Decision making is an essential part of planning. Decision making and problem solving are used in all management functions, although usually they are considered a part of the planning phase. This chapter presents information on decision making and how it relates to the first management function of planning. A discussion of the origins of management science leads into one on modeling, the five-step process of management science, and the process of engineering problem solving. Different types of decisions are examined in this chapter. They are classified under conditions of certainty, using linear programming; risk, using expected value and decision trees; or uncertainty, depending on the degree with which the future environment determining the outcomes of these decisions is known. The chapter continues with brief discussions of integrated databases, management information and decision support systems, and expert systems and closes with a comment on the need for effective implementation of decisions.
Planning Decision Making Organizing Leading Controlling
Nature of Decision Making
When you have finished studying this chapter, you should be able to do the following: • • • • • Discuss how decision making relates to planning. Explain the process of engineering problem solving. Solve problems using three types of decision-making tools. Discuss the differences between decision making under certainty, risk, and uncertainty. Describe the basics of other decision-making techniques.
NATURE OF DECISION MAKING Relation to Planning
Managerial decision making is the process of making a conscious choice between two or more rational alternatives in order to select the one that will produce the most desirable consequences (benefits) relative to unwanted consequences (costs). If there is only one alternative, there is nothing to decide. The overall planning/decision-making process has already been described at the beginning of Chapter 3, and there we discussed the key first steps of setting objectives and establishing premises (assumptions). In this chapter, we consider the process of developing and evaluating alternatives and selecting from among them the best alternative, and we review briefly some of the tools of management science available to help us in this evaluation and selection. If planning is truly “deciding in advance what to do, how to do it, when to do it, and who is to do it” (as proposed by Amos and Sarchet1), then decision making is an essential part of planning. Decision making is also required in designing and staffing an organization, developing methods of motivating subordinates, and identifying corrective actions in the control process. However, it is conventionally studied as part of the planning function, and it is discussed here.
Occasions for Decision
Chester Barnard wrote his classic book The Functions of the Executive from his experience as president of the New Jersey Bell Telephone Company and of the Rockefeller Foundation, and in it he pursued the nature of managerial decision making at some length. He concluded that the occasions for decision originate in three distinct fields: (a) from authoritative communications from superiors; (b) from cases referred for decision by subordinates; and (c) from cases originating in the initiative of the executive concerned.2
Barnard points out that occasions for decisions stemming from the “requirements of superior authority Á cannot be avoided,” although portions of it may be delegated further to subordinates. Appellate cases (referred to the executive by subordinates) should not always be
decided by the executive. Barnard explains3 that “the...