DECISION

MAKING
 Decision-making
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. If he is to become effective, he must
learn the intricacies of decision-making.
The Engineer Manager’s decision-making skills will be very crucial to his success as a professional. A
major blunder in decision-making may be sufficient to cause the destruction of any organization.
GOOD DECISIONS WILL PROVIDE THE RIGHT ENVIRONMENT FOR CONTINUOUS GROWTH
AND SUCCESS OF ANY ORGANIZED EFFORT.

DECISION-MAKING AS A MANAGEMENT RESPONSIBILTY

Decisions must be made at various levels in the workplace. They are also made at the various stages in
the management process.
Decision-making is a responsibility of the Engineer Manager. It is understandable for manager to make
wrong decision at times, but a wise Engineer will correct them as soon as they are identified. The bigger issue is
the manager who cannot or do not want to make decisions. Delaney concludes that this type of managers are
dangerous and “should be removed from their position as soon as possible.”

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 situation.”
The definition indicates that the Engineer Manager must adapt a certain procedure designed to determine
the best option available to solve certain problems.

Decisions are made at various management levels (top, middle, and low) and at various management
functions. Decision-making, according to Nickels and others, “is the heart of all the management functions.”

THE DECISION-MAKING PROCESS

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 OPPURTUNITY
4. DEVELOP VIABLE ALTERNATIVES
5. EVALUATE ALTERNATIVES
6. MAKE A CHOICE
7. IMPLEMENT DECISION
8. EVALUATE AND ADAPT DECISION RESULTS

DIAGNOSE PROBLEM
If a manager wants to make an intelligent decision, his first move must be to identify the problem. If
the manager fails in this aspect, it is almost impossible to succeed in the subsequent steps. An expert once said
“identification of the problem is tantamount to having the problem half-solved.”
What is a Problem? A problem exists when there is a difference between an actual situation and a desired
situation.
ANALYZE THE ENVIRONMENT
The environment where the organization is situated plays a very significant role in the success or
failure of such an organization. It is, therefore important that an analysis of the environment be undertaken.
COMPONENTS OF THE ENVIRONMENT
The environment consists of two major concerns:
1. Internal Environment- refers to organizational activities within a firm that surrounds decision-making.
2. External Environment- refers to variables that are outside the organization and not typically within the
short-run control of top management.

DEVELOP VIABLE ALTERNATIVES

Oftentimes, problems may be solved by any of the solutions offered. The best among the alternatives
solutions must be considered by management. This is made possible by using a procedure with the following
steps:
 1. Prepare a list of alternative solutions.
2. Determine the viability of each solutions.
3. Review the list by striking out those which are not viable.

EVALUATE ALTERNATIVES
After determining the viability of the alternatives and a revised list has been made, and evaluation of the
remaining alternatives is necessary. This is important because the next step involves making a choice. 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. Souder suggests that “each alternative must be analyzed and
evaluated in terms of its value, cost, and risk characteristics.”

MAKE A CHOICE
After the alternatives have been evaluated, the decision-maker must now be ready to make a choice. This
is the point where he must be convinced that all the previous steps were correctly undertaken. To make the
selection process easier, the alternatives can be ranked from best to worst on the basis of some factors like
benefit, cost, or risk.

IMPLEMENT DECISION
Refers to carrying out the decision so that the objectives sought will be achieved. To make
implementation effective, a plan must be devised.

EVALUATE AND ADAPT DECISION

In implementing the decision, the results expected may or may not happen. It is, therefore, important for
the manager to use control and feedback mechanisms to ensure results and to provide information for future
decisions.
Control- refers to actions made to ensure that activities performed match the desired activities or goals,
that have been set.
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 keeping
with the goals and objectives originally specified.

APPROACHES IN SOLVING PROBLEMS

In decision-making, the engineer manager is faced with problems which may either be simple or
complex. To provide him with some guide, he must be familiar with the following approaches.
Qualitative Evaluation- refers to evaluation of alternatives using intuition and subjective judgement.
Stevenson states that manager tend to use the qualitative approach when:
• The problem is fairly simple.
• The problem is familiar.
• The costs involved are not great.
• Immediate decisions are needed.
Quantitative Evaluation- refers to the alternatives using any technique in a group classified as rational
and analytical.
 QUANTITATIVE MODELS FOR DECISION MAKING
INVENTORY MODELS- consists of several types all designed to help the Engineer Manager make decisions
regarding inventory. They are as follows:
– Economic Order Quantity Model. Used to calculate the number of items that should be
ordered at one time to minimize the total yearly cost of placing orders and carrying the items in
inventory.
– Producing Order Quantity Model. An economic order quantity technique applied to
production orders.
– Back Order Inventory Model. An inventory model used for planned shortages.
– Quantity Discount Model. An inventory model used to minimize the total cost when quantity
discounts are offered by suppliers.
– Queuing Theory. Describes how to determine the number of service units that will minimize
both customer waiting time and cost of service. This is applicable to companies where waiting
lines are a common situations.
– Network Models. These are models where large complex tasks are broken into smaller segments
that can be managed independently. The two most prominent network models are:
 The Program Evaluation Review Technique- a technique which enables engineer
managers to schedule, monitor, and control large ad complex projects by employing three
time estimates for each activity.
 The Critical Path Method- This is a network technique using only one time factor per
activity that enables engineer managers to schedule, monitor, and control large and
complex projects.
– Forecasting. There are instances when engineer managers make decision that will have
implications in the future.
– Regression Analysis. Is a forecasting method that examines the association between two or
more variables. It uses date from previous period to predict future events. Regression analysis
may be simple or multiple depending on the number of independent variables presents. When
one independent variable is involved, it is called simple regression, when two or more
independent variables are involved, it is called multiple regression.
– Simulation. Is a model constructed to represent reality, on which conclusions about real-life
problems can be used. It is highly sophisticated tool by means of which the decision maker
develops a mathematical model of the system under consideration.
– Linear Programming. Used to produce an optimum solution within the bounds imposed by
constraints upon the decision. It is very useful as a decision making tool when supply and
demand limitations at plants, warehouse, or market areas are constraints upon the system.
– Sampling Theory. Where samples of populations are statistically determined to be used for a
number of processes, such as quality control an marketing research. When data gathering is
expensive, sampling provides an alternative. Sampling, in effect, saves time and money.
– Statistically Decision Theory. Refers to the “rational way to conceptualize, analyze, and
solve problems in situations involving limited, or partial information about the decision
environment.”