CHAPTER 2
I. The eight steps in the decision-making process:
1. Identidy a problem:
– What is a problem? Problem is an obstacle that makes it difficult to achieve a desired
goal or purpose. Every decision starts with a problem, a discrepancy between an existing
and a desired condition.
– How do managers identify a problem? Managers have to be cautious not to confuse
problems with symptoms of the problem. One manager might consider this to be the
problem, but another manager might not. In addition, a manager who resolves the wrong
problem perfectly is likely to perform just as poorly as the manager who doesn’t even
recognize a problem and does nothing.
2. Identify the Decision Criteria:
Decision criteria are factors that are important to resolving the problem. Every decision
maker has criteria guiding his or her decisions even if they’re not explicitly stated. For
instance, considering the demographics, interests, and preferences of consumers were
essential criteria in making advertising decisions. However, understanding the psychology
of consumers at different moments is shown to be more effective than relying exclusively
on demographics and interests.
3. Allocate Weights to the Criteria:
How? A simple way is to give the most important criterion a weight of 10 and then assign
weights to the rest using that standard.
4. Develop Alternatives: the decision maker to list viable alternatives that could resolve the
problem.
5. Analyze Alternatives: How? By using the criteria established in Step 2. Sometimes a
decision maker might be able to skip this step. If one alternative scores highest on every
criterion, you wouldn’t need to consider the weights because that alternative would already
be the top choice. Or if the weights were all equal, you could evaluate an alternative merely
by summing up the assessed values for each one.
6. Select an Alternatives: choose the best alternative or the one that generated the highest
total in Step 5.
7. Implement the Alternatives: put the decision into action by conveying it to those affected
and getting their commitment to it. Another thing managers may need to do during
implementation is reassess the environment for any changes, especially if it’s a long-term
decision.
8. Evaluate Decision Effectiveness: involve evaluating the outcome or result of the decision
to see whether the problem was resolved. If the evaluation shows that the problem still
exists, then the manager needs to assess what went wrong.
II. The four ways managers make decisions:
Although everyone in an organization makes decisions, decision-making is particularly
important to managers. Decision-making is the essence of management. It is part of all
four managerial functions which are planning, organizing, leading and controlling.
1. Rationality:
• Rational Decision-Making is choices that are logical and consistent. Moreover, the
