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What Are Managerial Decision Models?

A person who is planning a career in business may want to know, “What are managerial decision models?” This information is important because it demonstrates an objective way for managers to make decisions using sound methods and a foundation of data. Understanding this concept could help a person achieve their desired level of success as a manager in any industry ad in any type of business.


A Template of Logic

At their core, managerial decision models are templates of logic. When written, they look like a flow chart. The top of the model or chart features a statement. The next row after that refers to processes and steps that need to be taken in order to formulate a decision. The logic is consistent, and it is also in line with the direction of the business. One business’s logic model for making managerial decisions is likely to be different from another firm’s because businesses may have different missions or goals for the future. These models are simple and easy to interpret.

When a Managerial Decision Model Is Used

A managerial decision model is used when managers need to make a choice or decision between two or more options. They implement them when the decision is not obvious or when they need to document their decision based on formal processes. For example, the dismissal of an employee might require the use of a managerial decision model. Managers may also use these models in order to determine which product to make, how much to charge for a product and how much money to spend on advertising for a particular product.

The Five Key Steps in a Managerial Decision Model

A typical managerial decision model has five key steps. Those include establishing the objective, defining the problem, identifying possible alternative solutions, evaluating the courses of action and implementing the decision. Establishing the objective usually involves a simple statement, as does defining the problem. Identifying possible courses of action requires a manager to think of all of the variables involved in the problem. Evaluating the courses of action involves obtaining data or information related to the variables and possible outcomes. This often includes the use of computer modeling or algorithms that make use of artificial intelligence or predictive analysis. Implementing the solution may involve making changes along the way as new information becomes available.

What Might Change a Managerial Decision Model

Once a solution is implemented, a manager may have to account for changes in the business operating environment. According to Economic Discussion, a managerial decision model may require changes if there are different external conditions. For example, a recession of the economy might result in a product having lower sales. The firm might have to update its decision model in order to reflect the decreased level of consumer spending.

Understanding how managers use models to make decisions could help a person become familiar with the decision-making processes in different environments. The model that a manager uses for one type of decision might be different from when they make a different type of decision. Becoming familiar with the answer to “What are managerial decision models?” could also help a person decide if a career in business management would be a good fit for their skills and aptitudes.