DEcision making

1. Prof. Ir. Dr. Sevia Mahdaliza Idrus
SHAS 4542 Sem1 Session 2022/23 - Chap 4
Decision Making & Organizing

2. References:
Morse & Babcock
Chap4 & 5
Robbins & Coulter
Chap2 & 11

3. Part A

4. Decision Making for Engineers
Decision-making is commonly thought of as the cognitive process one undergoes before
choosing a particular course of action.
Engineers are trained to approach problems from a relatively more pragmatic and logical
perspective.
Engineers value efficiency, utility, and minimizing cost over aesthetics and flair.
Understanding how the engineering mind internalizes information and reacts accordingly can
provide insight on how the human mind makes decisions and how one can make better
decisions.
Be A Better
Decision
Maker
A key to success in engineering
management and in your career is
knowing how to be an effective
decision maker.

5. Decision Theory
Decision-making is one of the most fundamental yet complex psychological
processes performed regularly by human beings.
– no exact MODEL & THEORY
2 different ways to understand how decisions are made.
1. Rational perspective - decisions are made to maximize utility.
2. Naturalistic perspective - decisions are made with less practicality
but more influence from personal beliefs and prior experiences.
Decision
a choice among two
or more alternatives

6. All decisions can be sorted into one of four categories
(Yates & Tschihart, 2006):
1. Choices: selection of a subset from a larger set of
alternatives
2. Acceptances/rejections: the binary decision
3. Evaluations: assigning worth to an option
4. Constructions: attempting to create an ideal
solution given available resources
Decisions are made under three
types of circumstances (Roth, 2007):
1. Risk: the information is
unavailable, but probabilistic
models can be used because the
distributions of random variables
are known.
2. Uncertainty: the probability
distributions are unavailable, but
other obstacles are known (such
as radiation affecting
transmission from an antenna)
3. Ambiguity: functional form is
unknown, and trial-and-error
testing may be needed even to
determine inputs and outputs
Decision Theory

7. Normative Models
Rational Choice Models
Cost-benefit Analysis
Risk Assessment Models
Created to shed light how an individual commits to A decision
The individual identifies a set of options, determines the
criteria (usually quantitative) for evaluating the options, weighs
each option, and selects the option with the highest score
Decision Model
Assume that individuals are perfectly rational and
seek to optimize resources
Used by corporations and governments, this type of decision-
making is used when weighing business decisions and new policies.
Attempts to quantify values associated with each decision
Using probability to analyze games of chance. Evaluating
expected values while considering the consequences of both
false positives and false negatives
An ill patient may have the weigh the risk and benefits of the two
following treatments:
Treatment A has a projected 20% chance of death and 80% chance of
35 years of normal life after the treatment.
Treatment B has a 100% chance of survival with a certainty of 18 years
of normal life.

8. 2.
Generate all
possible solutions.
3.
Predict the
outcome of
each solution
1.
define clearly the
objectives of solving a
specific problem
4.
Determine the best
solution by balancing
the pros and cons along
with cost and benefit
Typical
engineering
decision
making
process
Decision-Making Process (DMP)

9. Decision-Making
Process (DMP)
8 steps in the
decision-making
process.
This process is as
relevant to personal
decisions as it is to
corporate decisions.

10. DMP2: Identify the Decision Criteria
▪ Decision criteria are factors that are important
to resolving the problem.
▪ Example: Sarah decides that memory and
storage capabilities, display quality, battery
life, warranty, and carrying weight are the
relevant criteria in her decision.
DMP Step 1 : Identify a Problem
▪ Problem: 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.
▪ Example: Sarah is a sales manager whose
reps need new laptops.
Decision-Making Process (DMP)

11. DMP3: Allocate Weights to the Criteria
• If the relevant criteria aren’t equally important, the decision maker must weight the
items in order to give them the correct priority in the decision.
• Example: The weighted criteria for Sarah’s computer purchase are shown below.
Criterion Weight
Memory and storage 10
Battery life 8
Carrying weight 6
Warranty 4
Display quality 3
Important Decision Criteria
Decision-Making Process (DMP)

12. DMP4: Develop Alternatives
• List viable alternatives
that could solve the
problem.
• Example: Sarah
identifies eight laptops
as possible choices
Decision-Making Process (DMP)
Laptop Memory and
Storage
Battery
Life
Carrying
Weight
Warranty Display
Quality
Acer Aspire E 10 3 10 8 5
Apple MacBook
Pro
8 5 7 10 10
Dell XPS 13 8 7 7 8 7
Lenovo ThinkPad 7 8 7 8 7
Lenovo Yoga 8 3 6 10 8
Microsoft Surface
Book
10 7 8 6 7
Razer Blade
Stealth
4 10 4 8 10
Possible Alternatives

13. DMP5: Analyze Alternatives - Identify the alternatives to analyze them using the criteria established DMP2.
DMP6: Select an Alternative - Choose the alternative that generates the highest total in DMP5.
Laptop Memory and
Storage
Battery Life Carrying
Weight
Warranty Display
Quality
Total
Acer Aspire E 100 24 60 32 15 231
Apple MacBook Pro 80 40 42 40 30 232
Dell XPS 13 80 56 42 32 21 231
Lenovo ThinkPad 70 64 42 32 21 229
Lenovo Yoga 80 24 36 40 24 204
Microsoft Surface Book 100 56 48 24 21 249
Razer Blade Stealth 40 80 24 32 30 206
Decision-Making Process (DMP)

14. DMP8: Evaluate Decision Effectiveness
▪ Evaluate the result or outcome of the
decision to see if the problem was resolved.
▪ If it wasn’t resolved, what went wrong?
DMP Step 1 : Implement the Alternative
▪ Put the chosen alternative into action.
▪ Convey the decision to those affected
and get their commitment to it.
Decision-Making Process (DMP)

15. Decisions Managers - options

16. Rationality in Making Decisions
• Assumptions of rationality:
• Rational decision maker is logical and objective
• Problem faced is clear and unambiguous
• Decision maker would have clear, specific goal and be aware of all alternatives and
consequences
• The alternative that maximizes achieving this goal will be selected
• Decisions are made in the best interest of the organization
Rational Decision Making:
choices that are logical and
consistent and maximize value

17. Intuition in Making Decision
Intuitive Decision:
making decisions on the
basis of experience,
feelings, and
accumulated judgment

18. Types of Decisions
Structured problems
• straightforward, familiar,
and easily defined
problems
Programmed decisions
• repetitive decisions that
can be handled by a
routine approach
• Procedure: a series of
sequential steps used to
respond to a well-
structured problem
• Rule: an explicit statement
that tells managers what
can or cannot be done
• Policy: a guideline for
making decisions
Unstructured Problems and
Nonprogrammed Decisions
• Unstructured problems:
problems that are new or
unusual and for which
information is ambiguous
or incomplete
• Nonprogrammed
decisions: unique and
nonrecurring and involve
custom-made solutions

19. Programmed vs. Nonprogrammed Decisions
Types of Decisions
Characteristic Programmed Decisions Nonprogrammed Decisions
Type of problem Structured Unstructured
Managerial level Lower levels Upper levels
Frequency Repetitive, routine New, unusual
Information Readily available Ambiguous or incomplete
Goals Clear, specific Vague
Time frame for solution Short Relatively long
Solution relies on… Procedures, rules, policies Judgment and creativity

20. 2
4 different individual decision-making styles based on 2 dimensions:
1. An individual’s way of thinking
2. An individual’s tolerance for ambiguity
Directive style: low tolerance for
ambiguity and seek rationality
Analytic style: seek
rationality but have a
higher tolerance for
ambiguity
Behavioral style: intuitive
decision makers with a low
tolerance for ambiguity
Conceptual style: intuitive
decision makers with a
high tolerance for
ambiguity
Decision-Making Styles

21. Decision-Style Model
Decision-style model from A. J. Rowe and J. D.
Boulgarides, Managerial Decision Making (Upper
Saddler River, NJ: Prentice Hall, 1992), p. 29.

22. Common Decision-Making Biases
Identifies 12 common
decision errors of
managers and biases they
may have.

23. Cutting-Edge Decision Making
Two technology driven cutting-edge aides to decision making are :
1. Big Data
• The vast amount of quantifiable data that can be analyzed by highly sophisticated
data processing.
• Big data has opened the door to widespread use of artificial intelligence (AI)
• Can be a powerful tool in decision making, but collecting and analyzing data for data’s
sake is wasted effort
2. Artificial Intelligence (AI)
• uses computing power to solve complex problems
• AI systems have the ability to learn and have facilitated the use of new tools such as:
• Machine learning
• Deep learning
• Analytics

24. 1. Machine Learning: A method of data
analysis that automates analytical
model building.
2. Deep Learning: A subset of machine
learning that use algorithms to create
a hierarchical level of artificial neural
networks that simulate the function of
the human brain.
3. Analytics: The use of mathematics,
statistics, predictive modeling, and
machine learning to find meaningful
patterns in a data set.
Cutting-Edge Decision Making

25. Part B: Organizing

26. Elements of Organizational
Design
• Organizing: management function that involves
arranging and structuring work to accomplish
the organization’s goals
• Organizational structure: the formal
arrangement of jobs within an organization
• Organizational chart: the visual representation
of an organization’s structure
• Organizational design: creating or changing an
organization’s structure

27. Purposes of Organizing
1. Divides work to be done into specific jobs and
departments.
2. Assigns tasks and responsibilities associated with
individual jobs.
3. Coordinates diverse organizational tasks.
4. Clusters jobs into units.
5. Establishes relationships among individuals, groups,
and departments. Establishes formal lines of
authority.
6. Allocates and deploys organizational resources.

28. Work Specialization
Work specialization:
dividing work activities
into separate job tasks
the economies and
diseconomies of work
specialization

29. Departmentalization
Departmentalization:
the basis by which
jobs are grouped
together

30. Departmentalization
Departmentalization: the
basis by which jobs are
grouped together

31. Today’s View on Departmentalization
• Two trends are:
• Cross-functional teams: a work
team composed of individuals
from various functional
specialties. This has become
more popular as tasks become
more complex.
• Customer departmentalization:
emphasizes monitoring and
responding to customers’ needs

32. Chain of Command & Authority
• Chain of command: the line of authority extending from upper
organizational levels to the lowest levels, which clarifies who
reports to whom
• Authority: the line of authority extending from upper
organizational levels to the lowest levels, which clarifies who
reports to whom
• Line authority: authority that entitles a manager to direct the
work of an employee
• Staff authority: positions with some authority that have been
created to support, assist, and advise those holding line
authority

33. Responsibility & Span of Control
• Responsibility: the obligation or
expectation to perform any
assigned duties
• Unity of command: the
management principle that each
person should report to only one
manager
• Span of control: the number of
employees a manager can
efficiently and effectively
manage
if one organization has a span of four and the other a span of
eight, the organization with the wider span will have two fewer
levels and approximately 800 fewer

34. Centralization and Decentralization
• Centralization: the
degree to which
decision making is
concentrated at
upper levels of the
organization
• Decentralization:
the degree to which
lower-level
employees provide
input or actually
make decisions
More Centralization More Decentralization
Environment is stable. Environment is complex, uncertain.
Lower-level managers are not as capable
or experienced at making decisions as
upper-level managers.
Lower-level managers are capable and
experienced at making decisions.
Lower-level managers do not want a say in
decisions.
Lower-level managers want a voice in
decisions.
Decisions are relatively minor. Decisions are significant.
Organization is facing a crisis or the risk of
company failure.
Corporate culture is open to allowing
managers a say in what happens.
Company is large. Company is geographically dispersed.
Effective implementation of company
strategies depends on managers retaining
say over what happens.
Effective implementation of company
strategies depends on managers having
involvement and flexibility to make
decisions.

35. Employee Empowerment
• Employee empowerment:
giving employees more
authority (power) to make
decisions.
• Formalization: how
standardized an
organization’s jobs are and
the extent to which
employee behavior is
guided by rules and
procedures.

36. Mechanistic and Organic Structures
• Mechanistic
organization: an
organizational
design that’s rigid
and tightly
controlled
• Organic
organization: an
organizational
design that’s
highly adaptive
and flexible

37. Mechanistic vs Organic Organizations

38. Strategy and Structure
• An organization’s structure should facilitate goal
achievement.
• Goals are an important part of the
organization’s strategies, it’s only logical that
strategy and structure are closely linked.
• There’s considerable evidence that an
organization’s size affects its structure, but once
an organization grows past a certain size, size
has less influence on structure

39. Technology and Structure
• Unit production: the production of items in units or small batches
• Mass production: the production of items in large batches
• Process production: the production of items in continuous processes
blank Unit Production Mass Production Process
Production
Structural
characteristics:
Low vertical
differentiation
Moderate vertical
differentiation
High vertical
differentiation
blank Low horizontal
differentiation
High horizontal
differentiation
Low horizontal
differentiation
blank Low formalization High formalization Low
formalization
Most effective
structure:
Organic Mechanistic Organic
Woodward’s Findings
on Technology and
Structure

40. Traditional Organizational
Design Options
• Simple structure: an organizational
design with little departmentalization,
wide spans of control, centralized
authority, and little formalization
• Functional structure: an
organizational design that groups
together similar or related
occupational specialties
• Divisional structure: an organizational
structure made up of separate,
semiautonomous units or divisions

41. Matrix and Project Structures
• Matrix structure: an organizational structure that assigns specialists from different
functional departments to work on one or more projects
• Project structure: an organizational structure in which employees continuously work
on projects

42. The Virtual Organization
• Virtual organization: an organization
that consists of a small core of full-time
employees and outside specialists
temporarily hired as needed to work on
projects
• Sometimes called “Network” or
“Modular” organization
• Telecommuting: a work arrangement in
which employees work at home and
are linked to the workplace by
computer

43. Compressed Workweeks,
Flextime & Job Sharing
• Compressed workweek: a workweek where
employees work longer hours per day but
fewer days per week
• Flextime (or flexible work hours): a scheduling
system in which employees are required to
work a specific number of hours a week but
are free to vary those hours within certain
limits
• Job sharing: the practice of having two or
more people split a full-time job
• Contingent workers: temporary, freelance, or
contract workers whose employment is
contingent on demand for their services

45. 45
sevia@utm.my