Management C05 Decision Making Web

7/28/2019 Management C05 Decision Making Web

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website

Chapter 5

Decision Making, Learning,

Creativity, and

Entrepreneurship

Mark Gosling

Office: D404 Phone: 5417

Email: [email protected] 5-2

Learning Objectives

LO1 Understand the nature of managerial decision

making

LO2 Describe the six steps that managers should take to

make the best decisions

LO3 Identify the advantages and disadvantages of

group decision making, and describe techniques

that can improve it

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The Nature of Managerial Decision Making

Decision Making

The process by which managers respond to

opportunities and threats by analyzing options,

and making determinations about specific

organizational goals and

courses of action

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Decision Making

Programmed Decision

Routine, virtually automatic decision making that

follows established rules or guidelines.

Managers have made the same decision many times

before

There are rules or guidelines to follow based on

experience with past decisions

Little ambiguity involved

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Decision Making

Non-Programmed Decisions Nonroutine decision making that occurs in

response to unusual, unpredictable opportunities

and threats.

Decision Making

Intuition

feelings, beliefs, and

hunches that come

readily to mind,

require little effort

and information

gathering and result

in on-the-spot

decisions

Reasoned judgment

decisions that take

time and effort to

make and result from

careful information

gathering, generation

of alternatives, and

evaluation of

alternatives

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The Classical Model

Classical Model of Decision Making

A prescriptive model of decision making thatassumes the decision maker can identify and

evaluate all possible alternatives and their

consequences and rationally choose the most

appropriate course of action

The Classical Model of Decision

Making

Figure 5.1 5-8

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The Administrative Model

Administrative Model of Decision Making

explains why decision making is uncertain and

risky

explains why managers usually make satisfactory

rather than optimum decisions

Why Information Is Incomplete

Figure 5.25-10

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Causes of Incomplete Information

Risk The degree of probability that the possible

outcomes of a particular course of action will

occur

Uncertainty

the probabilities of alternative outcomes cannot

be determinedand future outcomes are unknown


Ambiguous

Information

Information that can

be interpreted in

multiple and often

conflicting ways.

Figure 5.3

Young Woman or Old

Woman

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Time constraints and information costs

managers have neither the time nor money tosearch for all possible alternatives and evaluate

potential consequences

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Satisficing

Searching for and choosing an acceptable, orsatisfactory response to problems and

opportunities, rather than trying to make the best

decision

Managers explore a limited number of options

and choose an acceptable decision rather than the

optimum decision

Six Steps in Decision Making

Figure 5.4 5-15 5-16

Decision Making Steps

Step 1. Recognize Need for a Decision

Sparked by an event such as environment

changes.

Managers must first realize that a decision

must be made.

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Step 2. Generate Alternatives Managers must develop feasible alternative

courses of action

If good alternatives are missed, the resulting

decision is poor

It is hard to develop creative alternatives, so

managers need to look for new ideas

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Step 3. Evaluate Alternatives What are the advantages and disadvantages

of each alternative?

Managers should specify criteria, then

evaluate.


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Figure 5.5

General Criteria for Evaluating Possible

Courses of Action

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Step 4. Choose Among Alternatives

Rank the various alternatives and make adecision

Tendency is for managers to ignore critical

information, even when available

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Step 5. Implement Chosen Alternative

Managers must now carry out the alternative

Often a decision is made and not

implemented

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Step 6. Learn From Feedback

Compare what happened to what was

expected to happen

Explore why any expectations for the decision

were not met

Derive guidelines that will help in future

decision making

Group Decision Making

Superior to individual

making

Choices less likely to fall

victim to bias

Able to draw on

combined skills of group

members

Improve ability to

generate feasible

alternatives

Allows managers to

process more

information

Managers affected by

decisions agree to

cooperate

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Building Group Creativity

Brainstorming Managers meet face-to-face to generate and

debate many alternatives.

Group members are not allowed to evaluate

alternatives until all alternatives are listed.

When all are listed, then the pros and cons of

each are discussed and a short list created.


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Nominal Group Technique

A decision-making technique in which groupmembers write down ideas and solutions, read

their suggestions to the whole group, and discuss

and then rank the alternatives

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Delphi Technique

A decision-making technique in which groupmembers do not meet face-to-face but respond in

writing to questions posed by the group leader

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Groupthink

A pattern of faulty and biased decision making

that occurs in groups whose members strive for

agreement among themselves at the expense of

accurately assessing information relevant to a

decision

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Devils Advocacy

Critical analysis of a preferred alternative to

ascertain its strengths and weaknesses before it is

implemented

Documents

Management C05 Decision Making Web