Mastering Management & Decision Making: Theories & Processes

Posted on Jul 7, 2025 in Accounting and Finance

Henry Mintzberg’s Management Theories

Henry Mintzberg: Background & Contributions

Henry Mintzberg, born in Montreal in 1939, is renowned for his work on the structure and design of organizations, as well as strategy.

Mintzberg’s 10 Managerial Roles

Mintzberg identified ten common roles of managers, categorized into three groups:

Interpersonal Roles

Figurehead: The director or chief; has authority in the organization. Acts as a legal and social head.
Leader: Responsible for the motivation and management of employees.
Liaison: Develops and maintains a network of external contacts.

Informational Roles

Monitor: Receives a large amount of information, internal and/or external, and acts as a central information center.
Disseminator: Transmits information from outside or from other employees to members of the organization.
Spokesperson: Transmits information to the outside about the plans, rules, actions, and results of the organization.

Decisional Roles

Entrepreneur: Seeks opportunities and undertakes projects to bring about change, within and outside the organization.
Problem Solver: Responsible for corrective actions when there are major and unexpected disturbances.
Resource Distributor: Makes or approves important decisions in the organization.
Negotiator: Responsible for representing the organization in important negotiations.

Vroom’s Expectancy Theory of Motivation

Vroom’s Expectancy Theory posits that the effort to achieve high performance in the world of work is directly related to the possibility of achieving it, and that, once achieved, the individual is rewarded in such a way that the effort made has been worthwhile.

Valence: The level of desire a person has to reach a goal.
Expectancy: The degree of conviction that the work-related effort will produce the accomplishment of a task.
Instrumentality: A person’s estimate of a reward.

Hersey-Blanchard Situational Leadership Theory

Successful leadership is achieved when the right style of decision-making is selected based on the appropriate level of preparation or maturity of the followers. Adequate preparation involves both ability (technical knowledge) and willingness (motivation, desire) to develop a specific task.

Specific Leadership Behaviors:

Telling (High Task – Low Relationship): The leader tells people what to do.
Selling (High Task – High Relationship): The leader provides both managerial and supportive behavior.
Participating (Low Task – High Relationship): The leader and follower share decision-making.
Delegating (Low Task – Low Relationship): The leader provides little direction or support.

Robert Katz’s Management Skills

Robert Katz identified three essential skills that every administrator must possess:

Technical Skills: The ability to apply specialized knowledge or experience.
Human Skills: The ability to work with people, understand them, and motivate them both individually and as a group.
Conceptual Skills: The mental capacity to analyze and diagnose complicated situations. Example: decision-making, interpreting information rationally.

Decision Making & Problem Solving Fundamentals

Individual vs. Group Problem Solving

How can decisions be made individually? What constitutes a group? What is a work group? Should problems be solved in a group or individually?

Usually, it is supposed (or at least we should presuppose) that managers make decisions in the most rational way, even though sometimes they prioritize their own objectives instead of the company’s. Other times, they lead according to past events, or simply prefer simplifying problems for their own convenience.

Approaches to Individual Decision Making

Maximizer Model (Rationality)

In the Maximizer Model, decisions are made under conditions of full rationality:

The problem is clear and direct.
There is only one well-defined goal.
We know all the alternatives and consequences.
Criteria and alternatives can be measured and clearly prioritized.
There is no emotional conflict between the alternatives.
Preferences are constant and stable.

The selection maximizes the result.

Satisficer Model (Limited Rationality)

In the Satisficer Model, people who make decisions reduce problems to an easy understanding level and build simplified models where essential characteristics are summarized without the full complexity.

There is a limited list of the most evident alternatives.
We analyze the alternatives one by one, and the process stops when we find a “good enough” alternative.
The order of analyzing the alternatives is crucial.

Implicit Favorite Model

In this model, a preferred alternative is implicitly selected in the first phases of the decision-making process, and the rest of the alternatives are devalued. It also tries to solve problems by simplifying the process.

Decision-makers try to avoid the difficult step of alternative evaluation if identifying an “implicit” favorite is possible. Since the moment there is an implicit favorite, the rest of the process is a confirmation act to guarantee the correctness of the selection.

Intuitive Model (Intuition)

Intuition is an unconscious process that is created from our previous experience. It is not independent of the rational model; both are complementary.

What is intuition? The faculty to immediately understand things, without the need for reasoning. A presentiment? A sixth sense?
When should intuition be used? In situations with a high uncertainty level, few precedents for the decision, unpredictable variables, limited data, or when analytical data are not the most important factors.

Defining the Problem

A problem is that which endangers the achievement of a goal; it’s a lack. What are we facing?

A great problem often leads to an incomplete decision.
The only way to avoid an incomplete decision is by reviewing and contrasting it repeatedly against all observable facts, rejecting any definition that doesn’t include those elements.
Problems can arise from the environment, the organization, or stakeholders.

Structured Decision-Making Processes

The Decision-Making Process: Harvard Review Insights

The Harvard Review outlines a comprehensive decision-making process:

1. Create a Context for Success

The first step is to create an environment in which effective decisions are possible—an environment with interpersonal and behavioral relationships where ideas and information can be discussed and decisions made. This includes involving adequate people (experts, those with authority to allocate resources, opponents, key stakeholders) in an appropriate place, considering the method to reach agreements (consensus, majority, directive leadership), and defending the diversity of opinions and “healthy” debate (avoiding competition leading to rational, open research).

2. Frame the Issue Properly

We must properly understand the problem and how it affects the objectives of the company. A “frame” is a mental window through which we view a problem, situation, or opportunity. Frames are always influenced by our ideas, education, experiences, expectations, and prejudices. We won’t be able to make adequate decisions if we don’t expose the problem properly. A poorly defined problem can prevent the appearance of valid alternatives.

What’s the Real Problem?

Determining the nature of the problems.
Don’t impose your frame on others. Apply creative thinking.

If you frame the situation incorrectly, you’ll probably make a bad decision; if you frame it correctly, you’ll be halfway to a good decision.

3. Generate Alternatives

Good decisions emerge from a set of feasible alternatives. Decision-makers in these situations don’t simply say yes or no to a single choice. Instead, they say: “It is an interesting idea, but it cannot be the only one. Let’s think about other options before we do anything else.”

How to Generate Alternatives:

Brainstorming.
Bring a creative group to the task (generate creative conflict).

Characteristics of Good Alternatives:

Broadly constructed, not just variations of other concepts.
Genuine alternatives (not warmed-over ideas).
Feasible choices according to capabilities and resources.
Sufficiently numerous to represent a true choice.

4. Evaluate Alternatives

Once you have identified a set of alternatives, you must estimate how well each one meets the objective you established at the outset of the process. How much value does each alternative contribute to the objective?

Key Variables for Evaluation:

Costs, benefits, financial impact, intangibles, time, feasibility, resources, risk, ethics.

Methods to Evaluate Alternatives:

Financial analysis: NPV, IRR.
The prioritization matrix.
The trade-off table.
Decision trees.
Computers to rescue.
Considering problem uncertainty.

The Prioritization Matrix

List your objectives. (Give the highest position to the most important.)
Assign a value or weight to each. (0 to 10.)
Multiply your estimate by the priority values. Add all the scores. The highest number indicates the best alternative.

The Trade-Off Table

This table helps you identify the degree of variation between alternatives. Unlike the prioritization matrix, this one does not produce a numerical score. Instead, it juxtaposes key factors of alternatives in a way that makes it easier to compare and mentally weigh them. When you have laid out the alternatives with their associated information, consider how important these factors are for your company, and identify the trade-offs that you are willing to make.

Decision Trees

A visual representation of the alternative courses and their probable outcomes. Think of it as a “road map” of the various choices.

5. Choose the Best Alternative

Methods for choosing the best alternative include:

Catchball
Point-Counterpoint
Intellectual watchdog

Peter Drucker’s Decision-Making Process

Peter Drucker outlined a systematic approach to decision-making:

1. Classifying the Problem

Is it a generic problem? Is it exceptional and unique? Is it the first manifestation of a new kind of problem for which there is not a norm yet?

2. Define the Problem

Executives and managers, in general, must be able to:

Be aware of the existence of problems.
Anticipate problems that may arise in the future.

3. Set the Objectives of the Decision

The decision-maker must clearly know the expected result and define the objectives:

Know what you really want to achieve.
Evaluate the results after having put the decision into practice.

4. Identify Limiting Conditions

The conditions must be taken into account before identifying and analyzing the different alternatives. These conditions can be financial (maximum budget, seeking external funding), labor (legal restrictions, collective agreements), time (to solve a problem by a concrete date), operational, etc. It is also really important to consider aspects related to Corporate Culture and existing values in the company, as the coherence of decisions with that Corporate Culture is absolutely necessary.

5. Obtain the Information

It is indispensable to verify the quality of the information because even computerized data can contain errors or be unsuitable for making a correct decision. Good quality information must be “RARE”:

Relevant: Related to the decision to make.
Accurate: Doesn’t contain irrelevant data.
Reliable: Comes from a good source.
Exhaustive: Provides necessary data.

6. Describe & Evaluate Alternatives

Once you have the needed information to make the decision, it is necessary to describe and evaluate the different options. This process is divided into three parts:

Make a list of alternatives.
Consider advantages and disadvantages of each alternative.
Choose the best alternative.

A feasibility study of each alternative is needed, which can be done from three different points of view:

Technical feasibility
Social feasibility
Economic feasibility

7. Make the Decision

After having evaluated the alternatives, taking into account the adopted criteria and the described limitations, considering advantages and disadvantages and opportunity cost, we must adopt the most appropriate decision, according to the company and environment’s concrete circumstances. This agreed decision must allow reaching the previously set objectives. And before putting it into practice, it is necessary to specify it adequately (who, where, how, when).

8. Put the Decision into Practice

This step involves the actual implementation of the chosen decision.

9. Evaluate the Result

There must be a monitoring system for results in order to control different deviations as they occur. Depending on the nature of the problem and the adopted decision, the following must be taken into consideration:

The validity of a decision over time, either because staff loses interest or because experienced changes make the decision irrelevant.
If time and effort invested in the decision have been justified according to received profits.
If unexpected profits have been created.

Planning & Scheduling for Action

Taking into account the decision and the analysis of the risks and difficulties, an action plan should be drawn up specifying the activities required to make that decision a reality. It will be necessary to identify the tasks to be carried out, defining what they consist of, who should carry them out, how, and when. At the same time, an execution order must be established, indicating priorities.

Turning Decisions into Action

Once the action plan has been prepared, it is necessary to obtain the pertinent authorizations from the corresponding higher body, if sufficient delegated powers are not available. Although the”substanc” of the decision is important, at this stage the”for” acquires relevance and may condition the authorization.

Six Steps to Effective Problem Solving

Identify and Select the Problem: What is really causing the difficulty?
Once the individual, group, or team has identified the problem, they should write it down in a clear and concise statement. They should also be able to write a goal statement that focuses on the successful end of the process (it helps to see the gap between the problem and the goal). This whole process is about closing or fixing the gap between the problem and the goal.
Analyze the Problem: What is the real bottom-line root cause?
The key here is to focus everyone’s efforts on analyzing the problem for the real cause. Once the cause is found, plans can be made to fix it. Analyzing means gathering information (research and collect). Once the information is gathered, take a very close look at what is going on. Try to come to consensus on why the particular problem or issue occurs.
Generate Potential Solutions: Developing possible solutions…
This is a creative as well as practical step where every possible solution or variation is identified. In this step, use the brainstorming process to generate as many solutions as possible. There are no wrong answers here, and judgments should not be passed on another person’s suggestions. Toward the end of this brainstorming session, allow time for each person to clarify his or her suggestion so there is a common understanding for a later selection.
Select and Plan the Solution: What is the best solution? Prioritize!
It is time to select the best solution to fix the problem given the circumstances, resources, and other considerations. There are always a number of things that can affect a solution: money, time, people, procedures, policies, rules, and so on. All of these factors must be thought about and talked through. This is a slow process of elimination. There may be some possible suggestions that are immediately eliminated. Eventually, the group boils down the choices to one or two best solutions. The group should then discuss those solutions and come to consensus on the best solution. At this point, the group should apply a PDSA (Plan-Do-Study-Act) cycle to have a clear plan of action to track the solution, gather information on how it is working, and make necessary adjustments.
Implement the Solution
This is the DO stage of PDSA. Make sure the solution can be tracked to have information to use in the STUDY stage. This may seem to be an easy stage, but it really requires a scientific approach to observing specifically what is going on with the solution.
Evaluate the Solution
This final step is the STUDY stage of PDSA. Did the solution work? What went right, and what went wrong? What adjustments does the group have to make for the solution to work better? This is a careful analysis stage that improves upon the best solution using the information gathered during the DO stage. After this analysis, the group is ready to ACT upon their findings, and the problem should be solved or better under control.