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CHAPTER 4    •  Foundations of Decision Making    113
                    How Do Managers Make Decisions?


                                                How do businesses put new ideas into action? Through
                    4-1     Describe the        lots of decisions, that’s how.  When Bertucci’s, a   decision-making process
                                                                                                  A set of eight steps that includes identifying
                          decision-making         shopping-mall restaurant chain in New England and the   a problem, selecting a solution, and evaluating
                                                                                                  the effectiveness of the solution
                          process.              mid-Atlantic region, wanted to create a spin-off chain
                                                with a more contemporary, “hipper” appeal, manag-  problem
                                                ers had lots of decisions to make over a nine-month   A discrepancy between an existing and a desired
                      period from concept to opening. Managers hope, of course, that those decisions prove to be   state of affairs
                    good ones. 1


                     Forty hours a week: how often companies expect people
                                       to be strong decision makers.      2


                       Decision making is typically described as choosing among alternatives, but this view is
                    overly simplistic. Why? Because decision making is a process, not a simple act of choosing
                    among alternatives. Exhibit 4–1 illustrates the decision-making process as a set of eight steps
                    that begins with identifying a problem; it moves through selecting an alternative that can
                      alleviate the problem and concludes with evaluating the decision’s effectiveness. This process
                    is as applicable to your decision about what you’re going to do on spring break as it is to the
                    decisions UPS executives are making as they deal with issues that could affect the organiza-
                    tion’s future profitability (see Case Application #1 on p. 136). The process can also be used to
                    describe both individual and group decisions. Let’s take a closer look at the process in order
                    to understand what each step entails by using a simple example most of us can relate to—the
                    decision to buy a car.

                    What Defines a Decision Problem?
                    Step 1. The decision-making process begins with the identification of a problem or, more
                                                                                3
                    specifically, a discrepancy between an existing and a desired state of affairs.  Take the case of
                    a sales manager for Pfizer. The manager is on the road a lot and spent nearly $6,000 on auto
                    repairs over the past few years. Now her car has a blown engine and cost estimates indicate
                    it’s not economical to repair. Furthermore, convenient public transportation is unavailable.
                    So, we have a problem—a discrepancy between the manager’s need to have a car that works
                    and the fact that her current one doesn’t.

                                Identifying problems is IMPORTANT . . .
                                          and CHALLENGING!            4


                       In our example, a blown engine is a clear signal to the manager that she needs a new car,
                    but few problems are that obvious. In the real world, most problems don’t come with neon
                    signs identifying them as such. And problem identification is subjective. A manager who mis-
                    takenly solves the wrong problem perfectly is just as likely to perform poorly as the manager



                    Exhibit 4–1  The Decision-Making Process

                       Identification  Identification  Allocation  Development    Analysis     Selection   Implementation
                          of a        of Decision   of Weights      of            of          of an         of the
                        Problem        Criteria     to Criteria  Alternatives  Alternatives  Alternative   Alternative

                                                                   Evaluation
                                                                      of
                                                                    Decision
                                                                  E ectiveness
   109   110   111   112   113   114   115   116   117   118   119