Download - Characteristics Of Managerial Decisions
Lack ofStructure
Risk
Conflict
Uncertainty
Characteristics Of Managerial Decisions
Characteristics Of Managerial Decisions
Lack of structure the usual state of affairs in managerial decision making programmed decisions - decisions that have been
encountered and made in the past▪ have objectively correct answers▪ are solvable by using simple rules, policies, or numerical
computations nonprogrammer decisions - new, novel, complex
decisions having no proven answers▪ decision maker must create or impose a method for making
the decision
Comparison Of Types Of Decisions
Programmed Decisions Nonprogrammer Decisions
Problem
Procedure
Business example
Frequent, repetitive, routine.Much certainty regarding cause and effect relationships.
Dependence on policies, rules, and definite procedures.
Periodic reorders of inventory.
Novel, unstructured. Much uncertainty regarding cause and effect relationships.
Necessity for creativity, intuition,tolerance for ambiguity, creative problem solving.
Diversification in new products and markets.
Characteristics Of Managerial Decisions
Uncertainty and risk certainty - have sufficient information to predict precisely
the consequences of one’s actions uncertainty - have insufficient information to know the
consequences of different actions▪ cannot estimate the likelihood of various consequences of their
actions risk - available information permits estimation of the
likelihood of various consequences▪ probability of an action being successful is less than 100 percent,
and losses may occur▪ good managers prefer to manage risk
• Conflict– opposing pressures from different sources– occurs at two levels• psychological conflict - individual decision makers:
– perceive several attractive options– perceive no attractive options
• conflict between individuals or groups– few decisions are without conflict
Characteristics Of Managerial Decisions
Identifying anddiagnosing
the problem
Generatingalternativesolutions
Evaluatingalternatives
Evaluatingthe decision
Implementingthe decision
Making thechoice
The Stages Of Decision Making
Stages Of Decision Making
Identifying and diagnosing the problem recognize that a problem exists and must be solved▪ problem - discrepancy between current state and:▪ past performance▪ current performance of other organizations▪ future expected performance
▪ decision maker must want to resolve the problem and have the resources to do so
Generating alternative solutions ready-made solutions - ideas that have been tried before▪ may follow the advice of others who have faced similar problem
custom-made solutions - combining new ideas into solutions
Stages Of Decision Making
Evaluating alternatives determining the value or adequacy of the alternatives predict the consequences that will occur if the various
options are put into effect▪ managers should consider several types of consequences
success or failure of the decision will affect the track record of the decision maker
contingency plans - alternative courses of action that can be implemented based on how the future unfolds▪ contingency plans are necessary to prepare for different
scenarios
Stages Of Decision Making
Making the choice maximize - a decision realizing the best possible outcome▪ requires searching thoroughly for a complete range of alternatives▪ each alternative is carefully assessed▪ compare one alternative to another
satisfies - choose an option that is acceptable although not necessarily the best or perfect▪ compare the choice with the goal, not against other options▪ search for alternatives ends when an okay solution is found
optimizing - achieving the best possible balance among several goals
Stages Of Decision Making
• Implementing the decision– those who implement the decision must: • understand the choice and why it was made• be committed to its successful implementation
– can’t assume that things will go smoothly during implementation• identify potential problems• identify potential opportunities
– always expect the unexpected
List the resources andactivities required toimplement each step
Estimate the time neededfor each step
Determine how things willlook when the decision
is fully operational
ImplementationPlan
Order the steps necessaryto achieve a fully
operational decision
Assign responsibility foreach step to specific
individuals
Steps In The Implementation Plan
Stages Of Decision Making
Evaluating the decision collecting information on how well the decision is working evaluation is useful whether the feedback is positive or
negative if decision appears inappropriate, the process cycles back to
the first stageThe best decision
nothing can guarantee a “best” decision must be confident that the procedures used are likely to
produce the best decision given the circumstances▪ vigilance - decision maker carefully and conscientiously executes all
stages of decision making
Barriers To Effective Decision Making
Psychological biases biases that interfere with objective rationality illusion of control - a belief that one can influence events
even when one has no control over what will happen framing effects - how problems or decision alternatives
are phrased or perceived▪ subjective influences can override objective facts
discount the future - weigh short-term costs and benefits more heavily than longer-term costs and benefits▪ the avoidance of short-term costs or the seeking of short-term
rewards may result in negative long-term consequences
Barriers To Effective Decision Making
Time pressures today’s economy places a premium on acting quickly and
keeping pace in order to make timely and high-quality decisions one must:▪ focus on real-time information▪ involve people more effectively and efficiently▪ rely on trusted experts▪ take a realistic view of conflict
Social realities many decisions result from intensive social interactions,
bargaining, and politicking
Potential Advantages
1. Larger pool of information
2. More perspectives and approaches
3. Intellectual stimulation
4. People understand the decision
5. People are committed to the decision
Pros And Cons Of Using A Group ToMake Decisions
Potential Disadvantages
1. One person dominates
2. Satisfying
3. Groupthink - team spirit discourages disagreement
4. Goal displacement - newgoals replace original goals
Leadership 1. Avoid domination 2. Encourage input 3. Avoid groupthink and satisfying 4. Remember goals
Effective GroupDecision Making
Constructive Conflict 1. Air legitimate differences 2. Stay task-focused 3. Be impersonal 4. Play devil’s advocate
Managing Group Decision Making
Creativity 1. Brainstorm 2. Avoid criticizing 3. Exhaust ideas 4. Combine ideas
Managing Group Decision Making
• Leadership style– leader should attempt to minimize process-related
problems– leader should:• avoid dominating the discussion • encourage less vocal members to express themselves• mitigate pressures for conformity• stay alert to groupthink and satisfying• prevent group from losing sight of the primary objective
Managing Group Decision Making
Constructive conflict a certain amount of constructive conflict should exist cognitive conflict - issue-based differences in perspectives
or judgments▪ a constructive type of conflict▪ can air legitimate differences of opinion and develop better ideas
affective conflict - emotional disagreement directed toward other people that is likely to be destructive conflict
two techniques used to purposely program cognitive conflict▪ devil’s advocate - has the job of criticizing others▪ dialectic - structured debate comparing two conflicting courses of
action
Managing Group Decision Making
Encouraging creativity creativity is essential to survival and involves:▪ creation - bringing a new thing into being▪ synthesis - joining two previously unrelated things▪ modification - improving something or giving it new application
to become creative one must:▪ recognize creative potential in little opportunities▪ obtain sufficient resources▪ escape from work once in awhile and read widely
brainstorming - group generates ideas about a problem▪ evaluation of ideas is postponed until all have been proposed
Organizational Decision Making
• Constraints on decision makers– organizations cannot do whatever they wish
MarketHuman
Financial
ConstraintsLegalOrganizational
Organizational Decision Making
Models of organizational decision processes bounded rationality - decision makers cannot be truly
rational because:▪ they have imperfect, incomplete information about alternatives▪ the problems they face are so complex▪ human beings cannot process all the information to which they
are exposed▪ time is limited▪ people in the organization have conflicting goals
when the conditions above hold, perfectly rational decision making gives way to more biased, subjective decision processes
Organizational Decision Making
Models of organizational decision processes (cont.) incremental model - major decisions arise through a series
of smaller decisions▪ piecemeal approach to larger solutions
coalitional model - groups with differing preferences use power and negotiation to influence decisions▪ used when people disagree about goals or compete for resources
garbage can model - a chaotic process leading to seemingly random decisions▪ occurs when people are unsure of their goals and what should be
done▪ a dramatic departure from rationality in decision making
Organizational Decision Making
Negotiations and politics negotiations necessary to galvanize the preferences of
competing groups and individuals organizational politics - people try to influence decisions
to promote their own interests▪ use power to pursue hidden agendas
create common goals - helps to make decision making a collaborative rather than a competitive process
Decision making in a crisis stress and time constraints make decisions less effective should be prepared for crises in advance
Mistaken Assumptions: How Not To Handle Crisis Management
We don’t have a crisis.We can handle a crisis.Crisis management is a luxury we can’t afford.If a major crisis happens, someone else will rescue us.Accidents are just a cost of doing business.Most crises are the fault of bad individuals; therefore, there’s not much we can do to prevent them.Only executives need to be aware of our crisis plans; why scare our employees or members of the community?We are tough enough to react to a crisis in an objective and rational manner.The most important thing in crisis management is to protect the good image of the organization through public relations and advertising campaigns.
Plan For Crisis Management
Evaluation andDiagnostic Actions
CommunicationActions
StrategicActions
CrisisManagement
Technical andStructural Actions
Psychological andCultural Actions
Organizational Decision Making (cont.)
Emergent strategies the strategy that evolves from all the activities engaged
in by people throughout the organization result from dynamic processes in which people engage
in discovery, implement decisions, and reconsider the initial decision after discovering new things by chance
emergent strategies may start at any organizational level
emergent strategies are generally the result of constructive processes
Choice• Set objectives
• Generate options• Evaluate and selectacceptable, feasible,
suitable option
Discovery• Systematic gathering
and analysis of the facts
• Monitoringoutcomes of
actions
Action• Implementing
chosen option• Correcting
deviations fromfrom plan
Emergent Strategies