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Week 4Week 4
Decision Making:Decision Making:
The essence of a manager’s job.The essence of a manager’s job.

2. Malaysian Institute of Aviation Technology
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a. Decision making process
b. Three Approaches Managers Use in Making
Decision
c. Decision Problems
d. Decision conditions of certainty, risk and
uncertainty
e. Decision making styles
f. Case Application - Assignments
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Contents:

3. Malaysian Institute of Aviation Technology
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Personal decision making
Why do you think to take BAVM program?
Why you decided to marry someone?
What makes you buy something that is branded?
Organisational decision making
What makes manager decided to recruit someone?
Why setting up new project?
Why cut cost?
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Decision Making

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Why Malaysia Airlines decided to
never use larger aircraft in
domestic route?
- discussion

5. Malaysian Institute of Aviation Technology
 Most domestic routes are operated by 737s , A330
 Due to the airport limitations and also the fluctuating
demand which varies from day to day and season to
season.
 Able to control with ease and given the exceptionally
low domestic fares at very economical fares too.
 Fuel
 Easy operating
 Wide-body is much more comfortable as they are
designed for longer flights unlike the 737 which is
designed for short trips with quick turnaround times 5
Reasons?? - Discussion

6. Malaysian Institute of Aviation Technology
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 Decision making is typically described as
choosing among alternatives.
 It is a process begins with identifying the
problems.
 Problem is a discrepancy between an existing
and a desired state of affairs
 Example: car breakdown – identify problem
either blown engine or burst radiator horse
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Definition of decision making

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 Once a manager has identified a problem that needs
attention, the decision criteria that will be important in
solving the problem must be identified.
 Example: Project manager – decision in – buying vehicle.
Product manager has to assess those factors that are
relevant in her decision. These might include ctiteria
such as price, model (2 or 4 door), size (compact /
intermediate), manufacturer (French, German,
American), optional equipment (automatic-transmission,
side-protection, leather interior), repair records etc). 7
What is relevant in decision making
process

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A set of eight steps including identifying a problem, selecting alternatives and
evaluating the decision’s effectiveness.
Step 1: Identifying a Problem
A discrepancy between an existing and a desired
state of affairs.
 be aware of the problem
 compare existing state with desired state
 need for attention.
THE DECISION-MAKING PROCESS

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Step 2: Identifying Decision Criteria
Criteria that define what is relevant in a decision.
 determine what is relevant in making decision
Step 3: Allocating weights to the criteria
 How? e.g. most important criterion a weight of 10, least
important a weight of 1
 Why? To prioritise the criteria you identified in Step 2
THE DECISION-MAKING PROCESS.

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 Example: Criteria and Weight in Car Buying (Scale 1
to 10)
Criteria Weight
Price 10
Interior Comfort 8
Durability 5
Repair record 5
Performance 3
Allocating Weights
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Step 4: Developing alternatives
 How? List the viable alternatives that could resolve the problem
 No attempt is made in this step to appraise these alternatives, only
to list them
Step 5: Analysing alternatives
 Critically analyse each alternative
 Evaluate each alternative and appraise it against established criteria
in Step 2
 Listing of strength and weaknesses – rate each alternative.
 Judgment
THE DECISION-MAKING PROCESS.

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Analysing alternatives
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Alternati
ves
Initial
Price (10)
Interior
Comfort
( 8)
Durabili
ty (5)
Repair
Record (5)
Performa
nce (3)
Handling
(1)
Total
Jeep 2 10 8 7 6 6 39
Ford 9 6 5 6 7 5 38
Merced
es
8 5 6 10 9 5 43
Volvo 10 5 6 5 8 6 40
BMW 5 6 8 7 8 5 39
Isuzu 6 8 7 5 7 7 40

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Step 6: Selecting an alternative
 Is the critical act of choosing the best alternative
 How? Choose the alternative(s) with the highest score.
 Assessment criteria x criteria weight
Step 7: Implementing the alternative
 Implementation i.e. putting decision into action.
 Decision implementation includes conveying a decision to those
affected and getting their commitment to it
Discuss.
 The importance of proper implementation (group or committee s can
help a manager achieve commitment)
 Communication (meeting and send to procurement department)
THE DECISION-MAKING PROCESS.

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Step 8: Evaluating decision effectiveness
 Appraising the outcome of the decision.
Discussion
 Why?
 To see if the problem has been resolved
 What if not? (control function)
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THE DECISION-MAKING PROCESS

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Decisions in the Management Functions
• PLANNING
• What are the organisation’s long term objectives?
• What strategies will best achieve those objectives?
• What should the organisation’s short term objectives be?
• How difficult should individual goals be?
• ORGANISING
• How many employees should I have report directly to me?
• How much centralisation should there be in the organisation?
• How should jobs be designed?
• When should the organisation implement a different structure?
• LEADING
• How do I handle employee who appear to be low in motivation?
• What is the most effective leadership style in a given situation?
• How will a specific change affect worker productivity?
• When is the right time to stimulate conflict?
• CONTROLLING
• What activities in the organisation need to be controlled?
• How should those activities be controlled?
• When is a performance deviation significant?
• What type of management information system should the organisation have?

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 Manager as decision makers.
 Discussion with the whole class.
 Brainstorm.
 Managerial decision making is assumed to be rational in that
managers make consistent, value maximizing-choices within
specified constraint
 A decision maker who was perfectly rational would be fully
objective and logical. He or she would define a problem
carefully and would have a clear and specific goal.
 Moreover, the steps in decision making would consistently lead
toward selecting the alternatives that summarizes that goal
(assumptions of rationality)
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1. Rationality Assumptions
2. Bounded Rationality
3. Role of Intuition
Three Approaches Managers Use in Making
Decision
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Rationality assumptions
• Rational decision making: Describes choices that are consistent and value
maximising within specified constraints.
• Perfectly rational decision makers would be fully objective and logical. Carefully
defines problem, have a clear and specific goal. Decision would consistently lead
towards selecting the alternative that maximise the likely hood of achieving that
goal.
Rational
Decision Making
• Final choice
Will maximise
Pay off.
• Problem is clear
& non ambiguous.
• Single.
Well defined,
Goal to be
Achieved.
• All
Alternatives &
Consequences
known.
• Preferences
Are clear.
• Preferences
Constant &
stable.
• No time &
Cost constraints
existed.
Lead to
• Rational managerial decision making assumes that decisions
are made in the best economic interest of the Organisation.

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 Rational decision maker needs creativity: the ability to
produce novel and useful ideas
 These are ideas that are different from what’s been done
before but that are also appropriate to the problem or
opportunity presented
Why is creativity is important to decision making?
It allows the decision maker to appraise and
understand more fully, including seeing problems
others can’t see. 19

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 Management theory is built on the premise that individuals
act rationally and that managerial jobs revolve around the
rational decision making process. Few people actually
behave rationally. Given this fact, how do managers make
decisions if it is unlikely that they are perfectly rational?
 Herbert Simon, an economist and management scholar.
Found that within certain constraint, managers do act
rationally. Because it is impossible for human beings to
process and understand all the information necessary to
meet the test of rationality, what they do is construct
simplified models that extract the essential features from
problems without capturing all of their complexities.
 SIMON CALLED THIS DECISION_MAKING
PROCESSS BOUNDED RATIONALITY
Bounded Rationality
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Bounded Rationality
• Behaviour that is rational within the parameters of a simplified decision making
process, which is limited (bounded) by an individual’s ability to process
information.
• Correct decision making behaviour.
• Reflect competent through intelligent and rational deliberation.
• However, certain aspects of making decision are unrealistic.
• Therefore rational decision making happen with the assumption of limited
rationality of simplified decision making process.
• This resulted in “Satisfice” rather than “maximise”.
• Satisficing is acceptance of solutions that are good enough.
•DECISION MAKING PROCESS ARE STRONGLY INFLUENCED BY THE
DECISION MAKER’S SELF INTEREST, THE ORGANISATION CULTURE,
INTERNAL POLITICS AND POWER CONSIDERATIONS
• Escalation of commitment – increase commitment to previous decision despite

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Role of intuition.
• Intuition Decision Making:
• A subconscious process of making decisions on the basis of experience
and accumulated judgment.
Intuition
Subconscious
Mental
Processing.
Cognitive
Based
decisions
Values or ethics
Based
Decisions.
Affect- initiated
decisions
Experience
Based
decisions
Decisions based
On feelings &
emotions
Use data from
Subconscious
Mind to make
Decisions.
Decisions on
Ethical values or
Culture.
Decisions based
On past
Experiences.
Decisions based
On skills,
knowledge
& training.

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Types of Problems and Programmed decisions
Well structured problems & Programmed decision
Straightforward, familiar, easily defined problems.
A repetitive decision that can be handled by a routine approach.
Procedure:
A series of interrelated sequential steps that can be used to respond to a
well structured problems.
Rule:
An explicit statement that tells managers what they can or cannot do.
Policy:
A guideline that establishes parameters for making decisions.

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Types of Problems and Decisions
(cont’d)
Poorly structured problems & Non
Programmed Decisions
• Problems that are new or unusual and for
which information is ambiguous or
incomplete.
• Unique decision that requires a custom made
solutions.

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Well-Structured
ILL-Structured
LOWER Level
TOP Level
Type of
Problem
Level
In
Organisation
Programmed Decisions
Non Programmed Decisions
SOP to reduce Discretion.
Type of Problems, Types of Decisions and Level in Organisation

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Decision Making Conditions.
• Certainty:
• A situation in which a manager can make accurate decisions
because all outcomes are known.
• RISK:
• Those conditions in which the decision maker is able to
estimate the likelihood of certain outcomes.
• Uncertainty:
• A situation in which a decision maker has neither certainty
nor reasonable probability estimates available.
•A Condition in which managers do not have full knowledge of the
Problem they face and cannot determine even a reasonable
Probability of alternatives outcomes

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Decision Making Styles.
• Directive Style:
• Characterised by low tolerance for ambiguity and a rational
way of thinking
• Analytic Style:
• Characterised by a high tolerance for ambiguity and a rational
way of thinking.
• Conceptual Style:
• Characterised by a high tolerance for ambiguity and an
intuitive way of thinking.
• Behavioural Style:
• Characterised by a low tolerance for ambiguity and an
intuitive way of thinking.

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Analytical
Directive Behavioural
Conceptual
WAY of THINKING
TOLERANCEforAMBIGUITY
HIGH
LOW
RATIONAL INTUITIVE / spontaneous
Decision Making Styles

29. Malaysian Institute of Aviation Technology
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04th February 2009 Bachelor of Aviation Management 29
Managerial
Decision Making
DECISION.
• Choosing Best Alternative
 Maximising.
 Satisficing.
• Implementing.
• Evaluating.
Types of Problems & Decisions.
• Well structured - Programmed.
• Poorly structured - non programmed
Decisions Making Conditions.
• Certainty.
• Risk.
• Uncertainty.
Decision Making
Approach.
• Rationality.
• Bounded Rationality.
• Intuition.
Decision Maker’s Styles.
• Directive.
• Analytical.
• Conceptual.
• Behavioural.
Overview of Managerial Decision Making.

30. Malaysian Institute of Aviation Technology
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 Group discussion: My decision making
experience.
 Break into three (3) groups.
 Brainstorm on members experience on decision
making.
 Choose one good decision and one bad decision.
 Discuss what make them good and bad.
 Conclude by recommending list of suggestion
toward making good decision.
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31. Malaysian Institute of Aviation Technology
 Eight (8) steps process of decision making ..
 Decision making in the management process..
 The rational decision maker..
 The perfect rational approach to decision making..
 The bounded rational approach to decision making…
 Intuition in decision making…
 The decision making conditions…
 Decision making style…
 Current trend and issues.
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Summary:

32. Presentation slides and reportPresentation slides and report
Dateline: 19Dateline: 19thth
February 2013 (Tuesday)February 2013 (Tuesday)

33. 
1. Why do you think the top management of Malaysia
Airlines (MAS) decided to close its route to
Manchester from Kuala Lumpur. Discuss.
2. Air Asia has closed its services at Stansted Airport
London and moved to Gatewick Airport, London.
After a couple of months, Air Asia made a decision
to stop its’route to London. Why do you think this
happened? Discuss.
Questions – Choose 1