DECISION MAKING

Decision Making

• Defined as the process of identifying and choosing alternative courses of action in a manner appropriate to the demands of the situation.

• It is the heart of all the management functions.

Indecisive Managers

Should be removed from their position ASAP

Three Levels of Decision Making

• Management must strive to choose a decision option as correctly as possible.
• They are responsible for whatever outcome their decisions bring.
• The higher the management level is, the bigger and more complicated decision making becomes.

Top Level Management

Three Levels of Decision Making

Strategic Decisions (Long Term)

Middle-Level Management

Three Levels of Decision Making

Tactical Decisions (Intermediate Range)

First-Line Management

Three Levels of Decision Making

Operational Decisions (Day to day operations)

Decision Making Process

1. Diagnose the Problem
2. Analyze Environment
3. Develop Viable Alternatives
4. Evaluate Alternatives
5. Make a Choice
6. Implement Decision
7. Evaluate and Adapt Decion Results

David H. Holt

According to him, rational decision making is a process

Problem

A problem exists when there is a difference between an actual situation and a desired situation.

Environmental Analysis

Identification of constraint, which may be spelled out as internal or external limitations.

Internal Limitations

Limited funds; Limited training; Ill-designed facilities

External Limitations

Patents; Limited market; Strict enforcement of local zoning regulations

Internal Environment

Components of the Environment

Organizational activities within a firm that surrounds decision making.

External Environment

Components of the Environment

Variables that are outside the organization and not typically within the short-run control of top management.

Organizational Aspects

The Engineering Firm and the Internal Environment in Decision Making

e.g. org, structures, policies, procedures, rules, ability of management, etc.

Marketing Aspects

The Engineering Firm and the Internal Environment in Decision Making

e.g. product strategy, promotion strategy, etc.

Personnel Aspects

The Engineering Firm and the Internal Environment in Decision Making

e.g. recruitment practices, incentive systems, etc.

Production Aspects

The Engineering Firm and the Internal Environment in Decision Making

e.g. plant facility layout, inventory control, etc.

Financial Aspects

The Engineering Firm and the Internal Environment in Decision Making

e.g. liquidity, profitability, etc.

External stakeholders of the Engineering Firm

• Government
• Labor Unions
• Suppliers
• Banks
• Clients
• Engineers
• Competitors
• Public

Value of the alternatives

Benefits that can be expected.

Cost of the alternative

Out-of-pocket costs, opportunity costs, and follow-on costs.

Risk Characteristics

Likelihood of achieving the goals of the alternatives.

Diesel Generator

Reliable, lower upfront cost; High fuel cost and pollution

Battery Storage with Solar Panels

Clean energy, long-term savings; High initial investment

Hybrid System (Diesel + Solar + Battery)

Balanced cost and reliability; More complex system to maintain

Choice-making

Refers to the process of selecting among alternatives representing potential solutions to a problem.

Implementation

• Refers to carrying out the decision so that the objectives sought will be achieved.

• To make implementation effective, a plan must be devised.
  
  

Desired result

Good Decision

Not Achieved

Further Analysis

Feedback

The process which requires checking at each stage of the process to assure that the alternatives generated, the criteria used in evaluation, and the solution selected for implementation are in keeping with the goals and objectives originally specified.

Control

Actions made to ensure that activities performed match the desired activities or goals that have been set.

Results Achieved

Adapt Decision Results

Results Not Achieved

Determine steps where error was made