chapter 9 - managerial decision making and case

Managerial Decision MakingGROUP 4Chona GregorioSarah MonzonFederico BenavidesArthur GeronaIan DatarioCesar Yu Jr.

What is a decision?The Oxford Dictionary defines decision as a conclusion or resolution reached after consideration. It is a choice made from available alternatives.

Types of Decisions• Programmed Decision

is a decision that is recurrent and can be expected. Its responses or actions can be predefined.

• Non-programmed Decision are made in response to situations that are not anticipated, unstructured and have important consequences for the organization.

Difference between programmed and non-programmed decisionsLies in the degree of certainty or uncertainty that it involves.

Conditions That Affect The Possibility of Decision Failure

• Certainty means that all information needed to take the decision is readily available.

• Risk means that information is available but the results are subject to chance.

• Uncertainty means that goals are clear but information is incomplete.

• Ambiguity means that goals and problems are unclear which makes alternatives difficult to define.

Decision Making Models

I. Classical Model is based on rational economic

assumptions and manager beliefs about what ideal decision-making should be.

is normative because it defines how the decision should be made.

is most useful when applied to decisions where certainty or risk is involved since the information to take the decision is available.

Decision Making ModelsII. Administrative Model describes how managers take decisions in

complex situations. is divided in three concepts:

1. Bounded rationality => outlines the limits or boundaries that people has when taking decisions.

2. Satisficing => means that decision makers choose the first option that satisfies the minimum decision criteria, regardless of whether better solutions are presumed to exist.

3. Intuition => represents a quick apprehension of a decision based on experience but without thorough consideration.

Decision Making Models

III.Political modelis useful for making non-programmed

decisions when conditions are uncertain, information is limited and conflicts arise in between managers in making decisions.

can be resolved through coalitions.

A coalition is an informal alliance among managers supporting an specific goal.

Decision Making Steps

Personal Decision Framework

Four Major Decision Style

• Directive is used by people who prefer simple and clear solutions.

• Analytical is used by people who like to take decisions with as much information as possible, carefully considering alternatives.

• Conceptual considers a broad amount of information but are socially oriented.

• Behavioral considers the personal development of others to help them achieve their goals in line with the company’s goals and objectives.

Why Do Managers Make Bad Decisions?1. Being influenced by initial impressions.

2. Justifying past decisions.

3. Seeing what you want to see.

4. Perpetuating the status quo.

5. Being influenced by problem framing.

6. Overconfidence.

Group Decision Making

• Brainstorming builds on ideas given by other people where all ideas are acceptable; criticism and evaluation is not allowed.

• Electronic Brainstorming brainwritings which brings people together in an interactive group over a computer network.

• Rigorous Debate is a constructive conflict based on divergent points that brings a problem into focus and improve decision quality.

• Groupthink refers to the tendency of people in groups to suppress contrary opinions.

McDonald’sVideo Case Analysis

Brief Case Summary• Leading worldwide fast food chain and the pioneer in

franchise success. Now facing competition problems.

• Principal competitors are gaining ground in the industry.

• The tough business and profitability decline starts in 2001.

• The first quarterly loss since 1954was recorded in 2002.

Six Decision Making Steps Used By McDonald's Food Corp.1. Recognition of Decision Requirement Decline of customer guest count and the need to

change the way they do business.

2. Diagnosis and Analysis of Causes Continued building additional restaurants and

focusing in short-term targets while neglecting the long-term needs of the company.

Too much expansion becomes ineffective because focus is being done to new ones when old ones are left behind.

Six Decision Making Steps Used By McDonald's Food Corp.1. Recognition of Decision Requirement Decline of customer guest count and the need to

change the way they do business.

2. Diagnosis and Analysis of Causes Continued building additional restaurants and

focusing in short-term targets while neglecting the long-term needs of the company.

Too much expansion becomes ineffective because focus is being done to new ones when old ones are left behind.

Six Decision Making Steps Used By McDonalds Food Corp.3. Development of Alternatives Develop new growth strategies by discovering

what the clientele wanted (Customer Satisfaction) Update brand to reflect positive changes going

underway.

4. Selection of Desired Alternative Develop new growth strategies by discovering

what the clientele wanted (Customer Satisfaction) by not focusing so much on short-term goals.

Six Decision Making Steps Used By McDonald’s Food Corp.5. Implementation of Chosen Alternative

Reduced number of new restaurantsFocus on existing restaurantsOverhaul restaurant inside and outEvolve menu offeringsMeasure everything that matters

Six Decision Making Steps Used By McDonald’s Food Corp. 6. Evaluation and FeedbackWhen customer find more what they want and respond

positively to the new look and feel of the restaurant, SALES INCREASED.

Use of Tracking Matrix as a form of evaluation facilitates the work performance and improve coordination among workers.

Success of McDonald`s Decision to change are dependent on:

- Engagement from fellow managers- Learning from past mistakes- Taking some chances every now and then

Answers to Video Case Questions1. When a company’s succession plan names as interim

CEO, it buys time to decide on a permanent replacement. What are some of the risks a company might face during this process?

Having an interim CEO weakens the organization because:▫ Workers tend to lie low while waiting for a permanent

replacement.▫ Confusion in the ranks may arise such as questions on loyalty

and motivation.▫ The temporary CEO may not give his 100% contribution and

loyalty. Worse is he/she may put his/her interests before that of the organization’s.

▫ The organization may be put in an unstable and uncertain environment.

▫ Continuity of operations and programs may also be disrupted.

Answers to Video Case Questions2. When an organization is faced with unexpected

change, what can managers do to help insure that they made the right choice?

For Programmed: Follow the 6 steps in decision making. Review the set rules and processes of the organization. Form a group for decision making:

Brainstorming team and Crisis team Ask the five Why’s.

For Non-programmed: Managers usually rely on their experience and intuition. Use the company’s mission and vision as guide.

Answers to Video Case Questions

3. During Jim Cantalupo’s brief tenure as CEO, McDonald's stock went up 49%. When the company announced his replacement within a day of losing him, the share price rose again. Give insights.

The reason is probably because of the company’s stability and profitability which makes it less vulnerable to changes in management.

The company was able to make corrective actions on the problem of falling profitability. As a result, it’s cash flow improved significantly which makes it very attractive to investors.

Managerial Decision MakingEnd Of PresentationGroup 4