Page 115 - Fundamentals of Management Myths Debunked (2017)_Flat

114 Part 2 • Planning
who fails to identify the right problem and does nothing.
So, how do managers become aware they have a prob-
lem? They have to make a comparison between current
reality and some standard, which can be (1) past perfor-
mance, (2) previously set goals, or (3) the performance
of some other unit within the organization or in other
organizations. In our car-buying example, the standard is
past performance—a car that runs.

What Is Relevant in the
Decision-Making Process?

Step 2. Once a manager has identified a problem
that needs attention, the decision criteria that will be
important in solving the problem must be identified. In
Mark Richards/PhotoEdit, Inc. the factors that are relevant in her decision, which
our vehicle-buying example, the sales manager assesses
might include criteria such as price, model (two-door or
four-door), size (compact or intermediate), manufacturer
(French, Japanese, South Korean, German, American),
optional equipment (navigation system, side-impact
protection, leather interior), and repair records. These
The steps involved in buying a vehicle criteria reflect what she thinks is relevant in her decision. Every decision maker has criteria—
provide a good example of the decision-
making process. For this young woman, the whether explicitly stated or not—that guide his or her decision making. Note that in this step
process starts with the first step of identifying in the decision-making process, what’s not identified can be as important as what is because
the problem of needing a car so she can drive it’s still guiding the decision. For instance, although the sales manager didn’t consider fuel
to her new job and ends with the last step in
the process of evaluating the results of her economy to be a criterion and won’t use it to influence her choice of car, she had to assess
decision. that criteria before choosing to include or not include it in her relevant criteria.

How Does the Decision Maker Weight the Criteria

and Analyze Alternatives?
Steps 3, 4, and 5. In many decision-making situations, the criteria are not all equally impor-
5
tant. So, the decision maker has to allocate weights to the items listed in step 2 in order to
give them their relative priority in the decision (step 3). A simple approach is to give the most
important criterion a weight of 10 and then assign weights to the rest against that standard.
Thus, in contrast to a criterion that you gave a 5, the highest-rated factor is twice as impor-
tant. The idea is to use your personal preferences to assign priorities to the relevant criteria
in your decision and indicate their degree of importance by assigning a weight to each.
Exhibit 4–2 lists the criteria and weights that our manager developed for her vehicle replace-
decision criteria ment decision. What is the most important criterion in her decision? Price. What has low
Factors that are relevant in a decision
importance? Performance and handling.

Exhibit 4–2 Important Criteria and Weights in a Car-Buying Decision

Criterion Weight
Price 10
Interior comfort 8
Durability 5
Repair record 5
Performance 3
Handling 1