Most management decisions are made by using the administrative man model of decision making.
The administrative man never has complete knowledge and generates fewer alternatives.
Simon argued that the administrative man carries out decisions that are only satisficing, a term used to describe decisions that may not be ideal but result in solutions that have adequate outcomes. These managers want decisions to be “good enough” so that they “work,” but they are less concerned that the alternative selected is the optimal choice. The “best” choice for many decisions is often found to be too costly in terms of time or resources, so another less costly but workable solution is found.
DECISION-MAKING TOOLS
There is always some uncertainty in making decisions. However, management analysts have developed tools that provide some order and direction in obtaining and using information or that are helpful in selecting who should be involved in making the decision. Because there are so many decision aids, this chapter presents selected technology that would be most helpful to beginning- or middle-level managers, including decision grids, payoff tables, decision trees, consequence tables, logic models, and program evaluation and review technique (PERT). It is important to remember, though, that any decision-making tool always results in the need for the person to make a final decision and that all such tools are subject to human error.
Decision Grids
A decision grid allows one to visually examine the alternatives and compare each against the same criteria. Although any criteria may be selected, the same criteria are used to analyze each alternative. An example of a decision grid is depicted in Figure 1.3. When many alternatives have been generated or a group or committee is collaborating on the decision, these grids are particularly helpful to the process. This tool, for instance, would be useful when changing
TABLE 1.2 Comparing the Economic Man with the Administrative Man
Economic Administrative
Makes decisions in a very rational manner Makes decisions that are good enough has complete knowledge of the problem or
decision situation
Because complete knowledge is not possible, knowledge is always fragmented
has a complete list of possible alternatives Because consequences of alternatives occur in the future, they are impossible to predict accurately has a rational system of ordering preference of
alternatives
Usually chooses from among a few alternatives, not all possible ones
Selects the decision that will maximize utility The final choice is satisficing rather than maximizing Source: adapted from Simon, h. a. (1965). The shape of automation for man and management. New York, NY:
harper Textbooks.
the method of managing care on a unit or when selecting a candidate to hire from a large interview pool. The unit manager or the committee would evaluate all of the alternatives available using a decision grid. In this manner, every alternative is evaluated using the same criteria. It is possible to weight some of the criteria more heavily than others if some are more important. To do this, it is usually necessary to assign a number value to each criterion. The result would be a numeric value for each alternative considered.
Payoff Tables
The decision aids known as payoff tables have a cost–profit–volume relationship and are very helpful when some quantitative information is available, such as an item’s cost or predicted use. To use payoff tables, one must determine probabilities and use historical data, such as a hospital census and a report on the number of operating procedures performed. To illustrate, a payoff table might be appropriately used in determining how many participants it would take to make an in-service program break even in terms of costs.
If the instructor for the class costs $500, the in-service director would need to charge each of the 20 participants $25 for the class, but for 40 participants, the class would cost only
$12.50 each. The in-service director would use attendance data from past classes and the number of nurses potentially available to attend to determine probable class size and thus how much to charge for the class. Payoff tables do not guarantee that a correct decision will be made, but they assist in visualizing data.
Decision Trees
Because decisions are often tied to the outcome of other events, management analysts have developed decision trees.
The decision tree in Figure 1.4 compares the cost of hiring regular staff with the cost of hiring temporary employees. Here, the decision is whether to hire extra nurses at regular salary to perform outpatient procedures on an oncology unit or to have nurses available to the unit on an on-call basis and pay them on-call and overtime wages. The possible consequences of a decreased volume of procedures and an increased volume must be considered. Initially, costs would increase in hiring a regular staff, but over a longer time, this move would mean greater savings if the volume of procedures does not dramatically decrease.
Consequence Tables
Consequence tables demonstrate how various alternatives create different consequences. A consequence table lists the objectives for solving a problem down one side of a table and rates how each alternative would meet the desired objective.
#1
#2
#3
#4
Financial effect
Political
effect Departmental
effect Time Decision
Alternative
FIGURE 1.3 • a decision grid.
For example, consider this problem: “The number of patient falls has exceeded the benchmark rate for two consecutive quarters.” After a period of analysis, the following alternatives were selected as solutions:
1. Provide a new educational program to instruct staff on how to prevent falls.
2. Implement a night check to ensure that patients have side rails up and beds in low position.
3. Implement a policy requiring soft restraint orders on all confused patients.
The decision maker then lists each alternative opposite the objectives for solving the problem, which for this problem might be (a) reduces the number of falls, (b) meets regulatory standards, (c) is cost-effective, and (d) fits present policy guidelines. The decision maker(s) then ranks each desired objective and examines each of the alternatives through a standardized key, which allows a fair comparison between alternatives and assists in eliminating undesirable choices. It is important to examine long-term effects of each alternative as well as how the decision will affect others. See Table 1.3 for an example of a consequence table.
POSSIBLE EVENTS
Increased demand for procedures
Decreased demand for procedures
Increased demand for staff
Decreased demand for staff
Pay overtime and on-call wages
Decision point (last event to occur) ALTERNATIVE
ACTIONS
Hire regular staff
Variables affecting the direction of the decision tree:
• Revenue from procedures • Net cash flow
• Costs • First-year expected value
FIGURE 1.4 • a decision tree.
TABLE 1.3 A Consequence Table
Objectives for Problem Solving Alternative 1 Alternative 2 Alternative 3
1. Reduces the number of falls X X X
2. Meets regulatory standards X X X
3. is cost-effective X X
4. Fits present policy guidelines X
Decision Score
Logic Models
Logic models are schematics or pictures of how programs are intended to operate. The schematic typically includes resources, processes, and desired outcomes and depicts exactly what the relationships are between the three components. For example, Allmark, Baxter, Goyder, Guillaume, and Crofton-Martin (2013) used logic models to depict causal pathways between the provision of advice services and improvements in health.
Data and discussion from 87 documents were used to construct a model describing interventions, primary outcomes, secondary and tertiary outcomes following advice interventions.
Program Evaluation and Review Technique
PERT is a popular tool to determine the timing of decisions. Developed by the Booz-Allen- Hamilton organization and the U.S. Navy in connection with the Polaris missile program, PERT is essentially a flowchart that predicts when events and activities must take place if a final event is to occur. Figure 1.5 shows a PERT chart for developing a new outpatient treatment room for oncology procedures. The number of weeks to complete tasks is listed in optimistic time, most likely time, and pessimistic time. The critical path shows something that must occur in the sequence before one may proceed. PERT is especially helpful when a group of people is working on a project. The flowchart keeps everyone up-to-date, and problems are easily identified when they first occur. Flowcharts are popular, and many people use them in their personal lives.
Decision to develop
a staffed outpatient treatment
room
5-7-9 2-3-4 2-3-4
Renovation complete Staff
recruited
Staff hired 2-3-4
Staff trained 4-5-6
1-2-3
Equipment installed
Equipment received Equipment
ordered
Equipment and staff
ready 3-4-5
1-2-3 2-3-4
10-12-14
Critical path
Number of weeks to complete task ranked from most optimistic, to most likely, to most pessimistic finish times
Planning complete
Room gutted
FIGURE 1.5 • example of a peRT flow diagram.