Quiz 2 Chapters 5, 6, 7, 8

Chapter 6

Decision Making

Learning ObjectivesAfter reading this chapter, you should be able to: Recognize the nature of management

decisions: programmability, uncertainty, risk, conflict, decision scope, and crisis situations.

Utilize the six steps of decision making. Apply the criteria of quality and acceptance to

a decision. Reap the benefits and avoid the problems of

group decision making. Develop time management skills to generate

adequate time to make decisions. Know when to delegate, and how to do so

wisely.

Google Decides about China Critical Thinking Questions focus on”

Characterize the nature of Google’s decision to enter China – programmability, uncertainty, risk, conflict, and scope?

Did Google approach this decision in a manner different from Yahoo and Microsoft?

Introduction Making decisions under conditions of risk

and uncertainty is one of the most important activities that managers engage in.

Generally, there is a lack of information and a limited amount of time available to make the decision.

Procrastinating and not making a decision sometimes has greater risk than making it.

Decision Making The process of identifying

problems and opportunities and resolving them.

Management decisions can be made by managers, teams, or individual employees, depending on: The scope of the decision, and The design and structure of the

organization.

Characteristics of Management Decision Making

ProgrammabilProgrammabilityity

UncertaintyUncertainty

RiskRiskConflictConflict

Decision Decision ScopeScope

CrisisCrisis

Programmability

Uncertainty

Characteristics of Management Decision Making (Cont)

Non-programmed Decisions

Certainty

Uncertainty

Programmed Decisions

Risk – occurs when the outcome of management decision is uncertain Risk has both positive and negative aspectsDecision environment for risk vary

depending upon company culture and size

Conflict – occurs when there are opposing goals, scares resources, or differences in priorities

Crisis – a situation that involves small amounts of time to make a decision that can impact the

survival of the organization

Characteristics of Management Decision Making (Cont)

Decision Scope – the effect and time horizon of a decision

Strategic Decisions – long term perspective of 2-5 years and affect on the organization

Tactical Decisions – short term perspective of 1 year or less and focus on subunits

Operational Decisions – shortest time perspective, generally less than a year, often measured on a daily or weekly basis

Characteristics of Management Decision Making (Cont)

Crisis situations Highly ambiguous circumstances Rare and extraordinary events that can threaten survival of

organization, i.e. high impact Small amount of time to respond Element of surprise Outcomes are unclear

Characteristics of Management Decision Making (Cont)

Stages of Decision Making

Identifying Identifying and and

diagnosing diagnosing the problemthe problem

Generating Generating alternative alternative solutionssolutions

Evaluating Evaluating alternativesalternatives

Selecting Selecting the best the best

alternativealternativeImplementing Implementing the decisionthe decision

Evaluating Evaluating the decisionthe decision

Typical problems that require decisions

A high level of employee turnover.

A reduction in firm profits.

Unacceptable levels of “shrinkage” in a store.

Lower than planned quality of finished goods.

An unexpected increase in workplace injuries.

The invention of a new technology that can increase the productivity of the workforce.

Identifying and diagnosing the problem What is the problem?

Gather information Ask why several times

Generating Alternative Solutions Resort to programmed solutions? Novel situation? Creativity Use participation to achieve diversity and

buy-in

Evaluating Alternatives Decision criteria should be related to

the performance goals of the organization and its subunits.

Decision criteria can include: Costs Profits Timeliness Whether the decision will work Fairness

Evaluating Alternatives (cont)

A practical way to apply decision criteria is to consider:

Decision quality – aspect of decision making based on such facts as costs, revenues, and product design specifications.

Decision acceptance – aspect of decision making based on people’s feelings.

Approaches to selecting the best alternative Optimizing – selecting the

best alternative from among multiple criteria.

Satisficing – selecting the first alternative solution that meets a minimum criterion.

Key factors for successful implementation Providing resources (staff, budgets, office space) that

will be needed for the activities that are required for successful implementation.

Exercising leadership to persuade others to move the implementation forward.

Developing communication and information systems that enable management to know if the decision alternative is meeting its planned objectives.

Recognition and rewards for individuals and teams that are successful with implementation.

Assumptions of the Rational Decision Making Process The problem is clear and unambiguous.

There is a single, well-defined goal that all parties agree to.

Full information is available about criteria.

All the alternatives and their consequences are known.

Assumptions of the Rational

Decision Making Process (cont)

The decision preferences are clear.

The decision preferences are constant and stable over time.

There are no time and cost constraints affecting the decision.

The decision solution will maximize the economic payoff.

Factors That Limit Rational Decision Making

Organization PoliticsOrganization Politics

Emotions and Personal Emotions and Personal PreferencesPreferences

Illusion of ControlIllusion of Control

Factors That Limit Rational Decision Making Intuition

Gut Escalation of commitment

Nonrational Decision Making ModelsAdministrative ModelBounded rationality – the ability of a manager

to be perfectly rational is limited by factors such as cognitive capacity and time constraints

Therefore, decision makers apply heuristics , or decision rules, that quickly eliminate alternatives

By using the heuristic known as satisficing, a manager seeks out the first decision alternative that appears to be satisfactory

Satisficing is an accurate model many management decisions.

Nonrational Decision Making Models (cont)

Garbage Can Model

This model suggests that managers have a set of pre-established solutions to problems located in “garbage cans.”

The garbage can model is likely to be used when decision makers are undisciplined and have no clear immediate goals.

The decision making process lacks structure

This can lead to serious difficulties

Personal Decision-Making Styles

Analytical Conceptual

Directive Behavioral

Tasks and TechnicalTasks and TechnicalConcernsConcerns

People and SocialPeople and SocialConcernsConcerns

Value OrientationValue Orientation

LowLow

HighHigh

Tole

ran

ce f

or

Am

big

uit

yTole

ran

ce f

or

Am

big

uit

y

Decision Making StylesDecision Making Styles

Advantages and Disadvantages of Group Decision Making

Advantages Increased

acceptance Greater pool of

knowledge Different

perspectives Greater

comprehension Training ground

Disadvantages Social pressure Minority domination Logrolling Goal displacement “Groupthink”

Managing Group Decision Making

Leadership StyleLeadership Style

Devil’s Advocate RoleDevil’s Advocate Role

Stimulating CreativityStimulating Creativity

Leader Decision Making Styles

Decide and persuade

Discover facts and decide

Consult and decide

Consult with group

and decide

Group decision

Decision Making Techniques to Stimulate Group Creativity

BrainstormingBrainstorming StoryboardingStoryboarding

Nominal Group Nominal Group Technique Technique

(NGT)(NGT)

Delphi Delphi TechniqueTechnique

Skills for Decision Making Process Time management skills

To make good decisions, managers need time to understand the problem and develop creative solutions.

Delegation skills Managers who know how to

delegate are able to accomplish more than those who feel the need to be involved in every decision, no matter how trivial.

Effective Time Management Practices Plan a list of things that need to

be done today.

Plan weekly, monthly, and annual schedules of activities.

Schedule difficult and challenging activities when you are at your highest level of energy and alertness.

Set deadlines.

Effective Time Management Practices (cont)

Answer phone messages

and e-mail in batches

during a lull in your work schedule.

Have a place to work uninterrupted.

Do something productive during non-productive activities.

Effective Delegation Determine what you want

done. Match the desired task with

the most appropriate employee.

Communicate clearly when assigning the task.

Ask questions to make sure the task is fully understood.

Set clear guidelines.

Effective Delegation (cont)

Keep communication channels open. Allow employees to do the task the way

they feel comfortable doing it. Trust employees’ capabilities. Check on the progress of the

assignment. Hold the employee responsible for the

work. Recognize what the employee has done,

and show appropriate appreciation.

Google Decides about China Responses to Critical Thinking Questions:

Entering a specific country, specially China, is not a day to day decision, therefore nonprogrammable, high in uncertainty and risk, and clearly leads to conflict to and within Google

Google’s approach differed because they had a chance to benefit from the experience of Yahoo and Microsoft, who went in ahead, and they had a shorter time frame because of competition

Individual/Collaborative Learning Case 6.1 (p. 258)

Video :