Chapter 09 Managerial Decision Making

Selecting a Decision Making Model

• Depends on the manager’s personal preference.
• Whether the decision is programmed or non-programmed.
• Extent to which the decision is characterized by risk, uncertainty, or ambiguity.

Three Decision Making Models

• Classical Model

• Administrative Model

• Political Model

Classical Model

• Accomplishes goals that are known and agreed upon.
• Strives for certainty by gathering complete information.
• Criteria for evaluating alternatives are known.
• Decision maker is rational and uses logic.

• Based on economic conditions
• Is considered to be normative

Administrative Model

• How managers actually make decisions in situations characterized by non-programmed decisions, uncertainty, and ambiguity.
• Focuses on organizational, rather than economic.
• Two concepts are instrumental in shaping the administrative model.
• bounded rationality: means that people have limits or boundaries on how rational they can be.
• satisficing: means that decision makers choose the first solution alternative that satisfies minimal decision criteria.
• Is considered to be descriptive.
• It is considered intuitive.

Political Model

• Closely resembles the real environment in which most managers and decision makers operate.
• Decisions are complex.
• Disagreement and conflict over problems and solutions are normal.
• Coalition building is important.

Comparisons of: Classical, Political, & Administrative Models

• Classical Model Administrative Model Political Model

• Clear-cut problem and goals.
• Condition of certainty.
• Full information about alternatives and their outcomes.
• Rational choice by individual for maximizing outcomes.

• Vague problem and goals.
• Condition of uncertainty.
• Limited information about alternatives and their outcomes.
• Satisfying choice for resolving problem using intuition.

• Pluralistic; conflicting goals.
• Condition of uncertainty/ambiguity.
• Inconsistent viewpoints; ambiguous information.
• Bargaining and discussion among coalition members.