chapter 7 making better decisions. 7- 2 management 1e 7- 2 management 1e 7- 2 - 2 learning...

Chapter 7Making Better Decisions

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Learning Objectives

Describe the seven steps of the decision making process Identify problems by analyzing causes and effects Describe how managers generate alternatives Predict possible consequences of alternatives Demonstrate how managers select the most desirable

alternative Describe the manager’s role in implementing alternatives Explain the patterns of behavior and delayed results for

decisions made

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Decisions That Make a Difference (p. 170)

Types of decisions (p. 171)• Programmed decision – based on preestablished rules

in response to a recurring situation (p. 172)• Nonprogrammed decision – based on reason and/or

intuition in response to a unique situation that requires a tailored decision

• Classical model – normative model that leads to an optimal decision, assuming full availability of information, sufficient time, and rationality of the decision maker Optimal decision – best possible decision given all the

needed information

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Decisions That Make a Difference (cont.)

Classical model

Figure 7.2



Seven steps to better decision making (p. 173)

Figure 7.3



Adaptive management (p. 173)• Approach to decision making that requires

managers to use critical thinking, collaboration, and reflection skills to make nonprogrammed decisions

• Important in a rapidly changing business environment


Identifying and Understanding the Problem (p. 173)

Ambiguity (p. 175)• Information about the situation, goals, or criteria

that is incomplete or can be interpreted in multiple ways

Symptomatic effects (p. 176)• Observable behaviors related to underlying causal

variables • Problems – undesirable behaviors

Are noticed due to their symptomatic effects


Identifying and Understanding the Problem (cont.)

Underlying causes (p. 176)• Behaviors that lead to a desired or undesired

symptomatic effect Intermediate causes – plausible and easily found Root causes

• Revealed by: Systemic-based analysis – takes into account the array of

all known variables associated with a problem and its symptoms, including behavior over time

Policy-based analysis – isolates the variables in a system that can truly be addressed through management innovation (p. 178)



Systems archetype of causal variables for customer satisfaction

Figure 7.6



Drifting goals system archetype

Figure 7.7

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Policy-based analysis (p. 178)• Following a systemic-based analysis, can examine

specific policies that could be contributing to undesirable effects with stock-and-flow diagrams

Figure 7.8



Front desk manager’s “guest expectation gap” explanation

Figure 7.9



Dolphin Resort: Annualized revenue and profit

Figure 7.10



Dolphin Resort revenue per available room

Figure 7.11


Dolphin Resort: Annualized room rate


Figure 7.12



Dolphin Resort: Annualized occupancy percentage

Figure 7.13



Dolphin Resort: Guest expectation variables

Figure 7.14


Certainty• Decision maker knows all alternatives and their

outcomes Uncertainty • all alternatives and outcomes are not known

Level of certainty determined by:• Time• Cognitive ability• Information

Generating Alternatives (p. 182)


Generating Alternatives (cont.)

Groupthink (p. 182)• Unconscious mode of group decision making in

which individuals prioritize agreement over analysis Production blocking• Loss of productivity during a brainstorming session

because individuals are overwhelmed by the number of possibilities being generated

Heuristics (“rule of thumb”)• Set of informal rules used to simplify and expedite

the decision making process



Expectation gap between price and drifting goals

Figure 7.15



Brainstorming (p. 183)• Creating as many alternatives as possible, without

making value judgments about any idea

Figure 7.16


Evaluating Alternatives (p. 184)

Predict and assess the outcomes of each alternative• Risk – degree to which the outcomes of an

alternative can be predicted Nominal group technique• Group members rate proposed solutions and the total

tally determines the final decision Delphi technique• Group of experts propose and question ideas until a

consensus is reached


Evaluating Alternatives (cont.)

Prior-hypothesis bias (p. 186)• Basing decisions on beliefs or assumptions despite

evidence to the contrary• Process may be unconscious

Dialectical inquiry• A proposal and a conflicting counterproposal are

given equal consideration• Used to prevent prior-hypothesis bias


Path Selection (p. 186)

Intuitive (“gut”) decision• Based on feelings, previous experience, and existing

knowledge Satisficing• Choosing an acceptable solution rather than an

optimal solution• balances time, information, and ability to consider

and implement alternatives


Path Selection (cont.)

Reasoned judgment (p. 187)• Decision based on extensive information gathering,

careful analysis, and generation of alternatives Administrative model• Recognizes the limits of information, time, and

individuals and seeks a satisficing rather than an optimum solution

• Bounded rationality – rational decision making thatis limited by time, cognitive abilities, and available information Representative bias – generalizing from too small a sample


Implementation (p. 188)

Successful implementation involves connecting strategy, people, and operations

Illusion of control• Overestimating one’s ability to control evens and

activities


Feedback and Results (p. 188)

Figure 7.20

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Feedback and Results (cont.)

In systems thinking analysis, managers track patterns of behavior associated with variables and understand that there is a delay in altering behavior after decisions have been made (p. 189)

Figure 7.21

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Reinforcing engine (p. 190)• A system behavior indicative of growth coupled with an

unintended consequence in another part of the system• “limits to success”


Figure 7.22

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Reinforcing engine (cont.)• Delayed behavior over time – “limits to success”

Figure 7.23

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Balancing correction (p. 191)• A system behavior in which long-term problems

are created through short-term fixes• “fixes the fail”

Figure 7.24

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Balancing correction (cont.)• Delayed behavior over time – “fixes that fail”

Figure 7.25

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Copyright

Copyright © 2014 John Wiley & Sons, Inc.

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