Decision Making Perceptions Perceptions of the of the decision decision maker maker Outcomes
Decision Making Decision making is the process of choosing a course of action for dealing with a problem or opportunity. Steps in systematic decision making. Recognize and define the problem or opportunity. Identify and analyze alternative courses of action, and estimate their effects on the problem or opportunity. Choose a preferred course of action. Implement the preferred course of action. Evaluate the results and follow up as necessary.
Phases of Decision making ProcessIntelligence activityDesign activityChoice activity
Stages of decision making ProcessThe identification phaseThe development phaseThe selection phase
Decision making Process Certain decision environments. Exist when information is sufficient to predict the results of each alternative in advance of implementation. Risk decision environments. Exist when decision makers lack complete certainty regarding the outcomes of various courses of action, but they are aware of the probabilities associated with their occurrence.
Decision making Process Uncertain decision environments. Exist when managers have so little information on hand that they cannot even assign probabilities to various alternatives and their possible outcomes. Described as a rapidly changing setting in terms of: External conditions. The information technology requirements needed for analyzing and making decisions. The people who influence problem and choice definitions.
Types of decisions.Programmed decisions. Involve routine problems that arise regularly and can be addressed through standard responses.Nonprogrammed decisions. Involve nonroutine problems that require solutions specifically tailored to the situation at hand.
Classical decision theory Classical decision theory assumes the manager faces a clearly defined problem, knows all possible action alternatives and their consequences, and then chooses the optimum solution.
Behavioral decision theory Behavioral decision theory accepts the notion of bounded rationality. It assumes the manager acts only in terms of what is perceived about a given situation, and then chooses a satisficing solution.
Assumptions of the RationalAssumptions of the Rational Decision-Making Model Decision-Making Model 1. 1. Problem clarity Problem clarity 2. 2. Known options Known options 3. 3. Clear preferences Clear preferences 4. 4. Constant Constant preferences preferences 5. 5. No time or cost No time or cost constraints constraints 6. 6. Maximum payoff Maximum payoff
Steps in the Rational Steps in the RationalDecision-Making ModelDecision-Making Model EXHIBIT 5-3
Social ModelSocial model is drawn from psychology,which explain as human behavior beingguided largely by their unconsciousdesires. Social pressures and influencemay cause the manager to makeirrational decision.
Making ChoicesMaking Choices
Four reason for escalation of commitmentProject characteristicsPsychological determinantsSocial forcesOrganizational determinants
Intuition.The ability to know or recognize quicklyand readily the possibilities of a givensituation.A key element of decision making underrisk and uncertainty.
Escalation of Commitment11-9Figure 11-4 Psychological and Social Determinants * Ego defense * Individual motivators * Peer pressure * Saving face Organizational Determinants * Breakdown in communication * Politics Escalation Poor results * Organizational inertia of or commitment outcomes Project Characteristics * A delayed return on the investment * Setbacks attributed to temporary causes Contextual Determinants * External political pressure
Simon’s Normative Model of Decision MakingBased on premise that decision making isnot rationalDecision making is characterized by * limited information processing * use of judgmental heuristics * sacrificing
Making ChoicesMaking Choices
Judgmental HeuristicsAvailability Heuristic: A decision maker’s tendencyto base decisions on information that is readilyavailable in memory.Representativeness Heuristic: The tendency toassess the likelihood of an event occurring based onone’s impressions about similar occurrences.The Adjustment Heuristic: In this heuristic, thedecision maker makes a judgment by starting from aninitial value and the adjust to make the final decision.
Decision-Style ModelDecision-Style Model EXHIBIT 5-5
Participative Decision Making Techniques
The Three Components ofThe Three Components of Creativity Creativity EXHIBIT 5-4
11-15Figure 11-7 A Model of Organizational Creativity and Innovation Individual Characteristics Intellectual abilities Tacit (implied) and explicit knowledge Individual creative Styles of thinking behavior/performance Personality traits Intrinsic task motivation Group Characteristics - Norms - Diversity Group creative - Cohesiveness - Roles - Size - Problem-solving approaches behavior/performance Organizational Characteristics Organizational - Culture - Strategy - Resources - Structure creativity and - Rewards - Technology innovation
11-11 A Model of Participative Management Acceptance Participation in Autonomy and Commitment Goal Setting Increased Participation in control over work Decision Making behavior Security Contingency Factors Performance * Design of work and Innovation * Trust * Readiness to Participate Challenge Participation in Completion of Problem Solving Meaningful Participation in Tasks Change Satisfaction
11-12 Management Decision Styles You solve the problem or make the decision yourself, using information available to you at that time. You obtain the necessary information from your subordinate(s), then decide on the solution to the problem yourself. You share the problem with relevant subordinates individually, getting their ideas and suggestions without bringing them together as a group. Then you make the decision that may or may not reflect your subordinates’ influence. You share the problem with your subordinates as a group, collectively obtaining their ideas and suggestions. Then you make the decision that may or may not reflect your subordinates’ influence. You share a problem with your subordinates as a group. Together you generate and evaluate alternatives and attempt to reach agreement (consensus) on a solution.
Advantages and Disadvantages of11-10aTable 11-3a Group-Aided Decision Making Advantages Disadvantages 1. Greater pool of knowledge 1. Social pressure 2. Different perspectives 2. Minority domination 3. Greater comprehension 3. Logrolling 4. Increased acceptance 4. Goal displacement 5. Training ground 5. “Groupthink”
11-14b Group Problem-Solving Techniques (continued) Nominal Group Technique: Process to generate ideas and evaluate solutions This technique reduces roadblocks to group decision making by * separating brainstorming from evaluation * promoting balanced participation * incorporating mathematical voting techniques
Group Problem-Solving11-14c Techniques (continued) The Delphi Technique: Process to generate ideas from physically dispersed experts Computer-Aided Decision Making: Computers are used to reduce consensus roadblocks while collecting more information faster
Organizational Constraints on Organizational Constraints on Decision Makers Decision MakersPerformance Evaluation Evaluation criteria influence the choice of actions.Reward Systems Decision makers make action choices that are favored by the organization.Formal Regulations Organizational rules and policies limit the alternative choices of decision makers.System-imposed Time Constraints Organizations require decisions by specific deadlines.Historical Precedents Past decisions influence current decisions.
Choosing problems In choosing problems to address, ask and answer the following questions: Is the problem easy to deal with? Might the problem resolve itself? Is this my decision to make? Is this a solvable problem within the context of the organization?
Reasons for decision making failure.Managers too often copy others’ choices and try tosell them to subordinates.Subordinates may believe the manager isimposing his or her will rather than working foreveryone’s interests.Managers may focus on the problems they seerather than the outcomes they want.Managers use participation too infrequently.
Decision making framework Manager or team leader uses information that he or she possesses and decides what to do without involving others. Variant 1 manager solves the problem or makes the decision alone. Variant 2 manager obtains the necessary information from others and then decides Manager or team leader consults with others and allows them to help make the final choice
Ethics into decision making Ways to infuse ethics into decision making. Develop a code of ethics and follow it. Establish procedures for reporting violations. Involve employees in identifying ethical issues. Monitor ethical performance. Reward ethical behavior. Publicize ethical efforts.
Ethics into decision making Morality is involved in: Choosing problems. Deciding who should be involved in making decisions. Estimating the impacts of decision alternatives. Selecting an alternative for implementation. An effective decision needs to solve a problem as well as match moral values and help others