7/28/2019 Chptr 5 Decision Making

1/18

MAKING

DECISIONS

How managers decide

7/28/2019 Chptr 5 Decision Making

2/18

Managerial Decision Making

Decision makingDecisions in response to opportunities

Decisions in response to threats

7/28/2019 Chptr 5 Decision Making

3/18

Types of Decision Making

Programmed Decisions:routine, almost

automatic process.

Non-programmed Decisions:unusualsituations that have not been oftenaddressed.

7/28/2019 Chptr 5 Decision Making

4/18

The Classical Model

Classical model of decision making:a prescriptive

model that tells how the decision should be made.

Assumes managers have access to all the information

needed to reach a decision.

Managers can then make the optimum decision by easily

ranking their own preferences among alternatives.

7/28/2019 Chptr 5 Decision Making

5/18

The Administrative Model

Administrative Model of decision making:

Challenged the classical assumptions that managershave and process all the information.

Bounded rationality

Incomplete information

7/28/2019 Chptr 5 Decision Making

6/18

Incomplete Information Factors

Incomplete information exists due to many issues:

Risk

Uncertainty

Ambiguous information

Time constraints and Information costs

Satisficing

7/28/2019 Chptr 5 Decision Making

7/18

Decision Making Steps

Recognize need fora decision

Frame the problem

Generate & assessalternatives

Choose amongalternatives

Implement chosenalternative

Learn from feedback

7/28/2019 Chptr 5 Decision Making

8/18

Decision Making Steps

1. Recognize need for a decision2. Generate alternatives

3. Evaluate alternatives

4. Choose among alternatives:5. Implement choose alternative

6. Learn from feedback

7/28/2019 Chptr 5 Decision Making

9/18

Evaluating Alternatives

Is it legal

Is it ethical? Is it economically feasible?

Is it practical?

7/28/2019 Chptr 5 Decision Making

10/18

Cognitive Biases

Suggests decision makers use heuristics to deal

with bounded rationality.

Systematic errorscan result from use of an

incorrect heuristic.

7/28/2019 Chptr 5 Decision Making

11/18

Types of Cognitive Biases

-Prior hypothesis bias-Representativeness

-Illusion of control-Escalating commitment

7/28/2019 Chptr 5 Decision Making

12/18

Group Decision Making

Many decisions are made in a group setting. The

disadvantages are

Group think:biased decision making resulting from

group members striving for agreement.

7/28/2019 Chptr 5 Decision Making

13/18

Improved Group Decision Making

Devils Advocacy: one member of the group actsas the devils advocate and critiques the way the

group identified alternatives. Dialectical inquiry: two different groups are

assigned to the problem and each groupevaluates the other groups alternatives.

Promote diversity: by increasing the diversity in agroup, a wider set of alternatives may beconsidered.

7/28/2019 Chptr 5 Decision Making

14/18

Organizational Learning & Creativity

Organizational Learning: Managers seek to

improve members ability to understand theorganization and environment so as to raiseeffectiveness.

Creativity: is the ability of the decision maker todiscover novel ideas leading to a feasible courseof action.

7/28/2019 Chptr 5 Decision Making

15/18

Creating a Learning Organization

Top managers follow several steps to build

in learning:Personal Mastery

Mental Models

Team Learning

Build a Shared Vision

Systems Thinking

7/28/2019 Chptr 5 Decision Making

16/18

Building Group Creativity

Brainstorming: managers meet face-to-face

to generate and debate many alternatives.

Production blocking is a potential problem

with brainstorming.

7/28/2019 Chptr 5 Decision Making

17/18

Building Group Creativity

Nominal Group Technique: Provides a morestructured way to generate alternatives in

writing.

7/28/2019 Chptr 5 Decision Making

18/18

Building Group Creativity

Delphi Technique: provides for a

written format without having allmanagers meet face-to-face.

Delphi allows distant managers to

participate.