E. FRANK HARRISON

1. The Managerial Decision-Making Process E. FRANK HARRISON Fifth Edition

2. The Managerial Decision-Making ProcessFifth Edition Author: E. Frank Harrison, Ph.D. Slides by Monique A. Pelletier, Ph.D.

3. Chapter 5 Eclectic Approaches to Decision Making

4. Decision-Making Models • Rational model • Organizational model • Political model • Process model

5. Table 5.1 A Typology of Decision-Making Models Primary Decision-Making Model Criterion Key Ingredients Key Assumptions Rational Maximized Objectives; specific states of nature; subjective Fixed objectives; unlimited information; no cog- (classical) outcome probabilities; quantified utilities (payoffs); nitive limitations; no time and cost constraints; exhaustive alternatives; disregard of environment; quantifiable and transitive alternatives; controlled computational decision-making strategy; short- variables; closed system; quantitatively limited term horizon; highly structured process outcomes Organizational Satisficing Objectives; general states of nature; limited Attainable objectives; limited information; cogni- (neoclassical) outcome subjective probabilities; partially quantified tive limitations; time and cost constraints; par- utilities (payoffs); nonexhaustive alternatives; tially quantifiable and intransitive alternatives; sensitive environment; judgmental decision- open system; qualitatively -- and quantitatively -- making strategy; short-term horizon; moderately limited outcomes structured process Political Acceptable Objectives; general states of nature; no prob- Limited objectives; unlimited information; no cog- (adaptive) outcome abilities; unquantifiable utilities (payoffs); nitive limitations; no time and cost constraints; nonexhaustive alternatives; dominant environ- nonquantifiable and generally transitive alterna- ment; compromise or bargaining decision-making tives; open system; environmentally limited strategy; restricted number of outcomes; short- outcomes; no "right" decision term horizon; incremental steps; loosely structured process Process Objectives- Objectives; general states of nature; generally Highly dynamic objectives; limited information; (managerial) oriented subjective probabilities; objectives-oriented utilities cognitive limitations; time and cost constraints; outcome (payoffs); exhaustive alternatives; sensitive to generally nonquantifiable and intransitive environmental constraints; judgmental decision- alternatives; open system; sequential decision- making strategy with selective use of computation making functions; objectives-oriented outcomes and compromise; long-term horizon; limited number of outcomes; highly structured process

6. The Rational Model • Founded on quantitative disciplines • Maximized outcome • Computational decision-making strategy • Closed decision-making process • Fixed objectives • No bounded rationality

7. The Organizational Model • Attainable objectives • Bounded rationality • Short-term horizon • Qualitative orientation • Judgmental decision-making strategy • Open decision-making process • Satisficing outcome

8. The Political Model • Acceptable outcomes • Compromise decision-making strategy • No bounded rationality • Ambiguous or nonexistent objectives • Incremental or marginal choices • Short-term horizon

9. The Process Model • Dynamic objectives • Objectives-oriented outcomes • Long-term horizon • Accommodates innovation • Bounded rationality • Judgmental decision-making strategy • Open decision-making process

10. Interdisciplinary Framework of Decision Making • Behavioral disciplines • Quantitative disciplines • Behavioral/quantitative fusion

11. • Economics • Statistics Figure 5.1 The Interdisciplinary Framework of Decision Making • Philosophy Values and ethics Utility and probability The decision- making process • Sociology • Social psychology Individual behavior Group behavior • Psychology Models and simulation Environment • Law • Anthropology • Political science • Mathematics