CHAPTER 5
MAKING GOOD MANAGEMENT DECISIONS
This chapter focuses on decision making as a pervasive
facilitative activity in management work. Managers of
health programs constantly make decisions. This vital
facilitative activity permeates the core activities of
developing/strategizing, designing, and leading and the
other facilitative activities (see Figure 1.4).
Examples of the decisionsmanagersmake in performing
each of the core activities of their work illustrate the breadth
of their decision-making activity. In developing/strategizing
the future, managers, often with the involvement of other
participants, decide what a programs desired results will be,
expressed in terms of its mission and objectives. When
managers establish a new program, they must decide what
goes into the business plan. Further, they must make numerous decisions about how to conduct external and internal
situational analyses, and they must decide whether acceptable progress is being made toward achieving the desired
future state they have envisioned for the program.
In addition to making decisions about what a program
is to accomplish, managers also decide how desired results
will be achieved. In the designing activity, managers make
myriad decisions as they establish the initial organization
design and logic model of a program and subsequently
reshape them as circumstances change. They must decide
both what resources are needed and how to acquire them.
They must decide what work processes will be used to
achieve the desired results established through developing/
strategizing. Other decisions are required when managers
establish the intentional patterns of relationships among
human and other resources within a program as they shape
the programs organization design, the creation of which
then stimulates other decisions in regard to staffing.
In leading, managers must decide how to encourage other participants in a program to contribute to
LEARNING OBJECTIVES
After reading this chapter, you should be
able to:
Define decision making and
understand some of the important
characteristics of management
decisions in programs
Understand and model the sequential
steps in the decision-making process
Identify some of the most popular
quantitative models that support
decision making, including decision
grids, payoff tables, decision trees,
cost-benefit analysis, the program
evaluation and review technique, and
decision support systems
Understand the implementation and
evaluation of management decisions
as important steps in the decisionmaking process
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accomplishing the programs mission and objectives, and they must decide
how to facilitate those contributions. Managers decide what means of
influencing other participants will work effectively, and how they will be
applied. As leaders, managers focus on the various decisions that affect the
entire undertaking, including those intended to ensure the programs survival
and overall well-being. Because leading effectively means motivating participants to contribute to the programs performance, managers must decide
how to motivate diverse participants, each of whom has a unique set of needs
that can be partially met in the workplace.
Indeed, how managers conduct their decision making has a great deal to
do with success in all the other activities of management work. We will
begin our consideration of decision making with a definition.
Decision Making Defined
At its most basic level, decision making is simply making a choice between
two or more alternatives (Adair 2013; McLaughlin and Olson 2012).
Thinking of decision making in this way focuses attention on its essential
element: making a choice. However, decision making by managers involves
a process with a series of steps, which is described in detail in this chapter.
The quality of managers decisions is determined by how well they carry out
all the steps in the decision-making process.
The many decisions program managers face can be divided into different
types of decisions, but all of them involve choosing from among alternatives.
One way of dividing decisions into categories is to consider programmed and
nonprogrammed decisions (DuBrin 2011). Programmed decisions, on the
one hand, are well defined, recurring, and more or less routine. Examples
include decisions pertaining to scheduling, staffing, inventory, and selecting
protocols to use with patients/customers. Nonprogrammed decisions, on the
other hand, are not well defined; are not routine or recurring; and may
involve consideration of new and complex alternatives, choosing among
which is difficult. Examples include decisions about changes in a programs
organization design, extending a program into new markets, selecting a new
project director, or selecting a new information system.
An even more useful way to divide decisions into two types is to consider
decisions as problem-solving decisions or opportunistic decisions. As the
name implies, problem-solving decisions are made to solve existing or
anticipated problems. Opportunistic decisions can be made when opportunities to advance accomplishment of a programs desired results arise, often
by changing some elementperhaps a very small elementin the logic
model or organization design. Such a decision might be called for, for
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example, when there is an opportunity to purchase some needed equipment
or supplies at favorable prices, or an opportunity to recruit an especially
skilled clinician for a program. Health program managers routinely make
both problem-solving and opportunistic decisions in their work.
Although all management decisions are the responsibility of managers,
managers can choose to involve other participants in the decision-making
process to varying degrees. Answering the question of who makes decisions
in programs is an important aspect of making good management decisions.
In general, as discussed in this chapter, decision making is improved with
more involvement of the participants in a program.
Involving Other Program Participants in
Decision Making
Much of the literature on how managers make their decisions describes the
process as one in which decisions are made by managers acting alone or by
managers working with others (Adair 2013). Whether managers are making
decisions alone or with others, the process is often described as taking place
in an orderly, rational manner. In reality, decision making is more likely to
be characterized by disorder and emotionality than by rationality and order
(Yukl 2012). This is certainly the case when groups make decisions, as often
happens in programs.
An important model that considers involving other program participants in decision making was developed by Victor Vroom (1973) and
extended by Vroom and Yetton (1973), and subsequently revised by Vroom
and Jago (1988). In this classic model, the approach managers take to
involving other participants in decision making is shown to affect the
resulting decisions in two important ways. First, it affects the quality of the
decisions made. Second, it affects the level of acceptance of the decisions by
those who must implement or those who will be affected by them.
As originally developed, Vrooms (1973) model features a flowchart of
the various alternatives in a decision-making situation and a set of questions
to guide users. The model assumes that managers can take any of five
different approaches to including other participants in decision making. The
approaches are defined and labeled as follows:
Two types of autocratic decision-making approaches (AI and AII),
Two types of consultative decision-making approaches (CI and CII),
One approach that represents joint decision making by managers and
other participants as a group (GII). (There is a GI approach, but it is not
relevant to this discussion.)
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Each of these five decision-making approaches is briefly described as
follows:
AI Managers make decisions alone, using information available to them
at the time.
AII Managers obtain the necessary information from other participants,
and then decide themselves. Other participants merely provide
managers with information, and play no part in generating or
assessing alternatives in the decision-making process.
CI Managers share information about the problem or opportunity
requiring a decision with other relevant participants individually,
obtaining their ideas and suggestions, but without bringing them
together as a group. Then managers make the decision, which may or
may not reflect the influence of the other participants.
CII Managers share information about the problem or opportunity
requiring a decision with other relevant participants as a group,
obtaining their collective ideas and suggestions. Managers then make
the decision, which may or may not reflect the influence of the other
participants.
GII Managers share the information about the problem or opportunity
requiring a decision with other relevant participants as a group. In the
GII approach, managers and the other participants involved generate
and assess alternatives and attempt to reach agreement (consensus)
on an alternative. The managers role in this approach is much like
that of the chairperson of a committee. Managers do not try to
influence the group to adopt their preferred alternative, and they are
willing to accept and implement solutions that the group prefers.
Figure 5.1 shows Vrooms decision model, which a manager can work
through from left to right by answering seven questions to conclude which
of the five decision-making approaches (AI, AII, CI, CII, or GII) is most
appropriate in a given situation. The questions, which correspond to the
letters A through G, are shown across the top of the model.
The Vroom decision model has practical value for managers because it
demonstrates that they can effectively vary their approach to involving other
participants in decision making to fit attributes of particular situations.
When managers do seek the involvement of other participants in decision
making, they can facilitate participation in several ways (Yukl 2012):
Encouraging participants to express their ideas about alternatives in a
decision-making situation and to express their concerns about other
ideas being suggested
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Describing alternatives as tentative and encouraging participants to try
to improve them
Recording ideas and suggestions as a way of demonstrating that they are
important and not to be ignored
Looking for ways to build on participants ideas and suggestions by
focusing on their positive attributes rather than on their negative
attributes
Being tactful in expressing concerns about ideas and suggestions and
encouraging other participants to be tactful in how they express their
concerns
Listening to dissenting views or criticisms without getting defensive
Actively seeking to use ideas and suggestions and to address concerns
being expressed
Demonstrating appreciation for the ideas and suggestions of other
participants, especially giving credit to those who generate useful ideas
and suggestions and explaining why other ideas and suggestions are not
included in the decision
Even when managers correctly determine the appropriate degree of
involvement in decision making by other participants in a program,
many other variables affect the decision-making process. For example,
some decisions made by managers must be based on imperfect information about available alternatives and their consequences and implications. Further, making decisions frequently involves risk, uncertainty,
and conflict. These characteristics of management decisions and decision making, as described more fully in the next section, complicate the
decision-making process, rendering it one of managers most challenging
activities.
Key Characteristics of Management Decisions
and Decision Making in Programs
One of the most challenging characteristics of decision making for managers is that it often cannot be done in a completely rational manner. The
underlying assumptions necessary for making completely rational decisions
would require decision makers to know all the alternatives available in a
given situation as well as all of the consequences of selecting each alternative, and would require that decision makers always act rationally so as to
maximize a desired value, such as revenue or participant satisfaction, or
minimize an undesired value, such as cost.
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Because it usually is not possible to meet all of the assumptions required
for complete rationality, managers make decisions using a more limited
form of rationality, called bounded rationality (Simon 1982). Professor
Herbert Simon won a Nobel Prize in Economics for this conceptualization
of how managers make decisions.
The assumptions of bounded rationality are (1) that managers rarely
have enough information and knowledge to maximize or minimize any
result of their decision making; (2) that they face vaguely defined problems
or opportunities about which decisions are to be made; and (3) that they
have human limitations in regard to memory, reasoning power, and
objectivity. These bounds on rationality mean that managers are forced
to satisfice, a word created by Simon (1956, 129) from the words satisfy
and suffice. That is, in their decision making, managers typically choose
alternatives that appear adequate and acceptable, rather than those that will
completely maximize or minimize some result of their decision making
(Liebler and McConnell 2012). The satisficer considers possible alternatives
until a satisfactory one is found. Satisficing is a fact of life in making
management decisions.
Another characteristic of decision making by managers in programs is
that decisions must often be made under conditions of uncertainty. Just as
managers are forced to rely on bounded rationality and are not able to make
perfectly rational decisions, so too must they typically make their decisions
under conditions of uncertainty. This means that in making decisions,
managers must accept some degree of risk. Risk exists because managers
cannot know with certainty the probability that their decisions will lead to
positive results.
Under conditions of certainty, a manager would fully understand the
problem to be solved or opportunity requiring a decision, would know all of
the available alternative choices, and would be able to predict accurately the
results of selecting each alternative. Uncertainty can be reduced by acquiring more information, but in complex decision-making situations it cannot
be completely removed. Sometimes managers are required to make intuitive
decisions that are based on nothing more than instincts, feelings, and
personal experience with similar situations. In contrast to decisions that
are guided by large amounts of relevant information, intuitive decisions tend
to involve a high degree of uncertainty and risk.
Another important characteristic of management decisions is that they
are often influenced by significant conflicting demands and expectations.
The appropriate decision, from the standpoint of what contributes most to
achieving the desired results established for a program, might have painful
consequences for some participantsfor example, a decision to downsize a
KEY CHARACTERISTICS OF MANAGEMENT DECISIONS AND DECISION MAKING IN PROGRAMS 167
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program or to merge a project into a larger set of projects. Most managers
faced with decisions like these experience significant internal conflict.
In addition to creating personal conflict for the decision maker, many
decisions generate conflict between individuals or between groups within a
program or even within the programs larger organizational home. A
decision to emphasize one of a programs services automatically deemphasizes others. A decision to allocate space to one group involved in a project
automatically means that others cannot use that space.
Finally, as noted earlier, management decisions are also characterized
by the fact that they can be programmed or nonprogrammed. Nonprogrammed decisions are made when problems or opportunities demand
decisions but there are no existing models or formulae to call on for
guidance. This is in contrast to programmed decisions, for which previously
made decisions, operating policies, or standard practices provide guidance.
For example, the amount of money paid to a new employee is programmed
by human resource policies that dictate pay ranges and by salaries paid to
others with similar qualifications occupying similar positions. Nonprogrammed decisions are usually more difficult to make than programmed
decisions. Managers, however, must make both types of decisions.
The Decision-Making Process
Although decision making was defined earlier as making a choice from
among alternatives, the full decision-making process includes several
sequential steps that precede the actual choice. Once the choice is made,
the process includes additional steps to implement and evaluate the decision. In reality, managers rarely go through all the steps in sequence.
Frequently, under constant pressure to make decisions, managers skip or
combine steps. As Figure 5.2 and the following subsections illustrate,
however, decision makers can go through a process that comprises seven
separate steps and a feedback loop.
Becoming Aware That a Problem or Opportunity Exists
Effective decision makers must be sensitive to situations that represent
problems or opportunities for a program. This sensitivity, termed perceptual skill, enables managers to collect and interpret cues from their
surroundings. The initial step in the decision-making process is being
aware that problems or opportunities requiring decisions exist. Managers
with limited perceptual skill may remain oblivious to potential problems
until the problems blossom into full-blown crises, or until they discover too
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late that they did not seize a potential opportunity. It is difficult to gain
perceptual skill except through experience. The development of such skill is
one of the reasons why managers usually become more effective with
experience.
One way for managers to increase their awareness of instances in which
problem-solving and opportunistic decisions are called for is to acknowledge their ubiquity. Many decisions are required simply to respond to the
performance gaps in programs that managers routinely identify in their
efforts to determine whether ongoing performance is acceptable and
whether appropriate progress is being made toward achievement of a
programs mission and objectives. Remember from the discussion in
Chapter 2 that a key part of a managers developing/strategizing activity
is an ongoing assessment of performance and progress. The discussion of
program evaluation in Chapter 9 is also highly relevant to this topic.
Managers must make adjustments and corrections if they detect
inadequacies. All such changes require decisions.
In addition to the decisions managers must make in the interest of
closing ongoing performance gaps in a program, other decisions are
Feedback
Define the problem or opportunity stimulating
the need for a decision.
Evaluate the decision and
make necessary follow-up decisions.
Become aware that a decision is needed.
Develop relevant alternatives.
Choose an alternative.
Assess the alternatives.
Implement the decision.
Figure 5.2 The Decision-Making Process
THE DECISION-MAKING PROCESS 169
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imposed on them from outside their domain of responsibility. In some
instances, pressure comes from inside the organizational home of the
program. For example, a decision to merge one hospital with another,
when both operate hospice programs, will necessitate many decisions in
both programs, such as decisions about who will manage the merged
program or where it will be physically located.
The changes that continuously occur in the dynamic external environments in which most health programs exist force decisions within those
programs. For example, a growing, declining, or aging population in the
community served by a health program, as well as the plans and actions of
competitors, have significant implications for the program. Such environmental changes trigger numerous decisions by the affected program as its
manager seeks to adapt and adjust the program to fit the new environmental
conditions.
Changes in public policies and regulations that apply to a program, such
as changes in Medicare or Medicaid reimbursement policies, frequently
necessitate decision making. Similarly, National Labor Relations Board rulings can instantly change how programs relate to unionized employees, again
requiring decisions. Because health programs are so often dependent on
particular technologies, advances in these technologies also stimulate change.
For example, telemedicine programs have evolved concurrent with changes in
the technologies on which they are based, with each step in the evolution
requiring decisions about how programs will adjust to new technologies.
Perceptive managers in complex and dynamic environments should be
aware of the constant need both to solve problems and to make opportunistic decisions. Knowing that decisions are needed and knowing how to
precisely define the problem or opportunity at hand, however, are two
different things. This leads to the second step in the decision-making
process described in Figure 5.2.
Defining the Problem or Opportunity
Defining the real problem or opportunity in a given situation is not always a
clear-cut task. What appears to be the problem may only be a symptom. For
example, an apparent problem of conflicting personalities when two participants in a program cannot work together well might in fact be only a
symptom of such real problems as poorly coordinated work, conflicting
schedules, inadequate training, or ill-defined work expectations. Few things
are more frustrating in decision making than finding the right solution to the
wrong problemexcept perhaps the effort wasted in responding to a
perceived opportunity that does not really exist.
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A simple but effective way to move past the symptom to get at the
underlying problem or opportunity is to ask, Why? Answers to this
question can be used to trace back from symptoms to underlying root
causes, and thus to real problems (Andersen, Fagerhaug, and Beltz 2012).
Similarly, the answer to a question about why some event, trend, or
situation appears to be an opportunity for a program can also lead to a
clearer delineation of the opportunity. Two useful tools available to
managers to help with defining problems and opportunities are described
in the next subsections.
Cause-and-Effect (Fishbone) Diagram
A device useful in getting to the root cause or causes of a problem is a causeand-effect diagram, or, as it is frequently called because of its shape, a
fishbone diagram. Figure 5.3 is a fishbone diagram drawn by the manager of
a specialized surgical program embedded in an acute care hospital. The
problem of concern to this manager is a higher-than-expected rate of
nosocomial pneumonia among patients in the program. In the diagram,
pneumonia is the effect, and as the diagram shows, this effect has many
possible causes. The manager is interested in what is causing pneumonia,
because the underlying root cause or causes of the high rate of nosocomial
pneumonia must be addressed through decisions and subsequent actions.
In using a fishbone, or cause-and-effect, diagram to organize ideas
about what might be causing the nosocomial pneumonia among the
programs patients, the manager begins by identifying categories of possible
causes. Common causes of nosocomial infections have to do with equipment, interventions or procedures, participants, and patients. The manager
organizes the diagram around these potential categories of causes, which
form the larger bones in the diagram. Within each category, specific ideas
about the causes are developed, and are shown as the smaller bones in the
diagram. The diagram does not identify the causes, but it organizes the
managers thinking, and perhaps the ideas of other participants involved in
making this determination about the possible causes of the high rate of
nosocomial pneumonia. More information will be needed to determine the
causes of the nosocomial pneumonia, but identifying the possible causes is
the first step in determining causation.
Pareto Chart
Another tool useful for this manager in determining and addressing the
causes of the pneumonia is a Pareto chart, which is a bar graph showing the
relative importance of several causes of a problem. Charts or graphs of this
THE DECISION-MAKING PROCESS 171
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nature can help managers determine where to focus their attention. Figure
5.4 is a Pareto chart showing the relative importance of the several causes of
nosocomial pneumonia identified by the manager in this example; it directs
the managers attention to the most important causes that require decisions.
As can be seen in the Pareto chart, the largest number of cases of
nosocomial pneumonia in the analysis resulted from contaminated bronchoscopes. The next largest number of cases resulted from severe underlying
disease in patients. and cardiopulmonary
disease are tied for the third-largest number of cases. Based on the information assembled in the Pareto chart, the manager will focus initial efforts to
address the problem on contaminated bronchoscopes and inadequate postoperative care, variables concerning which the manager can intervene. Unless
the programs patient mix changes, the manager cannot do anything about the
fact that some patients have severe underlying disease or have cardiopulmonary disease.
To completely diagnose problems or define opportunities, decision
makers analyze a great deal of information. Judgment is required to
determine what information should be used in decision making, and
decision makers must endeavor to be as comprehensive, fair, and objective
as possible in gathering and examining information. The most difficult
pieces of information to deal with are often intangible factors, which can
play a significant role in defining problems and opportunities. Intangible
factors include such things as reputation, morale, satisfaction, and personal
Causes of Nosocomial Pneumonia
Number of Cases
Contaminated bronchoscopes
Severe underlying disease
Inadequate postoperative care
Cardiopulmonary disease
Figure 5.4 Pareto Chart of Causes of Nosocomial Pneumonia
THE DECISION-MAKING PROCESS 173
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biases. It is difficult to be as specific about these subjective factors as one can
be about those more readily subject to physical measurement. Nevertheless,
such information must be considered in fully defining problems or opportunities, which is an important step in the decision-making process.
No matter which tools a manager might use, defining problems or
opportunities is much easier when they fall within the scope of the
managers experience. Problems and opportunities that look familiar are
easier to diagnose and understand. Experience sharpens a managers ability
to define and specify problems or opportunities, just as it allows him or her
to hone perceptual skill, as noted previously.
The degree of success in the definition step of the decision-making
process is almost always directly proportional to the amount and quality of
relevant information gathered and analyzed in relation to a problem or
opportunity. Of course, good judgment is required in determining whether
enough information is in hand to make an accurate diagnosis of that
problem or opportunity. In general, more information is better, but
some decision makers paralyze themselves by continuing to gather information about a problem or opportunity long after they should have moved
on to the next step in the decision-making process.
Developing Relevant Alternatives
Once problems or opportunities that require decisions are fully diagnosed
and understood, decision makers can search for and develop alternatives for
consideration. One simple rule should guide decision makers in this step:
the greater the number of alternatives considered, the greater the likelihood
of eventually selecting a satisfactory alternative. Alternatives can be categorized as ready made or custom made.
Ready-made alternatives are based on approaches or solutions that
decision makers have tried before, or on recommendations of others who
have faced similar problems or opportunities. Custom-made alternatives
are designed specifically for a particular decision-making situation. Developing them generally involves greater expenditure of time and effort, and
thus they are less likely to be considered than the familiar, ready-made
alternatives.
In considering alternatives, decision makers should not think in terms
of one best alternative. Most problems have several solutions with both
positive and negative characteristics, and for many opportunities there is a
continuum of responses that would be appropriate. The task in developing
relevant alternatives is to develop as many potentially satisfactory alternatives as is reasonably possible.
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It is during this step in the decision-making process that creative and
innovative alternatives can be developed, if decision makers are not
inappropriately wedded to the idea of considering only ready-made alternatives. Essentially, creativity is the art and science of making new things or
generating new ideas. Some decision makers focus on ready-made alternatives because they doubt their own ability to develop truly creative,
custom-made alternatives.
Logic and experience play important roles in idea generation, as does
imagination. The use of imagination and creative thinking in this step of the
process is important in establishing the fullest possible set of relevant
alternatives. Creative thinking is a way of looking at problems or situations
from a fresh perspective that suggests unorthodox solutions (BusinessDictionary 2014a). It is useful to remember that creativity is latent within all
people. Ordinary people working in an atmosphere of freedom, trust, and
security can create new alternatives to address both problems and opportunities. It is therefore important for managers to encourage and foster the
creative process, which is described next.
The Creative Process
Embedded within the decision-making process, the creative process itself
can be viewed as a series of interconnected steps, including: (1) feeling a
personal need to be creative, (2) preparing by acquiring information, (3)
incubating both the problem or opportunity and possible alternatives by
considering them as fully as possible, and (4) verifying by making certain the
problem or opportunity is understood and that appropriate alternatives
have been identified and reviewed. The concept of a personal need to think
creatively emphasizes that a motivating force must initiate the creative
process. Such motivation can come in the form of a serious problem or a
rich opportunity.
Creative, custom-made alternatives usually emerge after a period of
intensive preparation during which the decision maker becomes saturated
with information and makes a concerted effort to perceive new and
meaningful relationships among the factors at hand. To a large extent,
the originality of ideas depends on the number of avenues the decision
maker explores and the extent to which he or she considers all possibilities.
The preparation step represents much of the work of engaging in the
creative process.
It is certainly possible for an original alternative to be developed quickly
as the result of a brief period of analysis. Sometimes this is necessary when a
decision, for which there is no ready-made alternative, is urgently required.
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For example, a manager whose program faces termination may have to
respond quickly and creatively if the program is to be preserved. When
circumstances permit, however, a period of incubation that allows the
decision maker to mull over the problem or opportunity and possible
alternatives is valuable.
The value of an incubation period lies in the fact that a more fully
developed idea for a custom-made alternative may result. It is useful to set a
deadline for the incubation period so that problems do not go unsolved for
unduly long periods, and so that opportunities do not pass by while the
decision maker mulls over various alternatives. But some period of incubation tends to be necessary if original alternatives are to be developed.
The final step in the creative process is verification. When the decision
maker first envisions a custom-made alternative, it is rarely in a polished and
final form. The verification step in the creative process is a period of refining
an idea, changing it, and improving it. In effect, this step often represents the
difference between an interesting idea and a truly innovative and creative
alternative.
Sometimes the creative process is facilitated by having a group of
program participants work on the development of relevant alternatives
in a decision-making situation. Groups of people usually bring more
experience and information, and therefore more ideas for alternatives, to
the task than do individuals acting alone. A group, through its interactions,
can stimulate each individual group members creative abilities as well.
Brainstorming is a standard method by which groups develop alternatives
(Miller 2012). In a brainstorming session, participants are asked to produce
ideas (without fear of censorship or control by the group) through free
association of their ideas and those of others. In this way, one idea can
stimulate a chain reaction of additional ideas.
Another approach to having a group establish alternatives is the
nominal group technique, in which participants are asked to generate
possible alternatives independently (that is, without group interaction),
and then to have the ideas reviewed and prioritized by the group (Levi
2014). Unlike with the free association of brainstorming, ideas are discussed
within the group only after those ideas have been independently developed
and then presented by each participant. Following a round of discussion,
during which initial ideas can be reworked, each participant privately rates
the alternatives from first to last. The tabulated ranking of the groups
alternatives are then openly discussed again, after which point there is a
final, private ranking. The tabulated results of this vote are considered the
nominal groups prioritized list of the alternatives. Both brainstorming and
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nominal groups generate a set of alternatives, which must then be assessed
by the decision maker before one is chosen.
Stimulating and Supporting Creativity in Decision Making
Managers who want a program to benefit from the development of creative and
innovative alternatives in decision making must stimulate and support creativity
and innovative thinking. These characteristics can be fostered among participants by managers who make it a specific and important aspect of managing a
program, and who establish and maintain a culture in which creativity and
innovation are valued. Managers can also facilitate these characteristics by
placing a high priority on creativity in making at least some of their staffing
decisions.Workplace climates in which creativity and innovation are stimulated
and facilitated share a number of characteristics (Robbins and Coulter 2013):
Risk-taking is tolerated, even encouraged. Participants are pushed to
take risks, and mistakes are treated as learning opportunities.
Rules, procedures, policies, and similar formally imposed controls are
kept to a minimum.
Cross-training and participation in diverse and multiple teams and
groups are encouraged. Managers recognize that narrowly defined jobs
create myopia, whereas diverse job activities and experiences give
participants a broader perspective.
Tolerance for ambiguity is widespread in the program. Participants are
given opportunities to express their respective identities through work
as individuals and as members of teams and groups.
A healthy degree of conflict is permitted. Differences in opinions about
how to do things are recognized as a means of increasing creativity.
Harmony and agreement between individuals and teams and groups is
not seen as necessary for good performance.
There is a high degree of tolerance for the impractical. Participants who
offer improbable or even foolish answers to what if questions are not
penalized or ridiculed. There is recognition of and appreciation for the
fact that what seems impractical at first might turn out to be a great
alternative in a decision-making situation.
The focus is on the ends more than on the means. If participants are
encouraged to consider alternative routes toward the accomplishment
of the programs mission and objectives, innovation may result.
Communication flows freely. Communication flows horizontally as well
as vertically and diagonally, facilitating the cross-fertilization of ideas.
THE DECISION-MAKING PROCESS 177
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There are also certain characteristics and behaviors that managers
who wish to stimulate creativity and innovation should avoid, minimize,
or change. Managers often reduce the chance of developing innovations
and creative ideas when they are isolated from the other participants in a
program, when they focus on short-term performance, and when they
maintain an incentive and reward system that does not support
innovation.
Assessing the Alternatives
Managers who successfully rely on their own insights and experiences, the
insights and experiences of others, and the creative processes available to
them will develop a robust set of alternatives to considerand each
alternative must be assessed against the others (see Figure 5.2).
In this step in the decision-making process, quantitative models can
be very helpful in structuring a careful assessment of the alternatives.
Five useful quantitative techniques that are widely used in decision
making are described in the paragraphs that follow: decision grids,
payoff tables, decision trees, cost-benefit analysis, and the program
evaluation and review technique. In addition, the use of decision support
systems, which combine many decision-making models with a database
to support decision making, is discussed. Many other quantitative
decision-making techniques and tools for managers exist, but these
are outside the scope of this book (see, for example, Anderson et al.
2012; Ozcan 2009).
Decision Grids
The most basic and in many ways the most useful decision-making tool is
the decision grid. This is nothing more than a display of the possible
alternatives in making a decision, along with the various elements that will
affect the decision. Figure 5.5 illustrates a decision grid involving a
programs decision to open and operate a satellite clinic. The four
alternatives are listed in the first column, with the elements affecting
the decision forming the rest of the grid. The grids main advantage is that
a large amount of pertinent information can be displayed in a convenient
and understandable manner. This becomes especially important in making complex decisions and when multiple program participants are
involved in the decision making and need to discuss and consider various
alternatives.
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The preferences of the programs participants are mixed for all alternatives, thus neutralizing the impact of this factor. Patients/customers have
a preference for the fourth alternative, although they find any alternative
acceptable except maintaining the status quo. The key factor in this decision
is the financial impact of the alternative selected. The fourth alternative is
the most attractive because the financial impact is positive and almost
immediate, and none of the other factors in the decision preclude selecting
this alternative.
Payoff Tables
If probabilities can be determined for the various possible outcomes of each
alternative being assessed in a decision-making situation, a payoff table can
be created. For example, suppose the manager of a clinical program must
decide how many disposable syringes should be ordered and stocked each
week.
Based on past usage patterns, the manager determines that there is
an 80 percent probability that 800 syringes will be needed per week, and a
20 percent probability that 1,000 syringes will be needed per week. The
manager can also assign costs to each of these two alternatives. In this
case, storage space is allocated at $10 per 1,000 syringes. In addition, if
too few syringes are ordered and stocked, an extra cost of $20 will result
Alternatives
Patients/
Customers
Preferences
Program
Participants
Preferences
Financial
Impact
Relative
Feasibility Decision
1. Maintain the status
quo
Unacceptable Mixed Negative Feasible, but
undesirable
Not recommended
2. Purchase a new site for
the clinic
Acceptable Mixed Positive over
a 5-year
period
Feasible, but
expensive
Not recommended
3. Lease a new site for the
clinic
Acceptable Mixed Positive in 2 to
3 years
Readily
feasible
2nd priority
4. Enter into an
agreement to use a
community-based
organizations existing
facilities for the clinic,
rent-free for 10 years
Highly
acceptable
Mixed Positive within
the first year
of operation
High feasible 1st priority
Figure 5.5 Decision Grid for the Possible Addition of a Satellite Clinic in a Program
THE DECISION-MAKING PROCESS 179
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for special ordering and messenger pickup. Figure 5.6 illustrates the two
alternatives (1,000 and 800 syringes) and the costs associated with each
of the two outcomes.
For the first alternative, if 800 syringes are stocked and the usage during
the week is 800, the costs will be $8 (see cell 1). If 800 syringes are stocked
and 1,000 are needed that week, the costs will be $28 ($8 for storage and $20
for the special order [see cell 2]). For the second alternative, if 1,000 syringes
are stocked and the usage during the week is 800, the costs will be $10 (see
cell 3). Also, if 1,000 syringes are ordered and stocked and 1,000 are used, the
costs will be $10.
If the clinic manager orders and stocks 800 syringes, then 80 percent of
the time this decision will be correct, and only an $8 storage cost will be
incurred; 20 percent of the time there will not be enough, and the $28
storage and reorder costs will be incurred. The expected cost can be
determined for each alternative as follows:
Expected cost if 800 syringes are ordered: $80.8 $280.2 $12
Expected cost if 1,000 syringes are ordered: $100.8 $100.2 $10
Thus, to minimize cost, 1,000 syringes should be ordered and stocked,
although this number will be needed only 20 percent of the time.
Although the savings is modest, if the technique is applied to many
items, the cumulative savings could be quite substantial. The basic difficulty
in using this technique is in determining probabilities. When possible, the
preferred procedure is to use historical data or experimental samples so that
Alternatives
800
syringes stocked
1,000
syringes stocked
$8.00
$10.00
$28.00
800
syringes needed
(0.8)
1,000
syringes needed
(0.2)
$10.00
Events and Results
1 2
3 4
Figure 5.6 Payoff Table for Ordering Syringes
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the probabilities have a clear basis in fact. Where this is not possible, a best
estimate may have to suffice.
Decision Trees
Decision grids and payoff tables are useful tools in assessing alternatives in a
decision-making situation, although both suffer from a common limitation.
In reality, decisions are seldom one-time occurrences. They are more often
linked to other decisions in the sense that one decision tends to necessitate
other decisions. A decision tree is quite helpful in assessing alternatives
when decisions that must be made are linked together over time, each with
various possible outcomes. It is especially useful when probabilities can be
determined for the possible outcomes.
To illustrate this technique, suppose the manager in a program determines that there is a 60 percent probability that demand for a certain
procedure will increase by 20 percent next year, and that there is a
40 percent probability that demand for the procedure will decrease by
10 percent. The decision is whether to buy a piece of automated equipment
(at a cost of $50,000) or to pay existing employees overtime wages to do the
increased work, should that be necessary. (The manager determined that it
would cost less to pay overtime than to hire an additional worker.)
Because of the vital nature of the procedure, simply deciding not to do
the increased work is not acceptable. Figure 5.7 illustrates a decision tree
based on this decision-making situation. The decision tree assumes that
quality is not an issue because it will be the same whether the procedure is
done manually or on the automated equipment. The decision therefore
hinges on making the wisest expenditure of money by choosing the lowercost alternative.
Assume that revenue from this procedure is currently $100,000 per
year. If the 60 percent probability of a 20 percent increase holds up, the
revenue for the next year (and future years if everything stays the same) will
increase to $120,000; if the 40 percent probability of a decrease in demand of
10 percent holds, then revenue will decrease to $90,000 in both cases (see
column 3 of the figure).
The cost of the machine (with installation and the first years operation
included) is $50,000; the cost of overtime wages is figured at $10,000 if the
increased work has to be done, and at $0 if it does not (see column 4). Net
cash flow can be determined in all events by subtracting cost from revenue
(see column 5). The expected value at the end of the first year can be
obtained in all events by multiplying net cash flow (column 5) by the
probability of the event. A 60 percent chance of increase times $70,000
THE DECISION-MAKING PROCESS 181
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equals an expected value of $42,000 (see column 6). At the end of the first
year the expected value of automation is $58,000 ($42,000 + $16,000), and
the expected value of paying overtime is $102,000 ($66,000 + $36,000). At
that point in time the lower-cost alternative clearly would be to forego the
machine and pay overtime. If the decision is projected out over additional
years, however, this may not be the lower-cost decision.
At the end of the second year (see column 9), the expected value of the
choice to automate is greater. Although the initial $50,000 outlay must still
be overcome, it will not take many years to do this. By extending the
computation, the number of years it would take to overcome the initial
outlay could be determined, and when compared to the expected useful life
of the machine, this information could form the basis of a complete
assessment of the alternatives in this decision-making situation.
Cost-Benefit Analysis
A manager deciding among alternative additions to the service mix provided
in a program will be interested in how the alternatives compare in terms of
financial impact. A useful way to make relative comparisons of multiple
alternatives is to calculate the cost-benefit ratio (Z) of each alternative.
Although these ratios should only be one factor in a decision, comparing
them can nevertheless assist the decision maker. Z is defined as the ratio of
the present value of the benefits of an alternative to the present value of the
alternatives costs:
Z Present value of benefits
Present value of costs
It is usually relatively easy to determine the financial costs of an
alternative. In health programs, however, the financial value of benefits is
often much more difficult to determine. What is the value of a human life?
What is the value of improved health? Is it better to spend money on making
older people more comfortable in their declining years, or to spend the
money on improving infant mortality rates? When such questions are at
issue, this technique has limited use.
There are, however, many decision-making situations in which the costs
and benefits of various alternatives can be determined rather straightforwardly. In such cases, cost-benefit analysis is a useful tool for assessing
alternatives. For example, a manager might find a cost-benefit comparison
very useful in assessing a choice between two competing models of a
particular piece of imaging equipment.
THE DECISION-MAKING PROCESS 183
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Model A costs $80,000 (installed) and requires a person to operate it at
an annual cost of $64,000, plus $12,000 in other operating costs. The total
cost for a year is $156,000. Model A will produce revenues of $185,000 per
year because of its rate of operation.
Model B of this equipment will have a total cost of $175,000, but will
permit revenues of $205,000 because of its superior rate of operation. Which
is the better alternative, assuming that they both produce equal-quality
results and have the same useful life expectancy and salvage value?
Model A : Z $185,000
$156,000 1.186
Model B : Z $205,000
$175,000 1.171
All other factors being equal, the cost-benefit ratio here argues that the
better alternative in this situation is to purchase Model A because of its
better Z value. This analysis is limited to one year. The manager should
make additional calculations for future years based on operating costs and
expected revenues from each model to decide which is the better alternative
over the life of each piece of equipment.
Program Evaluation and Review Technique
In some operational planning situations, the assessment of alternatives
involves considering the timing of activities or the best sequence for a
series of actions. In such situations the program evaluation and review
technique (PERT) can be very useful. PERT is the title given to this
technique by its developers (Fazar 1959). The basic concept used in this
technique, which was created to guide development of the U.S. Navys
Polaris submarine, is the network, or flow plan (Kerzner 2013). The
network is composed of a series of related events and activities. Events
are defined as sequential, required accomplishment points in a program, a
project, or some other complex undertaking. Activities are defined as the
time-consuming elements of a program, project, or undertaking that
connect the various events.
For example, suppose a hospital initiates a project to establish an openheart surgery program. A number of events and activities will have to take
place, including renovation of an existing operating room, installation of
new equipment, hiring and training of an open-heart surgery team, and
many others. As with other situations in which many events and activities
are involved, PERT can be used here. One alternative in this project is to do
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everything in a single sequence. For example, the hospital can begin by
renovating the operating room, then purchase and install equipment, and
then hire and train the team. The flaw in this approach is that the events and
activities will be strung out for an unnecessarily long time, thus delaying the
project. PERT can eliminate this flaw by giving the manager of this project a
better way to time and integrate events and activities in the sequence.
Figure 5.8 shows a PERT network for the development of an open-heart
surgery program. Events are shown as boxes in the network, and arrows
connecting the events represent activities. This example illustrates the three
basic characteristics of a situation that make it amenable to using PERT.
First, it must be possible to estimate how long it will take to accomplish each
activity. Second, there must be definite starting and ending points for each
activity. Without them, there can be no events, which are the beginnings
or endings of activities. Finally, and this is the key to PERTs usefulness,
there must be parallel activities. That is, several activities must be taking
place simultaneously for PERT to be of any real use to a manager. The
technique relies on finding the critical path, which is the longest path
through the sequence of events to completion. This path is shown as a
dashed line in the figure.
To make the network usable, the times between the various events
(activity times) must be computed. Usually, these can only be estimates, and
the standard approach involves coming up with three different time
estimates for each activity. Experience with the timing of similar activities
is often used in developing the time estimates. The first is an optimistic time
estimate, representing the time if everything goes smoothly in completing
the activity. The second is the most likely time estimate and represents the
most accurate forecast based on normal or typical circumstances. If only one
estimate were given, this would be it. The third is a pessimistic time estimate
and is based on maximum potential difficulties. The assumption here is that
whatever can go wrong will go wrong.
The pessimistic, most likely, and optimistic time estimates for developing the open-heart surgery program can be used to form a beta curve or
probability distribution as illustrated in Figure 5.9. This probability distribution assumes that the most likely time estimate is four times more likely to
occur than either the optimistic or the pessimistic time estimate.
Based on the probability distribution of the three time estimates
involved in performing an activity, a formula can be used to calculate
the estimated activity time to use in the PERT network as follows:
Activity time O 4M P
6
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where O is the optimistic time estimate, M is the most likely time estimate,
and P is the pessimistic time estimate.
Referring to Figure 5.8, it can be seen that the time estimates between
the first two events, which are based on the managers experience with the
timing of similar activities, have been made as follows: O = 5 weeks, M = 7
weeks, and P = 9 weeks. The estimated activity time would then be
Activity time 5 47 9
6 7 weeks
Using the resulting value, one can be reasonably certain that the activity
time between the first two events will be 7 weeks. The process of calculating
estimated activity times must be completed for all activities in the network.
The next step in using PERT to help evaluate timing and sequencing of
activities and events is to determine the critical path through the network.
Among the several pathways of events and activities, the critical path (again,
shown as the dashed line in Figure 5.8) is the one that takes the longest to
complete. Inasmuch as the critical path takes the longest time to complete, it
determines the completion time for developing this open-heart surgery
program. Other activities and events that do not lie along the critical path
are less important in terms of their timing because their completion will not
shorten or lengthen the total completion time.
The time differential between the amount of time scheduled to complete these noncritical events and the amount of time that would actually
alter the critical path through the project is the projects slack time. Slack
time provides an opportunity for the manager to reassess whether certain
resources should be transferred to activities along the critical path as a
means of shortening the critical path and therefore the completion time for
developing the open-heart surgery program. In the example represented in
Figure 5.8, it would do no good to speed up recruitment, hiring, or training
of the team or the renovation of the operating room in an effort to shorten
Most likely
M
Optimistic
O
Pessimistic
P
Figure 5.9 Beta Curve for Optimistic, Most Likely, and Pessimistic Time Estimates for Activities in
Developing the Open-Heart Surgery Program
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the completion time. The only way to accomplish this is to shorten the time
needed for equipment delivery and installation, because these activities form
the critical path in this project.
PERT, and even more sophisticated time management and scheduling
techniques (Project Management Institute 2013), can be used to great
advantage by managers in making timing and sequencing decisions in
many building or remodeling projects, in adding new equipment, in
physically moving a unit, in preparing budgets, and in developing policy
manuals or patient care protocols.
Managers may be supported in applying tools and techniques such as
PERT by a formal planning department and professional planners in the
larger organization in which a program is embedded. Most large health
services organizations employ people with such expertise in their planning, marketing, government affairs, and finance departmentsand perhaps in other departments as well. In addition, consultants can help
managers assess alternatives.
Decision Support Systems
The intensified pressure to make good management decisions in health
programs, combined with improved technology specifically designed to
support the management decision-making process, may cause managers
to consider using a decision support system (DSS). Such a system uses
computer-based technology to provide decision makers with information that
permits them to make better decisions (Burstein and Holsapple 2008;
Glandon, Slovensky, and Smaltz 2013; Schuff et al. 2011). In essence, decision
support systems incorporate data and models for analyzing this data to
support decision makers in assessing their alternatives (Holsapple and Joshi
2001). They turn raw data into information. You should recall from the
discussion in Chapter 2 that information is raw data that is (1) accurate and
timely, (2) specific and organized for a purpose, (3) presented within a context
that gives it meaning and relevance, and (4) [possibly leading] to an increase in
understanding and decrease in uncertainty (BusinessDictionary 2014b).
A DSS can be constructed in various ways, although effective systems
share the following characteristics:
Interacting with the DSS is easy.
Retrieving and displaying data are supported by the system.
Modeling capabilities are built into the system.
The system can produce clear and usable reports of the results of
analyses.
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Figure 5.10 shows a conceptual model of the components of an effective
DSS, each of which is described briefly in the following paragraphs.
The user engages the DSS through the user interface. The interface
should have the ability to communicate with the DSS simply and intuitively.
An effective DSS contains a model library. The appropriate mix of
models in a specific library depends on the requirements of decision makers
who use the system. Typically, a DSS designed for use in a health program
contains a mix of (1) statistical models (to summarize data, test hypotheses,
make forecasts, and the like); (2) financial models (to predict cash flows,
expenses, and revenues, as well as to perform break-even analyses or
compute internal rates of return on investments that might be made in a
program); and (3) what if models that can be used to determine the effect
of changing one or more variables on a value of interest.
The model manager is software that links a DSS users request to the
appropriate model in the model library so that the desired analysis can be
conducted. The models in an effective DSS can support decision making in
DSS
Model
library
Model
manager
Database
management
system
DSS database
Financial
databases
Clinical
repositories
Special
studies
External
databases
User
interface User
Report
writer
Figure 5.10 Conceptual Model of a Decision Support System
THE DECISION-MAKING PROCESS 189
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clinical areas (such as patient scheduling and quality assessment) as well as
in nonclinical areas (such as personnel scheduling, inventory control, and
accounting).
A critical part of any DSS is the database from which the models can
draw necessary information for analysis. Depending on the particular
situation, a programs database could contain data from many sources,
including clinical repositories, financial databases, special studies, and even
commercially available external databases. Among the specific elements
that might be found in a programs DSS database are the number of units of
service provided, resources used in providing the services, data for assessing
the quality of the services (see the broader discussion in Chapter 7), and data
for evaluating results. A database can contain data relating to any of the
components of a programs logic model (see Figure 2.1).
The final components of a DSS are a database management system,
which is software that retrieves data at the request of a user or makes needed
data available to the model manager for use in a particular decision-making
model, and a report writer, which provides a user with a report of the
analysis. Depending on the features of a given DSS, the reports produced
may show comparisons of several alternatives, the consequences of a
particular choice compared to alternatives, or a recommended choice.
Effective decision support systems are expensive. Even small ones cost
tens of thousands of dollars and are not available to all programs. When
affordable, however, these systems can greatly assist decision makers in
assessing alternatives in decision-making situations.
Choosing an Alternative
After developing and assessing alternatives, decision makers must choose
the alternative they think best in a given decision-making situation. If the
other steps in the decision-making process (see Figure 5.2) have been carried
out properly, the decision maker will typically be able to choose from among
several relevant alternatives.
Of course, one alternative always available is to do nothing. This
alternative must be considered most carefully of all. The decision maker
should visualize the likely results of taking no action. If taking no action
would result in the most desirable consequences, the decision maker should
take no action. This alternative should never be taken lightly, however. After
all, a problem or opportunityor a potential problem or opportunity
triggered the decision-making process. Unless analysis reveals that there
really is no problem or opportunity, the no-action alternative is usually
inappropriate.
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Making the choice from among alternatives in a decision-making
situationwhether done based on experience, intuition, advice from others,
experimentation, or analytical decision makingis rarely easy. Management decisions tend to be gray rather than black or white. They usually are
made in the context of a constantly changing environment, which means
that what is initially the most appropriate alternative may not remain the
most desirable choice as circumstances change.
Aside from the difficulties encountered in collecting and properly
analyzing enough information to fully inform a decision, problems can
develop from the influence of the decision makers personal prejudices and
biases. These problems can interfere with the decision makers effectiveness
by forcing the selection of an alternative that fits some preconceived notion
rather than the realities of the particular situation.
For some decision makers, the largest impediment to effectiveness is
their own indecisiveness. But the opposite situation can exist and may be
just as detrimental to the quality of decision making. Impulsiveness, or a
tendency to jump headlong into a situation without considering all factors,
is not uncommon among inexperienced decision makers as they make
management decisions early in their career. If enough of their decisions turn
out to be wrong, they may become indecisive.
To improve the quality of their decisions, managers should answer three
questions concerning the alternatives in each decision-making situation. First,
they should ask how each alternative contributes to the attainment of the
programs desired resultsthat is, to its mission and objectives. This question
is important because it reflects the fact that the alternatives in a decisionmaking situation are but means to an endan end that has been clearly
thought out and stated in the form of a mission and objectives. If an alternative
under consideration does not improve the likelihood of achieving these desired
results as well as or more than other alternatives, it should not be adopted.
Second, managers should ask whether alternatives under consideration
represent a high degree of financial effectiveness. In other words, does an
alternative make maximum use of available resources? There will be times,
of course, when financial considerations should not unduly affect decision
making, especially in a health program, where such considerations as need
or quality may appropriately take precedence. Usually, however, financial
aspects of a decision offer useful guidelines in selecting an alternative.
Third, managers should ask whether alternatives under consideration
are feasible or capable of being implemented. In answering this question, the
decision maker must think in very practical terms about how a particular
alternative will be implemented within the context of the programs
resources and organization design.
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Answering these three questions does not guarantee that the best
alternativeor even a good onewill be chosen. Doing so, however,
increases the probability of an appropriate selection.
Implementing the Decision
The process of decision making does not end with the selection of an
alternative. Managers are concerned about the effects of their decisions.
Thus, implementing the decision is an important step in the overall
decision-making process (see Figure 5.2). A well-chosen alternative, poorly
implemented, can be useless or even harmful to a program. Successful
implementation of a decision begins with carefully planning how the
implementation will take place.
Planning for Implementation
Ideally, there are three interconnected components of good planning for
implementation of a decision: (1) making a situational diagnosis, (2)
choosing a general approach to implementing the decision, and (3) selecting
a set of techniques to support the decision and its implementation and to
reduce resistance from those affected by the decision. Each component is an
important precursor to successful implementation.
Making a Situational Diagnosis The process of making a situational
diagnosis differs from the internal and external situational analyses
discussed in Chapter 2 in that this diagnosis focuses specifically on the
situation in which a particular decision is being implemented. The
situational diagnosis that occurs as part of planning for implementation
is a natural extension of the information-gathering effort that occurs in
the second step of the decision-making process. During the second step,
the decision maker explores the nature of the problem or opportunity he
or she faces.
The situational diagnosis that precedes implementation of an alternative, however, goes well beyond the original gathering of the information
needed to identify the nature of the problem or opportunity. It includes
collecting information about resources available for implementing the
chosen alternative as well as information on the views and attitudes of
key participants (and perhaps others outside the program) concerning the
choice that has been made. It is necessary to know about resource availability and constraints before the actual implementation begins, because this
information can influence the selection of a general approach to
implementation.
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Choosing a General Approach to Implementation In selecting a general
approach to implementation, the decision maker can choose an approach
from one of three broad categories: top-down, bottom-up, or participative
approaches. In top-downapproaches,whicharealsocalledpowerapproaches,
the decision maker simply announces to other participants in a program the
decision that is to be implemented, and explains how it is to be implemented.
The other participants are expected to accept the decision and take whatever
part they are told to take in its implementation.
Power approaches are necessary and appropriate in some situations. For
example, a change in the reimbursement policy of a major insurance carrier
might require an immediate decision in a health program, leaving little time
for anything but a top-down edict as a means of implementing the resulting
decision. On the one hand, top-down approaches have the advantage of
speed: decisions can be communicated quickly to affected participants in a
program. On the other hand, a major drawback of top-down approaches is
disruptiveness, particularly if those affected do not accept or understand the
decision.
In bottom-up approaches to implementing decisions, participants in a
program other than its manager are much more responsible for developing
the details of how to implement the decision at hand. In this case the
manager permits and encourages participants to decide how best to
implement the chosen alternative. The primary advantage of bottom-up
approaches to implementing decisions is that they foster widespread
commitment to accomplishing the implementation task within a program.
In participative approaches to implementing decisions, participants
responsible for implementation are involved in the entire decision-making
process, along with the manager. Participation is formally sought through
such devices as assigning participants to groups or teams specifically created
to develop alternatives, to choose from among the alternatives, and to
implement an appropriate alternative in response to a problem or opportunity. Participative implementation obviously differs from top-down edicts.
It also differs from bottom-up approaches to implementation, which tend to
focus on the details of implementation rather than on permitting participants to be involved fully in the entire decision-making process, as is
characteristic of true participative approaches.
Developing Support for and Reducing Resistance to Decisions The
third component of good planning for implementation of a decision involves
selecting techniques that help develop support for and reduce resistance to
decisions and their implementation. In considering useful supportive techniques for use with program participants, and perhaps with other program
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stakeholders in certain situations, decision makers should remember that
people respond to many types of change, including that resulting from
decisions and their implementation, in predictable and often negative ways.
Resistance may seem to managers like an inappropriate response, but it may
seem to the resistant participants to be perfectly reasonable, especially if their
past experiences with similar situations have been bad.
One of the underlying reasons why some participants view change
negatively, and resist it, is their personal history, including their previous
work and social experiences. For example, people who have experienced
personal failures in their relationships with others or who have lost a
previous job to downsizing or some other organizational change may be
more concerned about changes than people who have experienced great
success. A second cause can be the work environment itself. For example, if
a program has been stable for a long time, participants may resist decisions
that represent change. When participants have adjusted to the status quo
and believe it is permanent, the introduction of even minor changes can be
disruptive. Conversely, in a program with a history of continual change and
in which change is seen as part of the culture, participants expect change
and much more readily accept it.
There are many other reasons, which are discussed in the next paragraphs, for the resistance to change that is common among participants in
programs, including the following:
Feelings of insecurity
Fears of potential social and economic losses, to say nothing of
experience with actual losses
Distaste for being inconvenienced
Resentment that others are exerting control over them
Insecurity among affected participants is a major source of resistance to
decisions that involve change. For many people, there is great comfort in the
status quo, and any change is viewed as undesirable because it introduces a
degree of uncertainty or unfamiliarity. Even a seemingly simple change can
have far-reaching repercussions. For example, changing the schedule of
meetings that a programs participants must attend may symbolize for some
the managers lack of concern for inconvenienced participants. To others it
means interference with other aspects of their work schedule or routine. A
third group may see it as more evidence of the autocracy of managers.
Participants also may fear or be concerned about social losses of various
kinds that could result from implementation of a particular decision. Even
the potential of such losses can cause people to resist a particular alternative
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in a decision-making situation. For example, modifications in the organization design of a program may mean that close friends have to work in
separate rooms or are no longer able to interact during work. Complex
informal relationships among participants are often affected by changes.
Established status symbols may be destroyed in the process of reorganizing a
program. Further, someone may jeopardize social acceptance by other
participants if he or she supports an alternative that these coworkers
have rejected. In such circumstances, a person may be forced to choose
between cooperating with the manager or compromising friendships with
and acceptance by other participants. Thus, what may seem a desirable and
logical alternative in a decision-making situation can meet with heavy
resistance because the price in terms of social relationships is too costly.
Possible social losses are not the only concerns participants may have
about alternatives under consideration. Real or perceived economic losses
may also be involved. In many situations new technology allows more work
to be done by the same or even fewer people, and resistance by those affected
is understandable. Even if they do not lose their job or have their earnings
reduced, workers may find that changes in technology lead to a faster pace of
work or to a redistribution of their workload.
Even when a decision does not cause significant economic or social
losses, participants may be inconvenienced because of it. Any change causes
some inconvenience, and extra effort is required to adjust to it. When old
habits and routines must be replaced because of a decision, the
inconvenience often stimulates resistance. If inconvenience is the only
factor present, however, the degree of resistance may be minor.
Clearly there are many reasons for the often-encountered resistance to
particular alternatives in a decision-making situation. People affected by a
decision may resist for reasons ranging from little more than their dislike of
being inconvenienced, to concerns about the decisions economic impact on
them, to such complex factors as resentment of the managers power to
affect them so directly. Such factors often act in combination to strengthen
their resolve to resist. There are a variety of techniques, however, that
managers can use to help overcome resistance.
Key to any successful effort to reduce resistance to a decision or its
implementation is informing and educating those affected by the decision
about the decision itself and its implications for them before it is implemented. Effective communication about a change and education in regard
to its implications can turn resistance into support.
Involving participants in the entire decision-making process, including
determining how best to implement a given decision, can help overcome
resistance by reducing uncertainty and misunderstandings about the
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decision and its implications. Participating in decision making gives participants an opportunity to gain a clearer picture of the changes that might
occur as a result of the decision and enhances their commitment to
successful implementation.
Supportive techniques that managers may find useful in helping participants accept decisions include offering training programs, granting
requests for leave during a painful transition period, or even providing
special counseling sessions for people adversely affected by a decision. It is
sometimes possible to mitigate resistance by giving additional resources or
promising to make a desired change at a later date, in exchange for
participants support of a decision.
Which support-enhancing and resistance-reducing techniques are used
at any given time depends on how best to mollify the participants whose
resistance must be overcome. Selecting and packaging the appropriate set of
techniques to support the implementation of a decision and reduce resistance to it, as well as choosing a suitable general approach to implementing
the decision, both of which should be based on a thorough situational
diagnosis, are important precursors to actual implementation.
Actual Implementation
The actual implementation of a decision involves three distinct steps: (1)
unfreezing the status quo; (2) changing to a new state; and (3) refreezing to
make the new state permanent, at least until a future decision triggers a new
round of implementation. This classic model of implementing changes,
including those resulting from making and implementing decisions, traces
back to the decades-old work of psychologist Kurt Lewin (1947). Figure 5.11
illustrates the steps in Lewins model of implementing a decision. This
three-step approach to change remains popular and provides contemporary
managers with useful guidance.
Using the general approach selected to implement a decision, whether a
top-down, bottom-up, or participative approach, the manager (or others
responsible for the implementation) first unfreezes the status quo. This
means making participants aware that a decision has been made and that the
decision will necessitate changes. It may also involve steps to overcome
resistance to the impending change as discussed earlier.
Once the status quo is unfrozen, change can occur. As shown in the
figure, this means inserting different concepts, ideas, practices, or physical
things into the situation. In a top-down approach, a simple announcement
of a decision and plans for its implementation can unfreeze the status quo.
Decisions and plans for their implementation reached through bottom-up
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or more elaborate participative approaches can also be used to unfreeze the
status quo and initiate change.
If the change is a physical thing, such as a new piece of equipment, it is
put in place, and participants begin using it. If the change is a concept or
practice, such as new reporting relationships in a revised organization
design for a program, a new marketing strategy, or a modified accounting
system, it is initiated, and participants begin using it.
The third step in implementing a decision involves incorporating the
change into the routines of those carrying out the implementation. In effect,
a new equilibrium is established as participants adapt and accept the
decision as the norm. The situation is refrozen, until another decision
requires more change and the cycle begins again.
Step 1: Unfreezing
The managers task is unfreezing the status quo and preparing those who will
participate in or be affected by the decision and the resulting change.
This is done by
Making participants aware of the decision and impending change
Reducing or minimizing participants’ resistance
Step 2: Changing
The managers task is introducing the actual change necessitated by the
decision.
This is done by
Inserting different concepts or ideas, practices, or physical things into
a situation
Step 3: Refreezing
The managers task is refreezing the situation with the implemented decision
and resulting change in place.
This is done by
Restabilizing the situation
Establishing conditions that will contribute to permanence
Figure 5.11 Lewins Three Steps in Implementing Changes Resulting from a Decision
THE DECISION-MAKING PROCESS 197
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There is no assurance that a decision can be implemented, no matter
how appropriate a response to a problem or an opportunity it is, or how
carefully its implementation is planned. That being said, managers can
perform certain actions to increase the likelihood that their decisions will be
successfully implemented. Most important is for managers to be certain that
participants involved in implementing a decision understand the situation
fully. Participants who understand the necessity and appropriateness of a
particular decision are more likely to accept and adjust to it. Managers
implementing a decision should provide information as far in advance as
possible, and should include specifics pertaining to the reasons for the
decision, its implications, the timing of its implementation, and the expected
impact on the program as well as on participants.
Some decisions can be implemented on a trial basis. When feasible,
managers should consider this option. Familiarity gained through experience with the implementation of a decision, along with assurances that the
decision is not irrevocable, can reduce initial concern and increase the
likelihood of acceptance. Allowing participants to assimilate changes that
result from the implementation of a decision, which usually requires the
passage of time, may also ultimately increase acceptance by those involved.
It is also useful when implementing decisions to minimize the impact
on existing customs and informal relationships, where possible. Change
almost invariably disrupts the culture in which it occurs. But participation in
the entire decision-making process can help minimize such disturbance.
Participants then feel less threatened by the resulting changes because,
having helped plan those changes, they understand them betterand
through their involvement in decision making they usually become more
committed to the successful implementation of decisions.
Evaluating the Decision
The final step in the decision-making process outlined in Figure 5.2 is often
given inadequate attention by managers; in fact, it may be overlooked
altogether. Managers must evaluate their decisions, because they have a
responsibility to optimally use resources entrusted to them. Almost all
management decisions involve expending resources, such as money and
time, that have alternative uses. Systematic evaluation determines whether
the use of resources as a consequence of a decision yielded sufficient
benefits, such as improved or enhanced quality, efficiency, satisfaction,
adaptiveness, and survival potential, to justify the decision.
In addition, evaluation provides a basis for feedback, which can lead to
adjustments to previously made decisions in the form of new or modified
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decisions. The evaluation of a decision requires collection and assessment of
information on how well the decision is working; whether the decision has
been effectively implemented; and, most important, whether the problem or
opportunity that triggered the decision-making process has been either
solved or successfully seized, respectively.
Information obtained in evaluating a decision may show that actual
results do not match intended results, which provides feedback on the
decision-making process. The manager may cycle back to the first step in the
decision-making process after becoming aware that a problem or unmet
opportunity still exists. The process then begins again, but this time the
manager has more information, new insights into what might or might not
work, and a bit more experience with the challenging process of making
decisions in the context of a program. Alternatively, as shown by the
feedback loop in Figure 5.2, the manager can cycle back to any prior
step in the decision-making process, where he or she can make adjustments
in the continuing effort to solve a problem or take advantage of an
opportunity.
Summary
Decision making is defined as making a choice between two or more
alternatives. It is critical to effectively performing the core developing/
strategizing, designing, and leading activities in management work and is
discussed as a pervasive, facilitative activity in all management work. Figure
1.4 shows how decision making is intertwined with the core management
activities and the other facilitative activities.
A seven-step process of decision making (see Figure 5.2) is presented in
the chapter as follows:
1. Becoming aware that a problem or opportunity exists
2. Defining the problem or opportunity
3. Developing relevant alternatives
4. Assessing the alternatives
5. Choosing an alternative
6. Implementing the decision
7. Evaluating the decision
Several analytical tools that can be helpful in evaluating the alternatives in a decision-making situation are described. Most basic is the
SUMMARY 199
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decision grid, which displays possible alternatives in a decision-making
situation along with the various elements that will affect each. The payoff
table is more useful than the decision grid in situations where probabilities
can be assigned to various possible outcomes. The decision tree is a tool
that can be helpful in evaluating decisions that are linked together over
time, each with various possible outcomes. Cost-benefit analysis can be a
useful tool, too, so long as decision makers recognize the difficulty in
determining the true costs and benefits of various alternatives. The
program evaluation and review technique, which can be very useful in
considering the timing of activities or the best sequence for a series of
actions, is discussed. The general structure of a decision support system is
presented.
Many factors go into successful decision making by managers, including
experience, intuition, advice from others, experimentation, and analysis.
Effective decision makers take advantage of all these aids in carrying out
their decision-making responsibilities, because decision making in programs is often fraught with uncertainty, risk, and conflict.
REVIEW QUESTIONS
1. Define decision making, and discuss the two types of management decisions.
2. Describe some of the most important characteristics of management decisions.
3. List the sequential steps in the decision-making process, and describe each briefly.
4. Discuss creative thinking as a component of developing alternatives in decision-making
situations.
5. Describe some of the commonly used quantitative techniques available to help decision
makers choose from among alternatives in decision-making situations.
6. What is a decision support system?
7. Discuss the three interconnected components of good planning for implementation of a
decision.
8. Discuss the three steps involved in implementing a decision. What can managers do to
improve the likelihood of successful implementation?
9. Why is it important for managers to evaluate their decisions?
200 CHAPTER 5 MAKING GOOD MANAGEMENT DECISIONS
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References
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R. Kipp Martin. An Introduction to Management Science: Quantitative
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Burstein, Frada, and Clyde W. Holsapple, eds., Handbook on Decision Support
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Cengage Learning, 2011.
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KEY TERMS AND CONCEPTS
cost-benefit analysis
creative process
decision grid
decision making
decision-making process
decision support system (DSS)
decision tree
fishbone diagram
opportunistic decisions
Pareto chart
payoff table
problem-solving decisions
program evaluation and review technique
(PERT)
REFERENCES 201
Longest, B. B. J. (2014). Health program management : From development through evaluation. John Wiley & Sons, Incorporated.
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Levi, Daniel. Group Dynamics for Teams, 4th ed. Thousand Oaks, CA: Sage, 2014.
Lewin, Kurt. Frontiers in Group Dynamics: Concept, Method, and Reality in Social
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Miller, Brian Cole. Quick Brainstorming Activities for Busy Managers: 50 Exercises to
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We check all papers for plagiarism before we submit them. We use powerful plagiarism checking software such as SafeAssign, LopesWrite, and Turnitin. We also upload the plagiarism report so that you can review it. We understand that plagiarism is academic suicide. We would not take the risk of submitting plagiarized work and jeopardize your academic journey. Furthermore, we do not sell or use prewritten papers, and each paper is written from scratch.
When will I get my paper?
You determine when you get the paper by setting the deadline when placing the order. All papers are delivered within the deadline. We are well aware that we operate in a time-sensitive industry. As such, we have laid out strategies to ensure that the client receives the paper on time and they never miss the deadline. We understand that papers that are submitted late have some points deducted. We do not want you to miss any points due to late submission. We work on beating deadlines by huge margins in order to ensure that you have ample time to review the paper before you submit it.
Will anyone find out that I used your services?
We have a privacy and confidentiality policy that guides our work. We NEVER share any customer information with third parties. Noone will ever know that you used our assignment help services. It’s only between you and us. We are bound by our policies to protect the customer’s identity and information. All your information, such as your names, phone number, email, order information, and so on, are protected. We have robust security systems that ensure that your data is protected. Hacking our systems is close to impossible, and it has never happened.
How our Assignment Help Service Works
1. Place an order
You fill all the paper instructions in the order form. Make sure you include all the helpful materials so that our academic writers can deliver the perfect paper. It will also help to eliminate unnecessary revisions.
2. Pay for the order
Proceed to pay for the paper so that it can be assigned to one of our expert academic writers. The paper subject is matched with the writer’s area of specialization.
3. Track the progress
You communicate with the writer and know about the progress of the paper. The client can ask the writer for drafts of the paper. The client can upload extra material and include additional instructions from the lecturer. Receive a paper.
4. Download the paper
The paper is sent to your email and uploaded to your personal account. You also get a plagiarism report attached to your paper.
PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET A PERFECT SCORE!!!
