Lecture Notes 3 in Engineering Management PDF

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Lecture Notes 3 in Engineering Management Decision Making What is decision making? Decision-making may be defined as “the process of identifying and choosing alternative courses of action in a manner appropriate to the demands of the situations.” Decisions are made at various management levels (i.e. top, middle, lower level) and at various management functions (i.e. planning, organizing, staffing, directing and controlling) According to Nickels, decision-making “is the heart of all the management functions.” Decision Making as a Management Responsibility •

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

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Many times, he will be confronted with situations where he will have to choose from among various options.

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The engineer manager’s decision-making skills will be very crucial to his success as a professional.

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A blunder in decision-making may be sufficient to cause the destruction of any organization while good decisions will provide the right environment for continuous growth.

The Decision-Making Process According to David H. Holt, rational decision-making is a process involving the following steps: 1. Diagnose problem- State the problem objectively, define what is happening, a problem exists when there is a difference between an actual situation and a desired situation. 2. 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 either internal or external limitations. 3. Articulate problem or opportunity - Gather information about the problem, List the pros and cons of the problems, Sometimes the easiest way to solve a problem or make a decision is to weigh two opposite sides of a coin. •

Make a Pro/Con

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Construct a Cost/Benefit Analysis

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Compare the Risks and Rewards

4. Develop viable alternatives - Do not force yourself into only one choice, and be sure that each solution solves the problem.

5. Evaluate alternatives - Proper evaluation makes choosing the right solution less difficult. Look at pros and cons. 6. Make a choice - Make a decision that is based on what is best for the situation keeping the goal in mind. Choice-making refers to the process of selecting among alternatives representing potential solutions to a problem. 7. Implement decision • Implementation refers to carrying out the decision so that the objectives sought will be achieved. • At this stage, the resources must be made available so that the decision may be properly implemented. • It involves clear communication of the decision to all concerned and obtaining their commitment. 8. Evaluate and adapt decision results • Evaluation forms an integral part of any process. It involves evaluation of the outcome based on the desired goal and criteria. It also involves assessing the effectiveness and efficiency of the outcome (or the entire process). • In case of any undesired results, each step of the process is carefully reviewed to trace the root causes. • Make changes as necessary.

It is therefore, important for the manager to use control and feedback mechanisms 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 implementation are in aligned 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.

Decision Types Effective managers make various kinds of decisions. In general, these decisions are either: • Programmed decisions • Non-programmed decisions

Categories/Types of Decisions •

Programmed Decisions - routine, almost automatic process •

Situations occurred often enough to enable decision rules to be developed and applied in the future (There are rules or guidelines to follow)

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Made in response to recurring organizational problems (managers have made decision may times before)

Example: deciding to reorder office supplies, determining billing dates •

Non-programmed Decisions – Unusual situations that have not been often addressed •

In response to unique, poorly defined and largely unstructured, and have important consequences to the organization

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No rules to follow, since the decision is new

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These decisions are made based on information, and a manager’s intuition and judgment

Example: should the firm invest in a new technology? Conditions that influence decision making •

All the information the decision maker needs is fully available

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Certainty

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Risk

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Lacks complete information

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future outcomes associated with each alternative are subject to chance

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Uncertainty

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Sometimes can’t even assign probabilities

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information about alternatives and future events is incomplete

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managers may have to come up with creative approaches to alternatives

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Ambiguity

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by far the most difficult decision situation

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goals to be achieved or the problem to be solved is unclear

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alternatives are difficult to define

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information about outcomes is unavailable

Decision Styles •

Differences among people with respect to how they perceive problems and make decisions

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Thus in real organizational settings, the quality of decision does depend on the ability, style and approach of the manager

• Not all managers make decisions the same • Directive style • Analytical style • Conceptual style • Behavioral style Directive Style •

People who prefer simple, clear-cut solutions to problems

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Make decisions quickly

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May consider only one or two alternatives

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Efficient and rational

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Prefer rules or procedures

Analytical Style •

Complex solutions based on as much data as they can gather

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Carefully consider alternatives

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Base decision on objective, rational data from management control systems and other sources

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Search for best possible decision based on information available

Conceptual Style •

Consider a broad amount of information

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More socially oriented than analytical style

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Like to talk to others about the problem and possible solutions

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Consider many broad alternatives

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Relay on information from people and systems

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Solve problems creatively

Behavioral Style •

Have a deep concern for others as individuals

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Like to talk to people one-on-one

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Understand their feelings about the problem and the effect of a given decision upon them

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Concerned with the personal development of others

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May make decisions to help others achieve their goals

Summary •

Decision-making is a very important function of the engineer manager.

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His organization will rise or fall depending on the outcomes of his decisions.

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It is therefore, necessary for the engineer manager to develop some skills in decisionmaking....