Principles of Management - Decision Making and Problem Solving - Quick Guides | Management

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Study GuidePrinciples of Management–Decision Making andProblem Solving1. Conditions That Influence Decision MakingManagers make decisions every day, but not all decisions are made under the same conditions. Inmanagement, decision making usually happens underthree main conditions:certainty, risk, anduncertainty. While all managers experience each condition at times,risk and uncertaintyare morecommon when dealing with complex problems—especially at higher management levels.1.1 Decision Making Under CertaintyDecision making undercertaintyhappens when a manager hascomplete and accurateinformation. All the facts are known, and the outcomes of each option are clear.This is theideal situationfor problem solving. The manager’s main task is to:•Review the available alternatives•Choose the best possible solutionProgrammed DecisionsWhen problems occurrepeatedly, managers often rely onprogrammed decisions. These arestandard, preplanned responses based on past experience.Example:Automatically reordering inventory when stock drops below a certain level.Today, many programmed decisions are supported—or even handled entirely—bycomputers anddecision-support software, making the process faster and more consistent.Structured ProblemsProblems handled under certainty are usuallystructured problems. These problems are:•Familiar•Clearly defined•Easy to understand

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Study GuideManagers can oftenanticipatethese problems and prepare solutions in advance.Common examples include:•Pay raises•Promotions•Vacation requests•Committee assignmentsProactive managers create systems to handle these issues efficiently before they arise.1.2 Decision Making Under RiskIn arisk environment, managers donothave complete information. They understand the problemand possible solutions, but theycannot be surewhich option will work best.Risk is acommon conditionin management, especially when dealing with new or changingsituations.Nonprogrammed DecisionsNew or unusual problems requirenonprogrammed decisions. These decisions are:•Custom-made for the specific situation•Based on detailed analysis and judgment•Less routine and more complexAlthough computers can help process information,human judgmentplays a key role.Most decisions made bytop-level managersfall into this category. That’s whyconceptual skills—the ability to think broadly and strategically—become more important at higher management levels.Crisis ProblemsAcrisis problemis a sudden and unexpected issue that can cause serious harm if not handledquickly and correctly.Well-known examples include:•The Chernobyl nuclear plant explosion•The Exxon Valdez oil spill

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Study GuideSince no organization is immune to crises, many modern managers nowexpect crises to occur. Asa result, they:•Develop crisis management plans•Install early-warning information systems•Train employees to respond effectivelyBeing prepared can significantly reduce damage when a crisis strikes.1.3 Decision Making Under UncertaintyDecision making underuncertaintyis the most difficult condition. Here, managers:•Lack sufficient information•Cannot even estimate the probability of outcomesThis situation is likeentering unknown territorywith no map.Creativity and Intuition MatterBecause reliable data is unavailable, managers must rely heavily on:•Creativity•Intuition•Educated guesses•Experience-based judgmentThese decisions leaveroom for error, but they are often unavoidable in unpredictable situations.Groups are frequently used in uncertain situations becausecollective thinkingcan generate moreinnovative ideas and reduce blind spots.Unstructured ProblemsUncertainty usually involvesunstructured problems, which are:•Ambiguous•Unexpected•Lacking clear information

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