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Modern Management9th edition

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Objectives

• A fundamental understanding of the term decision

• An understanding of each element of the decision situation

• An ability to use the decision-making process

• An appreciation for the various situations in which decisions are made

• An understanding of probability theory and decision trees as decision-making tools

• Insights into groups as decision makers

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FUNDAMENTALS OF DECISIONS

Definition of a Decision

Types of Decisions

Programmed

Nonprogrammed

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FUNDAMENTALS OF DECISIONS

Table 7.1Traditional and Modern Ways of Handling

Programmed and Nonprogrammed Decisions

Decision-Making TechniquesTypes of Decisions Traditional ModernProgrammed:

Routine, repetitive decisions 1. Habit 1. Operations research:Organization develops specific 2. Clerical routine: Mathematical analysis modelsprocesses for handling them Standard operating procedures Computer simulation

3. Organization structure: 2. Electronic data processing Common expectations A system of subgoals Well-defined information channels

Nonprogrammed:One-shot, ill-structured, 1. Judgment, intuition, 1. Heuristic problem-solving novel policy decisions and creativity techniques applied to:Handled by general makers 2.Rules of thumb Training human decision problem-solving processes 3.Selection and training Constructing heuristic

of executives computer programs

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FUNDAMENTALS OF DECISIONS

Figure 7.1Decision programming continuum

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FUNDAMENTALS OF DECISIONS

The Responsibility for Making Organizational Decisions

Scope of the decision

Broader scope

Consensus

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FUNDAMENTALS OF DECISIONS

Figure 7.2Level of managers responsible for making decisions

as decision scope increases from A to B to C.

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FUNDAMENTALS OF DECISIONS

Figure 7.3How scope of decision affects management levelmaking decision at DuPont

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FUNDAMENTALS OF DECISIONS

Elements of the Decision Situation

The Decision Makers

Goals To Be Served

Relevant Alternatives

Ordering of Alternatives

Choice of Alternatives.

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THE DECISION-MAKING PROCESS

Figure 7.4Model of the decision-making process

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THE DECISION-MAKING PROCESS

Identifying an Existing ProblemManagers learn of problems by:

Orders from superiorsSituations relayed by subordinatesNormal activity

Listing Alternative SolutionsAuthority factorsBiological or human factorsPhysical factorsTechnological factorsEconomic factors

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THE DECISION-MAKING PROCESS

Figure 7.5Additional factors that limit

a manager’s number of acceptable alternatives

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THE DECISION-MAKING PROCESS

Selecting the Most Beneficial Alternative

Implementing the Chosen Alternative

Gathering Problem-Related Feedback.

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DECISION-MAKING CONDITIONS

Complete Certainty Condition

Complete Uncertainty Condition

Risk Condition.

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DECISION-MAKING TOOLS

Probability Theory

Expected value (EV = I × P)

Decision Trees

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DECISION-MAKING TOOLS

Figure 7.6Expected values from locating surfboard rental store

in each of three possible locations

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DECISION-MAKING TOOLS

Figure 7.7A basic decision tree illustrating

the decision facing Stygian management.

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GROUP DECISION MAKING

Advantages and Disadvantages of Using Groups to Make Decisions

Advantages:

More and better alternatives than individual

Implementation supported more fervently

Disadvantages:

Takes longer

Costs the organization more

Lower quality if contaminated (Groupthink)

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GROUP DECISION MAKING

Processes for Making Group Decisions

Brainstorming

Nominal Group Technique

1. Writes down individual ideas

2. Presents individual ideas orally

3. Entire group discusses ideas

4. Secret ballot is taken

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GROUP DECISION MAKING

Processes for Making Group Decisions (con’t)

Delphi Technique1. Identify problem

2. Offer solutions anonymously

3. Compile and send responses

4. Generate new solutions

5. Repeat 3 and 4 until consensus reached

Evaluating Group Decision-Making Processes

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GROUP DECISION MAKING

Figure 7.8The brainstorming process

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Chapter Seven

Questions