Managerial Decision

Making

COMPARATIVE MANAGEMENT (MBA 1114)

Master of Business Administration 2017
Faculty of Management Studies - Mihintale Center
Rajarata University of Sri Lanka
Group No 05
Group Members
D.N.K. Hettige RJT/MBA/2017/33
S.S. Janen RJT/MBA/2017/34
W.A.I.S. Kasthurirathne RJT/MBA/2017/35
L.G.S. Jayasinghe RJT/MBA/2016/39
Outline
Determinates of Decision Making
What is Decision Making
Types of Decisions
Possibility of Decision Failure
The Concept of Decision-Making Strategies
Decision Making Models
Comparisons of Decision Making Models
Steps in managerial decision making
Personal Decision Framework
Why Do Managers Make Bad Decisions?
Innovative Group Decision Making
Determinants of Decision Making
Problems and way to solving it

Scare resource and resource allocation

Pre-determinant goals and accomplishment of goals

What is Decision Making
Decision
Choice made from available alternatives

Decision Making
The process of identifying the problems and analyzing
the opportunities to achieve the goal and available
alternative to resolving them
The Interdisciplinary Framework of
Decision Making
Economics
Philosophy Statistics
Values and
ethics Utility and
probability

Individual The decision- Sociology

Psychology Group Social
behavior making behavior psychology
process

Models and
Environment
simulation
Law
Mathematics Anthropology
Political science
Types of Decisions
Programmed Decision
A decision made in response to a situation
that has occurred often enough to enable
decision rules to be developed and applied
in the future
eg. Recruitment, Documentation, Fright roots, etc
Types of Decisions (cont.)
Non-Programmed Decision
A decision made in response to situations
that are unique, are poorly defined and
largely unstructured, and have important
consequences for the organization
 Possibility of Decision Failure
Organizational
Problem

Low Possibility of Failure High

Certainty Risk Uncertainty Ambiguity

Programmed Decisions Non-programmed Decisions

Problem Solution
Possibility of Decision Failure
Certainty
All the information the decision maker needs is
fully available.

Risk
Decision has clear-cut goals.
Good information is available.
Future outcomes associated with each alternative
are subject to chance.
Possibility of Decision Failure (cont.)
Uncertainty
Managers know which goals they with to achieve.
Information about alternatives and future events is
incomplete.
Managers may have to come up with creative approaches to
alternatives.

Ambiguity
By far the most difficult decision situation.
Goals to be achieved or the problem to be solved is unclear.
Alternatives are difficult to define.
Information about outcomes is unavailable.
The Concept of Decision-Making
Strategies
i) Computational iii) Compromise
ii) Judgmental iv) Inspirational

Knowledge Preference for the Outcome

regarding
the outcome Strong Preference Weak Preference

Computational Compromise
High Level
Decision-Making Decision-Making
of Knowledge
Strategy Strategy

Judgmental Inspirational
Low Level Decision-Making
Decision-Making
of Knowledge
Strategy Strategy
Decision Making Models

a) Classical Model

b) Administrative Model

c) Political Model
a) Classical Model
Based on economic conditions
Is considered to be normative
Accomplishes goals that are known and
agreed upon.
Strives for certainty by gathering complete
information.
Criteria for evaluating alternatives are known.
Decision maker is rational and uses logic.
b) Administrative Model
How managers actually make decisions in situations
characterized by non-programmed decisions,
uncertainty, and ambiguity.
Focuses on organizational, rather than economic.
Two concepts are instrumental in shaping the
administrative model.
1) Bounded rationality: means that people have limits or
boundaries on how rational they can be.
2) Satisficing: means that decision makers choose the first
solution alternative that satisfies minimal decision criteria.
Is considered to be descriptive and also It is considered
intuitive.
c) Political Model
Closely resembles the real environment in
which most managers and decision makers
operate.
Decisions are complex.
Disagreement and conflict over problems and
solutions are normal.
Coalition building is important.
 Comparisons of Classical, Political, &
Administrative Models
Classical Model Administrative Model Political Model

Clear-cut problem and Vague problem and Pluralistic; conflicting

goals. goals. goals.

Condition of certainty. Condition of uncertainty. Condition of

uncertainty/ambiguity.
Full information about Limited information Inconsistent viewpoints;
alternatives and their about alternatives and ambiguous information.
outcomes. their outcomes.

Rational choice by Satisfying choice for Bargaining and

individual for maximizing resolving problem using discussion among
outcomes. intuition. coalition members.
Six Steps In Managerial Decision
Making Process
Recognition of
Decision
Requirement

Evaluation and Diagnose and

Feedback Analysis of Causes

Implementation of
Development of
Chosen
Alternatives
Alternatives

Selection of
Desired
Alternatives
 Step
Recognizing & defining the situation
(problem)
Diagnose/Analysis of the situation
Evaluating the alternatives
Selecting the best alternative
Implementing the chosen alternatives
Following up and evaluating the results
Example
A plant manager sees that employee
turnover has increased by 15%
Employees are unhappy, they feel lack of
motivation, low compensations
The plant manager can increase wages,
increase benefits, or change hiring
standards, etc
Increasing the benefits may not be
feasible. Increasing wages and changing
hiring standards may satisfy all conditions
Changing hiring standards will take an
extended period of time to cut turnover,
So increase wages or offer over time
The plant manager may need permission
from corporate headquarters. The HRD
establishes a new wage/OT structure
The pant manager notes that six months
later turnover has dropped to its previous
Personal Decision Framework

Personal Decision
Situation
Decision Style Choice
Programmed/non- Directive
programmed

Analytical
Classical,
Best Solution to
administrative,
Problem
political
Conceptual

Decision steps
Behavioral
 Personal Decision Framework (cont.)

used by people who prefer simple, clear-cut

Directive Style
solutions, consider less alternatives
used by managers who like to consider
Analytical Style complex solutions based on as much data as
they can gather

Conceptual used by people who like to consider a broad

Style amount of information, more socially oriented

Behavioral often the style adopted by managers having a

Style deep concern for others
a) Directive Style
Used by people who prefer simple, clearcut
solutions to problems
Decisions are made quickly because they do
not deal with a lot of information
Considers only one or two alternatives
People who prefer this style are generally
efficient and rational and prefer to rely on
existing rules or procedures for making
decisions
b) Analytical Style
Consider complex solutions based on as much
data as can be gathered
Carefully consider alternatives and base
decisions on objective, rational data from
management control systems and other
sources
Search for best possible decision based on
information that is available
c) Conceptual Style
Managers are more socially oriented than
those with analytical style
Likes to talk to others about the problem and
possible alternatives for solving it
Considers many broad alternatives, rely on
information from both people and systems,
and like to solve problems creatively
d) Behavioral Style
Adopted by managers having a deep concern
for others as individuals
Like to talk to people oneonone and
understand their feelings about the problem
and the effect of a given decision upon them
Usually are concerned with the personal
development of others and may make
decisions that help others achieve their goals
Personal Decision Framework (cont.)

Directive

Mark Zuckerberg

Analytical

Bill Gates
Personal Decision Framework (cont.)

Conceptual

Elon Musk

Behavioral

Sir Richard Branson

Why Do Managers Make Bad
Decisions
Being influence by initial impression
Justifying past decision
Seeing what you want to see
Perpetuating the status quo
Being influenced by others
Over confidence
 Innovative Group Decision Making
Start with brainstorming spontaneous suggestions in a group
Engage in rigorous debate use divergent points of view to focus
problems
Avoid groupthink acknowledge disagreement as value instead
of blind agreement
Act with speed some decisions have to be made incredibly
quickly
Dont ignore crisis managers should expect and plan for
rises(with speed)
Know when to bail good managers must know when to pull the
plug!
Thank You
 Case Study 05
Pinnacle Machine Tool Company
Case in a Nutshell
Don Anglos (CEO of the Pinnacle Company,
Confident leader of his own judgment, Directiv
Uncertainty of Stylish, Instinctive Decisions maker)
the future of the Sam Lodge(CFO of the Pinnacle Company,
company, need Analytical Stylish, make decisions based on
to make a facts)
strategic
decision Don Seek to
acquire for their
Pinnacle Machine Tool Co. (A small machine tool technology, very
manufacturer, slow growing, increasing risky decision ,
competition, currently run in low profits due to while Sam
price competition, in need of a better technology objects it
transfer, failed an attempt for JV, need to build a
monitoring software for their products)
Hoilman Inc. (Known for cutting sensor edge
technology and communication software, rumor
of hostile takeover, failed an attempt for JV with
Pinnacle)
Question 1

What steps in the decisionmaking process

have Don Anglos and Pinnacle taken?

Which ones have they not completed?

Six Steps In Managerial Decision
Making Process
Recognition of
Decision
Requirement

Evaluation and Diagnose and

Feedback Analysis of Causes

Implementation of
Development of
Chosen
Alternatives
Alternatives

Selection of
Desired
Alternatives
Don Anglos and Pinnacle have taken the following steps:
Though Don Anglos and Pinnacle have taken some steps in some categories of
Managerial Decision Making Process, it seemed most of the steps are not adequate of
backed up properly with data, analysis or research.
I. Recognition of decision requirement
- Don and Pinnacle have identified that with the increasing competition and
slow growth of business, they needed a new strategic approach
- They have recognized that a mechanism to over come the current competition
is needed and a technology transfer is required to implement a new business
model to face the up coming competition
II. Development of Alternatives
An aggressive pricing strategy to over come the revelry
A technology transfer from Hoilman to develop a monitoring software for their
products, for the strategic change from being a manufacturing firm to a
hightech service company
Acquiring Hoilman Inc. as a big competitor is planning a hostile takeover
Or not to acquire Hoilman, Inc. and remain a manufacturer
Don Anglos and Pinnacle have taken the following steps
(cont.) :

III. Selection of Desired Alternatives

- Don and Pinnacle have selected a competitive pricing strategy to face the
existing competition
- Pinnacle has selected to Joint Venture with Hoilman Inc.
- Don has selected to acquire Holiman Inc.
IV. Implementation of Chosen Alternatives
An aggressive pricing strategy to over come the revelry
A technology transfer from Hoilman to develop a monitoring software
Decision to Acquire Hoilman Inc. by Don

So, Don and Pinnacle have taken some steps in only four categories out of six, in
Managerial Decision Making Process and even some of those are not adequate.
Don Anglos and Pinnacle have not taken the following
steps:
Though Don Anglos and Pinnacle have achieved 4 out of 6 categories in Decision
Making Process, even the ones they have done seems to be unconfident. So the two
categories which they havent taken steps are,
I. Diagnose and Analysis of Causes
- Don and Pinnacle have identified the causes that would make their business
unhealthy like increasing competition and slow growth of business, but they
havent done any analysis or diagnosis of the depths and figures of the causes.
II. Evaluation and Feedback
The have selected couple of desired alternatives as aggressive pricing strategy
to over come the revelry and an attempt to Joint Venture with Hoilman Inc.
But they havent evaluated the reasons for the failures of those alternatives
and to know better what to do next.
Question 2

What decisionmaking style best describes

Dons approach: directive, analytical,
conceptual, or behavioral?

Which style best describes Sam Lodges

approach?
a) Directive Style
Used by people who prefer simple, clearcut
solutions to problems
Decisions are made quickly because they do
not deal with a lot of information
Considers only one or two alternatives
People who prefer this style are generally
efficient and rational and prefer to rely on
existing rules or procedures for making
decisions
b) Analytical Style
Consider complex solutions based on as much
data as can be gathered
Carefully consider alternatives and base
decisions on objective, rational data from
management control systems and other
sources
Search for best possible decision based on
information that is available
Both Don Anglos and Sam Lodge have show different set of leadership characteristics.
According to their behaviors and style of decision making, they can be categorize as,

I. Don Anglos
- Dons decision making style is best described as Directive. Don does not rely
on too much information and takes into consideration. Only one or two
alternatives as seen by the fact that most of his decisions are based purely on
gut feeling or a hunch.

II. Sam Lodge

Sams decision making style is Analytical as can be seen from his arguments
against acquiring Hoilman, Inc. Which were all based on numerical evidence
and provable facts
Question 3

Would you recommend that Pinnacle

attempt to acquire Hoilman? If so, why?

If not, what alternatives would you

suggest?
The planned Pinnacle attempt to acquire Hoilman by the CEP Don Anglos cannot be
accepted. The reasons for that can be given as follows;

I. Not the solution for the technology Transfer

- Dons decision for building a monitoring software seems to be a good strategy
to overcome existing competition and to have a competitive advantage, but
the requirement for implementing that is a technology transfer. By acquiring a
company without considering much low risk alternatives would not be the
best option.
II. No analysis or feedback from the customers
Dons decision is not analytical or even have not considered the fact that
whether their customers are demanding this service
III. Unknown and unfamiliar market entry, unaware of threats
The marketing they are planning to enter, the service market is an existing
market and at an urge of lots of new entries , so no market analysis has done
IV. Huge transformation is required, so need capital and other resources
- This acquisition would change the business model that Pinnacle is currently
having a manufacturing business and to transfer the business in to service
model, they need huge transformation including machine, labour, etc. So it
would be very costly, where currently Pinnacle cannot afford such an
investment
II. Need a new corporate culture with the diversified business
The existing culture at Pinnacle is based on manufacturing, but to become
service oriented, they need to change their corporate culture, which would
take lots of effort and time
III. Staff is not happy with the decision
Unhappy staff would create less outcome in any business. So majority of the
staff is unhappy about the planned acquisition of Hoilman Inc.
The alternatives that can be suggested instead of acquiring Hoilman Inc. are as
follows;

I. Seek new low risk technology Transfer, possibility of new JV or patent purchasing
II. Sub contract the service section rather than investing own money for unconfident
category of business
III. Attempt to increase the manufacturing business by introducing new manufacturing
products according to the market requirement
IV. Consider other possible alternatives than entering into service market
Thank You