The following objectives should be met by the end of this first module:
- Define decision making and understand some of the important characteristics of managerial decisions
- Understand and model the sequential steps in the decision-making process
- Be familiar with some of the most population quantitative models to assist decision makers, including decision grids, payoff tables, decision trees, cost-benefit analysis, and PERT
- Be able to calculate payoff tables, cost-benefit analysis, activity time and the critical path using PERT to evaluate alternatives choices and determine best choice
- Understand the important aspects of implementing decisions
These notes are intended only to supplement your readings. The best way to ensure each module is absorbed is to complete all the readings prior to reviewing these lecture notes. I will try to highlight what I believe to be the most important topics from your module readings. If you have any questions or concerns or there is something you do not understand, please ask me. You can either post on the webboard the question you have (that way others can benefit from the response), or you can e-mail me if you want a more private response. Either way it is extremely important that you have a complete and thorough understanding of the material for the module. Good luck and have a great semester!
This begins the last section in this course. This section contains two modules focusing on health service administration skills. The first is decision making and the second is healthcare coordination. Decision making is essential for an administrator and should not be taken lightly. There are many methods that are available to help make this process easier, more quantitative, and thus more reliable. Ultimately, other factors such as experience, intution, advice, experiementation, and scientific decision making techniques must all blend together to make the best choice available at the time. Hopefully, it will be the correct one.Decision making is defined as " making a choice between two alternatives". This sounds simple, but in actuality is much more difficult when jobs and/or money is on the line. Our text states that it is completely impossible to make totally rational decisions in healthcare. We tend to make decisions based on "bounded rationality". This means that managers are required to make a decision choosing from alternatives that best fits requirements available. This is called satisficing and is opposed to maximizing, which would be the best choice. As administrators in healthcare we must be satisfied with satisficing!
Managerial decision making is characterized by an acceptance of risk, uncertainty, conflicting demands and expectations, and lack of structure. All of these characteristics tend to make the decision itself all the more difficult.
The decision making process involves the following steps.
- Becoming aware that a decision must be made
- Defining the problem or opportunity in detail
- Developing relevant alternatives
- Evaluating the alternatives
- Choosing from the alternatives
- Converting the chosen alternative into action
- Evaluating the decision and following up
Quantitative models are available to aid in the decision making process. They help in evaluating the alternatives and comparing them to choose the best solution for your problem. A decision grid is the simplest method. It is a chart composed of the alternative choices compared to factors that are essential in the decision. The payoff table method is slightly more complicated and relies of probabilities of alternative choices. Historical data is the best choice to determine the probability and if these are not available, then experts in the area should provide a best guess. A decision tree is used when decisions and outcomes are very closely linked to other types of outcomes. The example in your text compares the costs of paying overtime in the lab versus the purchase of a machine that will automate the process. By using this method, you are able to determine that only after one year the automated process with have a higher expected value that paying overtime. This makes the decision much easier and is justified by quantifying costs. A cost benefit analysis is done by comparing the value of economic benefits to economic costs. This may be difficult in healthcare since the value of a life and delaying illness is hard to quantify. Lastly, program evaluation and review technique (PERT) is used to develop a flow plan for a project. Once this is diagrammed it can be useful for decision making along the way. The activity time as well as the critical path can be determined from this technique.
(HINT) Ensure that you know how to use all of the methods discussed above in decision making.
That is it for notes for module #10! Let me know if you have any questions.