Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.5–1 Introduction to Management Bob Fast Chapter 5 Week 3B Sept 27 I M 471.11 Fall 2011

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved. 5–1

Introduction to ManagementBob Fast

Chapter 5

Week 3B Sept 27

I M 471.11

Fall 2011

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved. Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.

PowerPoint Presentation by Clive Cook and Dale DilamarterPowerPoint Presentation by Clive Cook and Dale Dilamarter

Gary Dessler

Frederick A. Starke

Gary Dessler

Frederick A. Starke

Principles and Practices for Tomorrow’s Leaders

Second Canadian Edition

Principles and Practices for Tomorrow’s Leaders

Second Canadian Edition

ManagementManagement

Decision MakingDecision MakingDecision MakingDecision Making 55CHAPTERCHAPTER

Part Two: Planning


Chapter ObjectivesAfter studying this chapter and the case exercises at the end, you should be able to:

1. Demonstrate the importance of decision- making in management jobs.

2. Explain the difference between programmed and non-programmed decisions.

3. Describe the steps a manager must take to work through the rational decision-making process.

4. Apply the suggestions for making better decisions to a real problem.

5. Develop a decision matrix for solving a management problem.

6. Avoid the decision traps that managers face.7. Understand how to use groups more effectively

in the decision-making process.


Understanding Decision Making

• DecisionA choice made between available alternatives.

• Decision MakingThe process of developing and analyzing alternatives

and making a choice from among them.

• ProblemA discrepancy between a desirable and an actual

situation.

• JudgmentThe cognitive, or “thinking,” aspects of the decision-

making process.


Types of Decisions

• Programmed DecisionA decision that is repetitive and routine and can be

made by using a definite, systematic procedure.

• Nonprogrammed DecisionA decision that is unique and novel.

• The Principle of Exception “Only bring exceptions to the way things should be to

the manager’s attention. Handle routine matters yourself.”




Decision-Making Models

• The Classical Approach Have complete or “perfect” information about the situation. Distinguish perfectly between the problem and its

symptoms. Identify all criteria and accurately weigh all the criteria

according to preferences. Know all alternatives and can assess each one against

each criterion. Accurately calculate and choose the alternative with the

highest perceived value. Make an “optimal” choice without being confused by

“irrational” thought processes.


Decision-Making Models (cont’d)

• The Administrative ApproachBounded Rationality (Herbert Simon)

Managers’ decisions are only as rational as their unique values, capabilities, and limited capacity for processing information permit them to be.

Satisfice To look for solutions until a satisfactory one is found.


Steps in the Decision-Making Process


Step 1. Define the Problem

1. It’s trickier than it appears.

2. Start by writing down your initial assessment of the problem.

3. Dissect the problem. What triggered this problem (as I’ve assessed it)? Why am I even thinking about solving this

problem? What is the connection between the trigger and

the problem?


Step 2. Clarify Your Objectives

1. Write down all the concerns you hope to address through your decision.

2. Convert your concerns into specific, concrete objectives.

3. Separate ends from means to establish your fundamental objectives.

4. Clarify what you mean by each objective.

5. Test your objectives to see if they capture your interests.


Step 3. Identify Alternatives

1. Generate as many alternatives as you can yourself.

2. Expand your search, by checking with other people, including experts.

3. Look at each of your objectives and ask, “how?”

4. Know when to stop.


Step 4. Analyze the Alternatives

1. Mentally put yourself into the future. Process Analysis

Solving problems by thinking through the process involved from beginning to end, imagining, at each step, what actually would happen.

2. Eliminate any clearly inferior alternatives.

3. Organize your remaining alternatives into a table (matrix) that provides a concise, bird's-eye view of the consequences of pursuing each alternative.


Consequence Matrix

Figure 5.3


Step 5. Make a Choice

• Analyses are useless unless the right choice is made.Under perfect conditions, simply review the

consequences of each alternative, and choose the alternative that maximizes benefits.

In practice, making a decision—even a relatively simple one like choosing a computer—usually can’t be done so accurately or rationally.


How to Make Better Decisions

1. Be creative The process of developing original, novel

responses to a problem Cultivate creativity

Check your assumptions Think through the process Get more points of view Provide physical support Encourage anonymous input


Source: Lester A. Lefton and Laura Valvatine, Mastering Psychology, 4th ed. Copyright © 1992 by Allyn & Bacon. Reprinted by permission. FIGURE 5.4

Looking at the Problem in Just One Way


Source: Max H. Bazerman, Judgment in Managerial Decision Making. Copyright © 1994 Wiley, p. 93. Reprinted by permission of Wiley. FIGURE 5.5

The Advantage of Not Just Lookingat the Problem in One Way


Source: Applied Human Relations, 4th ed., by Benton/Halloran cW 1991. Reprinted by permission of Prentice-Hall, Upper Saddle River, NJ. FIGURE 5.6

Using Creativity to Find a Solution


How to Make Better Decisions (cont’d)

2. Increase Your Knowledge Ask questions.

Who, What, Where, When, Why, and How Get experience.

3. Use Your Intuition A cognitive process whereby a person instinctively

makes a decision based on his or her accumulated knowledge and experience.

Beware of the limitations Be realistic about risks Avoid over-confidence


Are You More Rational or More Intuitive?

FIGURE 5.7Source: Adapted and reproduced by permission of the Publisher, Psychological Assessment Resources. Inc., Odessa FL 33556, from the Personal Style Inventory by William Taggart, Ph.D., and Barbara Hausladen. Copyright 1991, 1993 by PAR, Inc.


How to Make Better Decisions (cont’d)

3. Weigh the Pros and Cons Quantify realities by sizing up your options, and

taking into consideration the relative importance of each of your objectives.

4. Don’t Overstress the Finality of Your Decision Remember that few decisions are forever. Knowing when to quit is sometimes the smartest

thing a manager can do.


Decision Matrix

Figure 5.8


Decision-Making Shortcuts and Traps

• Using a HeuristicApplying a rule of thumb or an approximation as a

shortcut to decision making.

• Perception (Personal Bias)The selection and interpretation of information we

receive through our senses and the meaning we give to the information.

Managers’ experiences and functional roles mould and influence how problems are perceived


Decision-Making Shortcuts and Traps (cont’d)

• Inaccurate Framing of the ProblemMisdefining the problem may be the biggest barrier to

making good decisions.

• AnchoringUnconsciously giving disproportionate weight to the

first information you hear.

• Adopting a Psychological SetThe tendency to rely on a rigid strategy or point of

view when solving a problem.


Decision-Making Shortcuts and Traps (cont’d)

• Organizational Barriers “Organizational politics”Time pressureLack of involvement in decision-making

• Escalation of Commitment Increased commitment to a previously chosen course

of action even though it has been shown to be ineffective


Pros and Cons of Using Groupsto Make Decisions


Tools for Improving Group Decision-Making

• Brainstorming• Devil’s-Advocate Approach• Delphi Technique• Nominal Group Technique• Stepladder Technique


How to Lead a Group Decision-Making Discussion

1. Ensure that all group members participate.

2. Distinguish between idea generation and idea evaluation.

3. Do not respond to each participant or dominate the discussion.

4. See that effort is directed toward overcoming surmountable obstacles.


Case Study 5 - 2

Make a Decision NowPage 160


Next Class – October 4

• Read:Chap 6 – Planning ProcessChap 7 – Strategic Management

• Due:Reading Assessment #1

“Values and organization”

• Coming up:Guest presenter – Oct 11th

Documents

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.5–1 Introduction to Management Bob Fast Chapter 5 Week 3B Sept 27 I M 471.11 Fall 2011