summary of chapter 6

Decision making
· How do managers make decisions?
Managers at all levels and all organization make decisions.
Decision making is simply defined as “choosing among alternatives”.
Top level managers make decisions about their organization’s goals.
Where to locate manufacturing facilities, what new markets to move
Into and what products to offer? While middle and lower level managers make decisions about production, quality and employees.
· How are decisions made?
Decisions made on three foundations:
Ø Rationality: consistent, value-maximizing choices where the problem is clear and unambiguous, the decision maker’s goal is clear and specific and decision maker must go for alternatives.
Ø Bounded rationality: decisions are made rationally but decision maker is bounded by limited ability to process information. decision making strongly influenced by organization’s culture, politics and power consideration
Ø Intuition: in this term managers make decision on the basis of their experiences, feelings and judgements.
· Types of problems and decisions:
Ø Structured problem: straightforward, familiar and easily defined problems are called structured problems. Example costumer’s returning a purchase to a store; college’s handling of student wanting to drop a class. Such cases are belonging to structured problems.
Ø Unstructured problems; are problems new or unusual and for which information is ambiguous or incomplete.
· Decision making conditions: three conditions managers may face while decision making.
Certainty: a situation in which a manager can make accurate decisions because all outcomes are known.
Uncertainty: a situation in which a decision maker has neither certainty nor reasonable probability estimates available.
Risk: a situation in which the decision maker is able to estimate the likelihood certain outcomes.
· Decision making styles: following are the styles of decision making.
Ø Directive style: a decision-making style characterized by low tolerance for ambiguity and a rational way of thinking.
Ø Analytic style: a decision-making style characterized by a high tolerance for ambiguity and an intuitive way of thinking.
Ø Conceptual style: a decision-making style that is characterized by a high tolerance for ambiguity and intuitive way of thinking.
Ø Behavioural style: a decision-making style characterized by a low tolerance for ambiguity and an intuitive way of thinking.
· How do managers need to know about making decisions in today’s world?
Ø Understand cultural difference.
Ø Know when it’s time to call it quit.
Ø Use an effective decision-making process.
Ø Develop highly reliable organizations.


Multiple choice questions

· Under how many conditions managers make decisions?
1. one
2. two
3. three

· kinds of problems that managers face;
1. rational
2. structured, unstructured problems · How many steps are there in decision making?
1. two
2. five
3. none of these

· when managers use rule of thumb in decision-making it is known as:
1. heuristics
2. policy
3. implementation of alternative

· what’s relevant in a decision ,defined

1. decision criteria
2. identifying problem
3. selection of alternative
3. none of these


· decisions are made by
1. all organizations
2. tall organizations
3. short organizations