The Decision-Making Process

Introduction to Management 11e John Schermerhorn

Chapter 7Chapter 7

The The

Decision-Making ProcessDecision-Making Process

Planning Ahead — Chapter 7 Study Questions

1. What is the role of information in the management process?

2. How do managers use information to make decisions?

3. What are the steps in the decision-making process?

4. What are the current issues in managerial decision making?

Management 11e Chapter 7 2

Study Question 1: What is the role of information in the management process?

Information, technology and management Managers must have

Computer competency Ability to understand computers and use them to their

best advantage

Information competency Ability to gather, analyze and use information for

decision making and problem solving



What is useful information? Data

Raw facts and observations

Information Data made useful for

decision making

Information drives management functions



Characteristics of useful information: Timely High quality Complete Relevant Understandable



Information needs of organizations Information exchanges with the external

environment: Gather intelligence information Provide public information

Information exchanges within the organization: Facilitate decision making Facilitate problem solving




Figure 7.1 Internal and external information needs of an organization



Information systems Use IT to collect, organize and distribute data

for use in decision making

Management information systems Meet the information

needs of managers in making daily decisions


Figure 7.2 Information technology is breaking barriers and changing organizations


Study Question 2: How do managers use information to make decisions?

Managerial advantages of IT utilization: Planning advantages

Better and more timely access to useful information

Involving more people in planning

Organizing advantages More ongoing and informed communication

among all parts of the organization Improved coordination and integration



Managerial advantages of IT utilization (cont.): Leading advantages

Improved communication with staff and stakeholders

Keeping objectives clear

Controlling advantages More immediate measures of performance results Allows real-time solutions to performance

problems Management 11e Chapter 7 12

Figure 7.3 The manager as an information-processing nerve center



Problem solving The process of identifying a discrepancy between

actual and desired performance and taking action to resolve it



Problem-solving approaches or styles:



Systematic versus intuitive thinking



Multidimensional thinking applies both intuitive and systematic thinking Effective multidimensional thinking requires

skill at strategic opportunism




Managers use

different cognitive

styles


Types of problems Structured problems are ones that are

familiar, straightforward, and clear with respect to information needs

Programmed decisions apply solutions that are readily available from past experiences to solve structured problems



Types of problems Unstructured problems are ones that are full

of ambiguities and information deficiencies Nonprogrammed decisions apply a specific

solution to meet the demands of a unique problem

Commonly faced by higher-level management



Crisis decision making A crisis involves an unexpected problem that

can lead to disaster if not resolved quickly and appropriately





Managers make decisions with various amounts of information


Figure 7.4 Three environments for managerial decision making and problem solving


Study Question 3: What are the steps in the decision-making process?

Five-step decision-making process: Identify and define the problem

Generate and evaluate alternative solutions

Make decision

Implement the decision

Evaluate results



Step 1 — Find and define the problem Focuses on information gathering,

information processing, and deliberation Decision objectives should be established Common mistakes in defining problems:

Defining the problem too broadly or too narrowly Focusing on symptoms instead of causes Choosing the wrong problem



Step 2 — generate and evaluate alternative courses of action Potential solutions are formulated and more

information is gathered, data are analyzed , the advantages and disadvantages of alternative solutions are identified

Approaches for evaluating alternatives: Stakeholder analysis Cost-benefit analysis



Step 2 — generate and evaluate possible solutions (cont.) Criteria for evaluating alternatives:

Benefits Costs Timeliness Acceptability Ethical soundness



Step 2 — generate and evaluate possible solutions (cont.) Common mistakes:

Selecting a particular solution too quickly

Choosing a convenient alternative that may have damaging side effects or may not be as good as other alternatives



Step 3 — decide on a preferred course of action Two different approaches

Behavioral model leads to satisficing decisions

Classical model leads to optimizing decisions


Figure 7.6 Differences in the classical and behavioral decision-making models



Step 4 — implement the decision solution Involves taking action to make sure the

solution decided upon becomes a reality Managers need to have willingness and

ability to implement action plans Lack-of-participation error

should be avoided



Step 5 — evaluate results Involves comparing actual and desired

results Positive and negative consequences of

chosen course of action should be examined If actual results fall short

of desired results, the manager returns to earlier steps in the decision-making process



Check ethical reasoning Ask these spotlight questions


Study Question 4: What are the current issues in managerial decision making?

Issues in decision making How do decision errors happen? Hueristics are strategies for simplifying

decision making





Creative Decision making: Creativity is the generation of a novel idea or

unique approach that solves a problem or crafts an opportunity creativity is more likely when decision makers are

highly task motivated

Organizations should create an environment that supports and encourages creativity



Personal creativity drivers



Situational creativity drivers Team creativity skills

Management support for creative ideas

Organizational culture



Situational creativity drivers


Chapter 7 Case

Amazon: One E-Store to Rule Them All

Education

The Decision-Making Process