Download - Foundation of Decision Making Ch: 4
-
7/28/2019 Foundation of Decision Making Ch: 4
1/36
Fundamentals of Management: 4-1 Gao Junshan, UST Beijing
Chapter 4
Foundations of Decision Making
-
7/28/2019 Foundation of Decision Making Ch: 4
2/36
Fundamentals of Management: 4-2 Gao Junshan, UST Beijing
Where We Are
Part 1 Introduction
Part 2 Planning
Part 3 Organizing
Part 4 Leading
Part 5 Controlling
Part 2 Planning
Chapter 3
Foundations of Planning
Chapter 4
Foundations of Decision Making
Chapter 3
Foundations of Planning
Chapter 4
Foundations of Decision Making
-
7/28/2019 Foundation of Decision Making Ch: 4
3/36
Fundamentals of Management: 4-3 Gao Junshan, UST Beijing
Chapter Guide
Process of decision making Importance
The 8 step process Quantitative analysis tools
Assumptions on rationality Rational model of decision making
Modification of the rational model
Decision making in real world
-
7/28/2019 Foundation of Decision Making Ch: 4
4/36
Decision-making process: importance
Fundamentals of Management: 4-4 Gao Junshan, UST Beijing
-
7/28/2019 Foundation of Decision Making Ch: 4
5/36
Fundamentals of Management: 4-5 Gao Junshan, UST Beijing
An example of the decision-making process
Identifying
a Problem
Identifying
Decision Criteria
Allocating Weights
to Criteria
I need to buy
a new car.
Price
Interior Comfort
Durability
Repair Record
Performance
Price
Interior Comfort
Durability
Repair Record
Performance
10
8
6
4
2
Decision-making process: car buying example
-
7/28/2019 Foundation of Decision Making Ch: 4
6/36
Fundamentals of Management: 4-6 Gao Junshan, UST Beijing
Decision-making process: car buying example
Developing
Alternatives
Analyzing
Alternatives
Selecting
an Alternative
Implementing
the Choice
The Toyota
is the best.
Ford
Jeep
Mazda
Dodge
Audi
Isuzu
Chevy
Price
Comfort
Durability
Repair Record
Performance
Toyota
ChevyIsuzuAudiDodge
MazdaJeepFordToyota
Appraising
Decision Results
-
7/28/2019 Foundation of Decision Making Ch: 4
7/36
Fundamentals of Management: 4-7 Gao Junshan, UST Beijing
Problem Identification
Solving the wrong problem perfectly is no better
than do nothing for the right problem
Problem is identified by comparing the current
state with some standards that represent a desired
state of affaires:
Past performance, previously set goals, performance ofother units/organizations
Problem identification is subjective in nature
Decision-making process: step summary
-
7/28/2019 Foundation of Decision Making Ch: 4
8/36
Fundamentals of Management: 4-8 Gao Junshan, UST Beijing
Decision Criteria
They reflect the factors that managers think
important in making the choice
They are not equally important
A simple approach to deal with different
criteria is to assign them different weights
Judgments are involved in selecting criteriaand assigning weighs
Decision-making process: step summary
-
7/28/2019 Foundation of Decision Making Ch: 4
9/36
Analyzing alternatives
Decision-making process: step summary
Fundamentals of Management: 4-9 Gao Junshan, UST Beijing
-
7/28/2019 Foundation of Decision Making Ch: 4
10/36
Selecting an alternative
Decision-making process: step summary
Fundamentals of Management: 4-10 Gao Junshan, UST Beijing
-
7/28/2019 Foundation of Decision Making Ch: 4
11/36
-
7/28/2019 Foundation of Decision Making Ch: 4
12/36
Fundamentals of Management: 4-12 Gao Junshan, UST Beijing
Implementation and Evaluation
Selecting the best choice based on the analysis
Putting into the decision into action includes
Communicating with those to be affected and
Gaining their commitment of support
Participation of decision making brings
enthusiasms
Evaluation of the decision result is an importantphase of decision making process and part of the
controlling function
Decision-making process: step summary
-
7/28/2019 Foundation of Decision Making Ch: 4
13/36
Fundamentals of Management: 4-13 Gao Junshan, UST Beijing
Chapter Guide
Process of decision making
Assumptions on rationality
Rational model of decision making
Creativity
Modification of the rational model Decision making in real world
-
7/28/2019 Foundation of Decision Making Ch: 4
14/36
Rational Model of Decision Making
Decision choices are consistent, valuemaximizing within the specified constraints
Decision makers remain logical and objective
Outcomes of all alternatives are known and
accurate comparison of them can be made
MazdaJeepFordToyota
Rationality assumptions: rational model
Fundamentals of Management: 4-14 Gao Junshan, UST Beijing
-
7/28/2019 Foundation of Decision Making Ch: 4
15/36
Fundamentals of Management: 4-15 Gao Junshan, UST Beijing
Rationality assumptions: rational model
-
7/28/2019 Foundation of Decision Making Ch: 4
16/36
Fundamentals of Management: 4-16 Gao Junshan, UST Beijing
Becoming Creative
Think of yourself as creative
Pay attention to your intuition
Move away from your comfort zone
Engage in activities that put you outside your comfort zone
Seek a change of scenery
Find several right answers
Play your own devils advocate
Believe in finding a workable solution
Brain storming with others
Turn creative ideas into action
Rationality assumptions: rational model
-
7/28/2019 Foundation of Decision Making Ch: 4
17/36
Real WorldDecisional Conditions
Certainty UncertaintyRisk
Rationality assumptions: rational model
Fundamentals of Management: 4-17 Gao Junshan, UST Beijing
-
7/28/2019 Foundation of Decision Making Ch: 4
18/36
In the real world managers make rational
choice under the these constraintsUncertainty of environments
Incomplete information
Capabilities to process
massive information Time and cost
Rationality assumptions: modification of rational model
Fundamentals of Management: 4-18 Gao Junshan, UST Beijing
-
7/28/2019 Foundation of Decision Making Ch: 4
19/36
Fundamentals of Management: 4-19 Gao Junshan, UST Beijing
A Search Process to Satisfice
Ascertain
the Need
for a Decision
Simplify
the Problem
Set
Satisficing
Criteria
Identify a
Limited Set
of Alternatives
Compare
Alternatives
Against Criteria
Expand
Search for
Alternatives
Select the
First Good
Enough Choice
A Satisficing
Alternative
Exists
Yes
No
Rationality assumptions: modification of rational model
-
7/28/2019 Foundation of Decision Making Ch: 4
20/36
Fundamentals of Management: 4-20 Gao Junshan, UST Beijing
Simon was a pioneer of the development of computer artificial
intelligence. In economics, he contended that the theory of economic
man, which argues that the individual invariably chooses a course that
will maximize personal benefits, failed to account for the inherent
uncertainty of human action. His highly original work on decision-
making in such books as Administrative Behavior(1947), earned him the
Nobel Memorial Prize in Economic Sciences in 1978. Simon's other
books include Scienti f ic Discovery(1987).
From Columbia Electronic Encyclopedia, 6th Edition
Simon, Herbert Alexander
19162001
American social scientist and economist
Rationality assumptions: modification of rational model
-
7/28/2019 Foundation of Decision Making Ch: 4
21/36
Fundamentals of Management: 4-21 Gao Junshan, UST Beijing
Chapter Guide
Process of decision making
Assumptions on rationality
Decision making in real world Types and styles of decision making
Common errors in decision making
Decision making in groups
Cultural factors
-
7/28/2019 Foundation of Decision Making Ch: 4
22/36
Fundamentals of Management: 4-22 Gao Junshan, UST Beijing
How Do Problems Differ?
Programmed
Decisions
NonprogrammedDecisions
Well-
Structured
PoorlyStructured
Decision making in reality: types and style
-
7/28/2019 Foundation of Decision Making Ch: 4
23/36
Making
programmed
Decisions
Decision making in reality: types and style
Fundamentals of Management: 4-23 Gao Junshan, UST Beijing
-
7/28/2019 Foundation of Decision Making Ch: 4
24/36
Decision making in reality: types and style
Fundamentals of Management: 4-24 Gao Junshan, UST Beijing
-
7/28/2019 Foundation of Decision Making Ch: 4
25/36
Decision making in reality: types and style
Fundamentals of Management: 4-25 Gao Junshan, UST Beijing
-
7/28/2019 Foundation of Decision Making Ch: 4
26/36
Fundamentals of Management: 4-26 Gao Junshan, UST Beijing
Escalation of
Commitment
RepresentativeHeuristic
AvailabilityHeuristic
Common Errors
in Decision Making
Decision making in reality: errors and creativity
-
7/28/2019 Foundation of Decision Making Ch: 4
27/36
Information Technology to Assist
Decision Makings Expert system
Software that acts like an expert in analyzing and solving
ill-structured problems
Neural network
Software that
is designed to imitate
the structure of brain
cells and connections
among them
Decision making in reality: errors and creativity
Fundamentals of Management: 4-27 Gao Junshan, UST Beijing
-
7/28/2019 Foundation of Decision Making Ch: 4
28/36
Fundamentals of Management: 4-28 Gao Junshan, UST Beijing
Group Decision Making
More information
More alternatives
Increased acceptance
Legitimacy
Time-consuming
Minority domination
Pressures to conform
Unclear responsibility
Advantages Disadvantages
Decision making in reality: decision making in groups
-
7/28/2019 Foundation of Decision Making Ch: 4
29/36
Evidence of Groupthink
Decision making in reality: decision making in groups
Fundamentals of Management: 4-29 Gao Junshan, UST Beijing
-
7/28/2019 Foundation of Decision Making Ch: 4
30/36
Fundamentals of Management: 4-30 Gao Junshan, UST Beijing
Techniques to ImproveGroup Decision
Making
Brainstorming
Nominal GroupTechnique
Electronic
Meetings
Decision making in reality: decision making in groups
-
7/28/2019 Foundation of Decision Making Ch: 4
31/36
Fundamentals of Management: 4-31 Gao Junshan, UST Beijing
NationalCulture and
Decision Making
Degreeof Risk
DecisionStyle
Decision making in reality: cultural factors
-
7/28/2019 Foundation of Decision Making Ch: 4
32/36
Hofstedes Dimensions of National Culture
Decision making in reality: cultural factors (see Chap 2, p47)
See: G. Hofstede, Culture Consequences: Internat ional Dif ferences in Work
Related Values(Beverly Hills, CA: Sage Publications, 1980), pp. 2526; and
Hofstede, The Cultural Relativity of Organizational Practices and Theories,
Journ al of Internat ional Business Studies(Fall 1983), pp. 7589.
Fundamentals of Management: 4-32 Gao Junshan, UST Beijing
-
7/28/2019 Foundation of Decision Making Ch: 4
33/36
Decision making in reality: cultural factors
Fundamentals of Management: 4-33 Gao Junshan, UST Beijing
-
7/28/2019 Foundation of Decision Making Ch: 4
34/36
Chapter Summary
Fundamentals of Management: 4-34 Gao Junshan, UST Beijing
-
7/28/2019 Foundation of Decision Making Ch: 4
35/36
Fundamentals of Management: 4-42 Gao Junshan, UST Beijing
Summary in numbers
8 steps of decision making process
7 assumptions of rational model
4 realities leading to bounded rationality
4 decision styles (in 2 dimensions)
4 evidences of groupthink
4 measures of Hofstede culture difference
3 levels of uncertainty
3 common ways of programmed decisions
3 common errors of decision making 3 elements of creativity
3 techniques to improve group decision making
2 types of decision problem vs. 2 types of decisions
-
7/28/2019 Foundation of Decision Making Ch: 4
36/36
Fundamentals of Management: 4 43 Gao Junshan UST Beijing
Conducting Effective Meeting
Prepare and distribute an agenda well in advance of
the meeting
Consult with participants before the meeting to
ensure proper participation
Establish specific time parameters for the meeting;specify when it will start and end.
Maintain focused discussion during the meeting
Encourage and support participation by all
members
Encourage the clash of ideas discourage the clash of personalities
Bring closure by summarizing accomplishments
and allocating follow-up assignments
Management skills: Effective meeting