and control is essential to Follow-up and control is essential to ensure that an implemented decision ensure that an implemented decision meets its objective.meets its objective.

Performance is measured by Performance is measured by observing the implemented decision observing the implemented decision in relation to its standard derived in relation to its standard derived from the objective.from the objective.

Follow-Up and ControlFollow-Up and Control



Unacceptable variance from standard Unacceptable variance from standard performance should elicit timely and performance should elicit timely and appropriate corrective action.appropriate corrective action.

Corrective action (Corrective action (subprocess no. 1subprocess no. 1) may ) may result in the implementation of another result in the implementation of another alternative (alternative (subprocess no. 2subprocess no. 2), which, if ), which, if not successful, may result in a revision of not successful, may result in a revision of the original objective (the original objective (subprocess no. 3subprocess no. 3).).

Also:Also:

Date post:	31-Oct-2014
Category:	Education
Upload:	paapumaddy
View:	534 times
Download:	5 times

Chap02

Education