Decision-making

o Managers of all kinds and types, including the engineer manager, are primarily tasked to provide leadership in the quest for the attainment of the organizations objectives.

o If he is to become effective, he must learn the intricacies of decision-making.

o A major blunder in decision-making may be sufficient to cause the destruction of the any organization. o Good decision, on the other hand, will provide the right environment for the continuous growth and success of any organized effort.

Decision-making as Management Responsibility

o Decision-making is a responsibility of the engineer manager. o It is understandable for managers to make wrong decisions at times. The wise manager will correct them as soon as they are identified. o The bigger issues is the manager who cannot or do not want to make decisions. o Delaney concludes that this type of managers are dangerous and should be removed from their position as soon as possible

o Management must strive to choose a decision option as correctly as possible.

o The higher the management level is, the bigger and the more complicated decision-making becomes.

What is Decision-making?
o Decision-making may be defined as the process of identifying and choosing alternative sources of action in a manner appropriate to the demands of the situation. o Decisions are made at various management levels (i.e., top, middle, and lower levels) and at various management functions (i.e., planning, organizing, directing, and controlling). o Decision-making, according to Nickles and others, is the heart of all the management functions

The Decision-making Process

o Rational decision-making, according to David H. Holt, is a process involving the following steps: 1. diagnose problem 2. analyze environment 3. articulate problem or opportunity *4. develop viable alternatives 5. evaluate alternatives 6. make a choice 7. implement decision 8. evaluate and adapt decision results

o Diagnose problem
If the manager wants to make an intelligent decision, his first move must be to identify the problem. An expert once said identification of the problem is tantamount to having the problem half-solved.

What is a problem? A problem exist

when there is a difference between an actual situation and a desires situation.

o Analyze environment
The environment where the organization is situated plays a very significant role in the success or failure of such an organization. The objective of environmental analysis is the identification of constraints, which may be spelled out as either internal or external limitations.

Examples of internal limitations are as follows: 1. Limited funds available for the purchase of equipment. 2. Limited training on the part of employees. 3. Ill-designed facilities
Examples of external limitations are as follows: 1. Patents are controlled by other organizations. 2. A very limited market for the companys products and services exists. 3. Strict enforcement of local zoning regulations.

Components of the Environment. The environment

consists of two major concerns: 1.internal and 2.external

The internal environment refers to organizational activities within a firm that surrounds decision-making. Shown in Figure 2.1 are the important aspects of the internal environment.

The external environment refers to variables that are outside the organization and not typically within the sort-run control of top management. Figure 2.2 shows the forces comprising the external environment of the firm.

o Articulate problem or opportunity

A problem is really an opportunity to improve ones standing. If one wants to benefit from solving a problem or exploiting an opportunity, a solution that will effectively address the situation is required. A good solution must be chosen from among several alternatives.

The Firm
Internal Environment Organizational Aspects like organizational structure, policies, procedures, rules, ability of management External Environment Marketing Aspects like product strategy and promotion strategy Personal Aspect Decision like recruitment practices and External Environment incentive systems Production Aspect like plant facility layout and inventory control Financial Aspect like liquidity and profitability

o Develop viable alternatives

The list of solutions prepared by the engineering manager shows the following alternative courses of action: 1.improve the capacity of the firm by hiring more workers and building additional facilities; 2.secure the service of subcontractors; 3.buy the needed additional output from another firm; 4.*stop serving some of the companys customers; and 5.*delay servicing some clients.

o Evaluate alternatives
Proper evaluation makes choosing the right solution less difficult. How the alternatives will be evaluated will depend on the nature of the problem, the objectives of the firm, and the nature of alternatives presented. Sounder suggests that each alternative must be analyzed and evaluated in terms of its value, cost, and risk characteristics.

o Evaluate alternatives
Proper evaluation makes choosing the right solution less difficult. How the alternatives will be evaluated will depend on the nature of the problem, the objectives of the firm, and the nature of alternatives presented. Sounder suggests that each alternative must be analyzed and evaluated in terms of its value, cost, and risk characteristics.

The value of the alternatives refers to benefits that can be expected. An example may be described as follows: A net profit of 10 million Php. per year if the alternative is chosen.
The cost of the alternative refers to out-ofpocket costs (like 100 million Php. for construction of facilities), opportunity cost (like the opportunity to earn interest of 2 million Php. per year if money is invested elsewhere), and followon cost (like 3 million per year for maintenance of facilities constructed).

The risk characteristics refer to the likelihood of achieving the goals of the alternatives. If the probability of a net profit of 10 million Php. is only 10 percent, then the decision-maker may opt to consider an 80 percent probability of success.

Another example of an evaluation of alternatives is shown below: An engineer manager faced with the problem of choosing between three applicants to fill up a lone vacancy for a junior engineer. He will have to set up certain criteria for evaluating the applicants. If the evaluation is jot done by a professional human resources officer, then the engineer manager will be forced to use a predetermined criteria.

A typical evaluation of job applicants will appear as follows:

Evaluation Sheet Title of vacant Position: Junior Engineer Date of Evaluation: December 28, 2011 Applicant Education Training Experience Age Total Points

1. Jose Sibayan, Jr.

2. Menandro Rillon 3. Dnate dela Cruz

40
40 40

35
36 38

4
5 6

10
9 7

89
90 91

Evaluator: Edgardo J. Viloria Manager Engineering Division III

o Make a choice
This is the point where he must be convinced that all the previous steps were correctly undertaken. Choice-making refers to the process of selecting among alternatives representing potential of selecting among alternatives representing potential solutions to a problem. At this point, Webber advises that particular effort should be made to identify all significant consequences of each choice.

o Implement Decision
This is necessary, or decision-making will be an exercise in futility. Implementation refers to carrying out the decision so that the objectives sought will be achieved. To make implementation effective, a plan must be devised. At this stage, the resources must be made available so that the decision may be properly implemented. Those who will be involved in implementation, according to Aldag and Stearns, must understand and accept the solution..

o Evaluate and Adapt Decision Results

In implementing the decision, the results expected may or may not happen. It is, therefore, important for the manager to use control and feedback mechanism to ensure results and to provide information for future decisions. Feedback refers to the process which requires checking at each stage of the process to assure that the alternatives generated, the criteria used in evaluation, and the solution selected for implementations are in keeping with the goals and objectives originally specified.

Control refers to actions made to ensure that activities performed match the desired activities or goals, that have been set. In this last stage of decision-making process, the engineer manager will find out whether or not the desired result is achieved. If the desired result is achieved, one may assume that the decision made was good. If it was not achieved, Ferrell and Hirt suggest that further analysis is necessary.

THANK YOU!

Prepared by: Arambala, Kathleen T.