Management 12e richard draft chapter 09

Types of Decisions and Problems Decision making is the process of identifying opportunities Decision is a choice made from available alternatives... Facing Certainty and Uncertainty

Chapter 9

Managerial Decision Making

Types of Decisions

and Problems

Decision

making is the

process of

identifying

opportunities

Decision is a

choice made from available alternatives

Programmed and

Nonprogrammed Decisions

 Programmed Decisions

 Recurring problems

 Apply rule

 Nonprogrammed Decisions

 Unique situations

 Poorly defined

 Unstructured

Facing Certainty

and Uncertainty

 Difference between programmed and

unprogrammed decisions

 Certainty – Situation in which all information is

fully available

 Risk – Future outcomes associated with an

alternative are subject to chance

 Uncertainty - Depends on the amount and

value of information available

9.1 Conditions that Affect the

Possibility of Decision Failure

Ambiguity and Conflict

 Ambiguity - Making decisions in difficult

situations

 The goals and the problem are unclear

 Wicked decisions involve conflict over goals and have changing circumstances, fuzzy

information, and unclear links

 There is often no “right” answer

The Ideal, Rational Model

 Rational economic assumptions drive decisions

 Operates to accomplish established goals, problem is

defined

 Decision maker strives for information and certainty,

alternatives evaluated

 Criteria for evaluating alternatives is known; select

alternative with maximum benefit

 Decision maker is rationale and uses logic

 Normative─ how a decision maker should make

a decision

How Managers Actually

Make Decisions

 Administrative/descriptive approach

 How managers really make decisions

 Recognize human and environmental limitations

 Bounded rationality – People have limits or

boundaries on how rational they can be

 Satisficing – Decision makers choose the first

solution that satisfies minimal decision criteria

Steps in the Administrative

Model

 Goals are often vague

 Rational procedures are not always used

 Managers’ searches for alternatives are limited

 Most managers settle for satisficing

 Intuition – Quick apprehension of situation

based on practice and experience

Decision-Making Model:

Political

 Decisions involve managers with diverse

interests

 Managers must engage in coalition building

 Informal alliance to support specific goal

 Without a coalition, powerful groups can derail

the decision-making process

 Political model resembles the real environment

Decision-Making Model:

Political

 Assumptions of the political model

 Organizations are made up of groups with

diverse interests, goals, and values

 Information is ambiguous and incomplete

 Lack of time, resources, or mental capacity to

process all information regarding a problem

 Decisions are the result of bargaining and

discussion among coalition members

9.2 Characteristics of Classical,

Administrative, and Political Decision-Making

Models

Decision-Making Steps

 Recognition of Decision Requirement – I dentify problem or

opportunity

 Diagnosis and Analysis – Analyze underlying causal factors

 Develop Alternatives – Define feasible alternatives

 Selection of Desired Alternative – Alternative with most desirable

outcome

 Implementation of Chosen Alternative – Use of managerial,

administrative, and persuasive abilities to execute chosen alternative

 Evaluation and Feedback – Gather information about effectiveness

9.3 Six Steps in the Managerial Decision-Making Process

9.4 Decision Alternatives

with Different Levels of Risk

9.5 Personal Decision

Framework

Personal Decision Framework

 Directive style – People who prefer simple,

clear-cut solutions to problems

 Analytic style – Managers prefer complex

solutions based on a lot of data

 Conceptual style – Managers like a broad

amount of information

 Behavioral style – Managers with a deep

concern for others

Why Do Managers Make

Bad Decisions?

 Being influenced by initial impressions

 Justifying past decisions

 Seeing what you want to see

 Perpetuating the status quo

 Being influenced by problem framing

 Overconfidence

Innovative Decision Making

 Mechanisms to help reduce bias-related

decision errors:

 Start with brainstorming

 Use hard evidence

 Engage in rigorous debate

 Avoid groupthink

 Know when to bail