Managerial Decision Making

MANAGERIAL DECISION MAKING

Introduction

·       Decision-making is a critical managerial function, involving the selection of a course of action among alternatives.

·       Decisions in organizations are broadly classified based on types and levels:

Types of Decisions

1. Strategic Decisions
• Long-term, complex decisions taken by top management.
• Influence the direction and scope of the organization.
• Example: Entering a new market, mergers, or launching a new product line.
2. Tactical (Managerial) Decisions
• Taken by middle management.
• Medium-term, policy-based decisions to implement strategic goals.
• Example: Allocating resources to departments, setting marketing plans.
3. Operational Decisions
• Taken by lower-level managers or supervisors.
• Day-to-day, routine decisions.
• Example: Scheduling staff shifts, ordering supplies.

Levels of Decision-Making

Level	Decision Type	Responsibility	Time Frame
Strategic Level	Strategic Decisions	Top Management	Long-term
Tactical Level	Tactical Decisions	Middle Management	Medium-term
Operational Level	Operational Decisions	Supervisors/Line Managers	Short-term/Daily

Approaches to Decision-Making

A. Rational Approach

• Based on logic, data, and analysis.
• Involves clear problem identification, data collection, evaluation of alternatives, and choosing the best option.
• Suitable for programmed and structured decisions.
• Example: Cost-benefit analysis for selecting a vendor.

B. Intuitive Approach

• Relies on instinct, experience, and gut feeling rather than formal data.
• Common in uncertain or novel situations where data is incomplete.
• Fast but may lack consistency.
• Example: Hiring a candidate based on personal judgment.

C. Bounded Rationality (Herbert Simon)

• Managers aim to make rational decisions but are limited by information, cognitive limitations, and time.
• They "satisfice" – choose the option that is good enough, not necessarily optimal.

D. Incremental Approach

• Small, step-by-step improvements or decisions are made rather than drastic changes.
• Often seen in public policy and large bureaucratic organizations.

E. Political Approach

• Decision-making is influenced by power, negotiation, and conflict among stakeholders.
• More relevant in organizations with conflicting interests.

F. Creative Approach

• Involves brainstorming and innovation to arrive at novel solutions.
• Often used in R&D, advertising, or start-ups.

Implications of Decision-Making on Information Systems (IS)

A. Role of IS in Decision-Making

• Data Collection & Storage: IS helps collect, store, and organize vast amounts of data from internal and external sources.
• Data Analysis & Forecasting: Decision Support Systems (DSS) and Business Intelligence tools analyze data to support complex decisions.
• Real-time Information Access: Enables faster and more accurate decisions.
• Improves Communication: Enhances coordination and information sharing across departments.

B. Matching IS with Decision Types

Decision Type	Relevant IS	Function
Strategic	Executive Support System (ESS)	Summarizes trends, forecasts, dashboards
Tactical	Management Information System (MIS)	Reports, summaries, comparisons
Operational	Transaction Processing System (TPS)	Routine data entry and processing tasks

C. IS Helps in:

• Reducing uncertainty in decision-making.
• Enabling simulation and modeling to test decision outcomes.
• Supporting collaborative decisions through groupware and communication tools.
• Providing decision audit trails for accountability.

Video Description

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