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Chapter 7

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  • 1. PowerPoint Presentation to Accompany Management, 9/e John R. Schermerhorn, Jr . Prepared by: Jim LoPresti University of Colorado, Boulder Published by: John Wiley & Sons, Inc. Chapter 7: Information and Decision Making
  • 2. Planning Ahead — Chapter 7 Study Questions
    • What is the role of information in the management process?
    • How do managers use information to make decisions?
    • What are the steps in the decision-making process?
    • What are the current issues in managerial decision making?
  • 3. Study Question 1:What is the role of information in the management process?
    • Information and knowledge — basic linkages:
      • Knowledge and knowledge workers provide a decisive competitive factor in today’s economy.
      • Knowledge worker.
        • Someone whose value to the organization rests with intellect, not physical capabilities.
      • Intellectual capital.
        • Shared knowledge of a workforce that can be used to create wealth.
  • 4. Study Question 1:What is the role of information in the management process?
    • Information and knowledge — basic linkages (cont.)
      • Knowledge and intellectual capital are irreplaceable organizational resources.
      • The productivity of knowledge and knowledge workers depends on:
        • Computer competency.
        • Information competency.
  • 5. Study Question 1:What is the role of information in the management process?
    • Implications of IT within organizations:
      • Facilitation of communication and information sharing.
      • Operating with fewer middle managers.
      • Flattening of organizational structures.
      • Faster decision making.
      • Increased coordination and control.
  • 6. Figure 7.1 Information technology is breaking barriers and changing organizations.
  • 7. Study Question 1:What is the role of information in the management process?
    • Implications of IT for relationships with external environment:
      • Helps with customer relationship management.
      • Helps organizations with supply chain management.
      • Helps in monitoring outsourcing and other business contracts.
  • 8. Study Question 1:What is the role of information in the management process?
    • How IT is changing the office …
      • Progressive organizations actively use IT to help achieve high performance in uncertain environments.
      • IT has dramatically changed nature of offices.
      • Key developments in networked offices:
        • Instant messaging.
        • Peer-to-peer file sharing (P2P).
  • 9. Study Question 2: How do managers use information to make decisions?
    • 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.
  • 10. Study Question 2: How do managers use information to make decisions?
    • 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.
  • 11. Study Question 2: How do managers use information to make decisions?
    • Basic information system concepts:
      • Information system.
        • Use of the latest IT to collect, organize, and distribute data for use in decision making.
      • Management Information System (MIS).
        • Specifically designed to meet the information needs of managers in daily decision making.
  • 12. Study Question 2: How do managers use information to make decisions?
    • Basic information system concepts (cont.):
      • Decision Support System (DSS).
        • An interactive information system that allows users to organize and analyze data for solving complex and sometimes unstructured problems.
        • Group decision support system (GDSS) facilitates group efforts to solve complex and unstructured problems.
        • GDSSs use groupware.
  • 13. Study Question 2: How do managers use information to make decisions?
    • Basic information system concepts (cont.):
      • Artificial intelligence (AI)
        • Computer systems with the capacity to reason the way people do.
      • Expert systems (ES).
        • Software systems that use AI to mimic the thinking of human experts.
  • 14. Study Question 2: How do managers use information to make decisions?
    • Basic information system concepts (cont.):
      • Intranets and corporate portals.
        • Allow employees, by password access, to share databases and communicate electronically.
      • Extranets and enterprise portals.
        • Allow communication and data sharing between the organization and the external environment.
      • Electronic data interchange (EDI).
        • Uses controlled access to enterprise portals and supporting software to enable electronic transactions between businesses.
  • 15. 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.
  • 16. Study Question 2: How do managers use information to make decisions?
    • 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.
  • 17. Figure 7.2 The manager as an information-processing nerve center.
  • 18. Study Question 2: How do managers use information to make decisions?
    • A performance deficiency is …
      • Actual performance being less than desired performance.
    • A performance opportunity is …
      • Actual performance being better than desired performance.
    • Problem solving is …
      • The process of identifying a discrepancy between actual and desired performance and taking action to resolve it.
    • A decision is …
      • A choice among possible alternative course of action.
  • 19. Study Question 2: How do managers use information to make decisions?
    • Programmed decisions .
      • Apply solutions that are readily available from past experiences to solve structured problems.
      • Structured problems are ones that are familiar, straightforward, and clear with respect to information needs.
      • Best applied to routine problems that can be anticipated.
  • 20. Study Question 2: How do managers use information to make decisions?
    • Nonprogrammed decisions .
      • Develop novel solutions to meet the demands of unique situation that present unstructured problems.
      • Unstructured problems are ones that are full of ambiguities and information deficiencies.
      • Commonly faced by higher-level management.
  • 21. Study Question 2: How do managers use information to make decisions?
    • Crisis decision making.
      • A crisis involves an unexpected problem that can lead to disaster if not resolved quickly and appropriately.
      • Rules for crisis management:
        • Figure out what is going on.
        • Remember that speed matters.
        • Remember that slow counts, too.
        • Respect the danger of the unfamiliar.
        • Value the skeptic.
        • Be ready to “fight fire with fire.”
  • 22. Study Question 2: How do managers use information to make decisions?
    • Decision environments:
      • Certain environments.
        • Offer complete information about possible action alternatives and their outcomes.
      • Risk environments.
        • Lack complete information about action alternatives and their consequences, but offer some estimates of probabilities of outcomes for possible action alternatives.
      • Uncertain environments
        • Information is so poor that probabilities cannot be assigned to likely outcomes of known action alternatives.
  • 23. Figure 7.3 Three environments for managerial decision making and problem solving.
  • 24. Study Question 2: How do managers use information to make decisions?
    • Problem-solving approaches or styles:
      • Problem avoiders.
        • Inactive in information gathering and solving problems.
      • Problem solvers.
        • Reactive in gathering information and solving problems.
      • Problem seekers.
        • Proactive in anticipating problems and opportunities and taking appropriate action to gain an advantage.
  • 25. Study Question 2: How do managers use information to make decisions?
    • Systematic versus intuitive thinking.
      • Systematic thinking approaches problems in a rational, step-by-step, and analytical fashion.
      • Intuitive thinking approaches problems in a flexible and spontaneous fashion.
      • Multidimensional thinking applies both intuitive and systematic thinking.
      • Effective multidimensional thinking requires skill at strategic opportunism.
  • 26. 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 possible solutions.
      • Choose a preferred course of action and conduct the “ethics double check.”
      • Implement the decision.
      • Evaluate results.
  • 27. Figure 7.4 Steps in managerial decision making and problem solving.
  • 28. Study Question 3: What are the steps in the decision-making process?
    • Step 1 — identify 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.
  • 29. Study Question 3: What are the steps in the decision-making process?
    • Step 2 — g enerate and evaluate possible solutions.
      • 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.
  • 30. Study Question 3: What are the steps in the decision-making process?
    • Step 2 — g enerate and evaluate possible solutions (cont.).
      • Criteria for evaluating alternatives:
        • Benefits.
        • Costs.
        • Timeliness.
        • Acceptability.
        • Ethical soundness.
      • 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.
  • 31. Study Question 3: What are the steps in the decision-making process?
    • Step 3 — decide on a preferred course of action.
      • Classical decision model.
        • Managers act rationally in a certain world.
        • Managers face clearly defined problems and have complete knowledge of all possible alternatives and their consequences.
        • Results in an optimizing decision.
  • 32. Study Question 3: What are the steps in the decision-making process?
    • Step 3 — decide on a preferred course of action (cont.).
      • Behavioral decision model
        • Managers act in terms of what they perceive about a given situation.
        • Recognizes limits to human information-processing capabilities.
          • Cognitive limitations.
          • Bounded rationality.
          • Results in a satisficing decision.
  • 33. Study Question 3: What are the steps in the decision-making process?
    • Step 4 — i mplement 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.
  • 34. Figure 7.5 Differences in the classical and behavioral models of managerial decision making.
  • 35. Study Question 3: What are the steps in the decision-making process?
    • Step 5 — e valuate 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.
  • 36. Study Question 4: What are the current issues in managerial decision making?
    • Types of heuristics for simplifying decision making:
      • Availability heuristic.
        • People use information “readily available” from memory as a basis for assessing a current event or situation.
      • Representativeness heuristic.
        • People assess the likelihood of something happening based upon its similarity to a stereotyped set of occurrences.
      • Anchoring and adjustment heuristic.
        • People make decisions based on adjustments to a previously existing value or starting point.
  • 37. Study Question 4: What are the current issues in managerial decision making?
    • Escalating commitment.
      • The tendency to increase effort and apply more resources to a course of action that is not working.
    • Ways to avoid the escalation trap:
      • Set advance limits and stick to them.
      • Make your own decisions.
      • Carefully determine why you are continuing a course of action.
      • Remind yourself of the costs.
      • Watch for escalation tendencies.
  • 38. Study Question 4: What are the current issues in managerial decision making?
    • Potential advantages of group decision making:
      • Greater amounts of information, knowledge, and expertise are available.
      • More action alternatives are considered.
      • Increased understanding and acceptance of outcomes.
      • Increased commitment to implement final plans.
  • 39. Study Question 4: What are the current issues in managerial decision making?
    • Potential disadvantages of group decision making:
      • Pressure to conform.
      • Minority domination may occur.
      • Decision making takes longer.
  • 40. Study Question 4: What are the current issues in managerial decision making?
    • Ethical decision making.
      • Any decision should meet “ethics double check.” mentioned in step 3 of the decision-making process.
        • How would I feel if my family found out about this decision?
        • How would I feel if this decision were published in the local newspaper?
        • Any discomfort in answering these questions indicates the decision has ethical shortcomings.
  • 41. Study Question 4: What are the current issues in managerial decision making?
    • Ethical decision making (cont.)
      • Considering the ethics of a proposed decision may result in better decisions and prevention of costly litigation.
      • Ethical decisions satisfy the following criteria:
        • Utility.
        • Rights.
        • Justice.
        • Caring.
  • 42. Study Question 4: What are the current issues in managerial decision making?
    • Knowledge management.
      • Processes through which organizations develop, organize, and share knowledge to achieve competitive advantage.
    • Chief Knowledge Officer (CKO)
      • Energizes learning processes.
      • Manages and enhances organization’s intellectual assets.
    • Knowledge management requires a culture that values learning and fosters a learning organization.
  • 43. COPYRIGHT Copyright 2008 © John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that named in Section 117 of the United States Copyright Act without the express written permission of the copyright owner is unlawful. Requests for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.

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