Chapter 6 Decision Making The Essence Of The Manager S Job

LEARNING OBJECTIVES
You should be able to:
Outline the steps in the decision-making process
Explain why decision-making ability is so important for a manager
Describe the rational decision maker
Contrast the perfectly rational and bounded rationality approaches to decision making
Explain the role that intuition plays in the decision-making process
6.2

LEARNING OBJECTIVES (continued)
You should be able to: (continued)
Identify the two types of decision problems and the two types of decisions that are used to solve them
Differentiate the decision conditions of certainty, risk, and uncertainty
Describe the different decision-making styles
6.3

DECISION MAKING
Decisions
Choices from two or more alternatives
All organizational members make decisions
Decision-Making Process
Step 1 - Identifying a Problem
problem - discrepancy between an existing and a desired state of affairs
6.4

DECISION MAKING (continued)
Decision-Making Process (continued)
Step 2 - Identifying Decision Criteria
decision criteria - what’s relevant in making a decision
Step 3 - Allocating Weights to the Criteria
must weight the criteria to give them appropriate priority in the decision
Step 4 - Developing Alternatives
list the viable alternatives that could resolve the problem without evaluating them
6.5

DECISION MAKING (continued)
Decision-Making Process (continued)
Step 5 - Analyzing Alternatives
each alternative is evaluated against the criteria
Step 6 - Selecting an Alternative
choosing the best alternative from among those considered
Step 7 - Implementing the Decision
implementation - conveying the decision to those affected by it and getting their commitment to it
Step 8 - Evaluating Decision Effectiveness
determine whether the problem is resolved
6.6

THE DECISION-MAKING PROCESS 6.3 6.7 Exhibit 6.1 Identifying a Problem Identifying the Decision Criteria Allocating Weights To Criteria
Price
Manufacturer and model
Warranties
Support
Reliability
Repair Record
Reliability
Service
Warranty Period
On-site Service
Price
Case Style
10 8 5 5 4 3 My sales representatives need new computers.

6.8 Exhibit 6.1 (continued) Developing Alternatives Fujitsu AST Sharp IBM HP TI NEC Analyzing Alternatives NEC AST HP Fujitsu IBM Sharp TI Selecting an Alternative Implementing Decision Evaluation of Decision Effectiveness
Reliability
Service
Warranty Period
On-site Service
Price
Case Style
The Fujitsu is the best. Compaq Compaq

THE MANAGER AS DECISION MAKER
Rational Decision Making
Decisions are consistent, value-maximizing choices within specified constraints
Managers assumed to make rational decisions
Assumptions of Rationality - decision maker would:
be objective and logical
carefully define a problem
have a clear and specific goal
select the alternative that maximizes the likelihood of achieving the goal
make decision in the firm’s best economic interests
Managerial decision making seldom meets all the tests
6.12 © 2003 Pearson Education Canada Inc.

“ Good Enough” versus Optimizing Lacks Complete Information Cannot Assess All Alternatives Cannot Weigh All Criteria Bounded Rationality 6.13

THE MANAGER AS DECISION MAKER (continued)
Bounded Rationality
Behave rationally within the parameters of a simplified decision-making process that is limited by an individual’s ability to process information
Accept solutions that are “good enough”
Escalation of commitment - increased commitment to a previous decision despite evidence that it may have been wrong

THE MANAGER AS DECISION MAKER (continued)
Role of Intuition
Intuitive decision making - subconscious process of making decisions on the basis of experience and accumulated judgment
does not rely on a systematic or thorough analysis of the problem
generally complements a rational analysis

WHAT IS INTUITION? Managers make decisions based on experience Managers make decisions based on feelings and emotions Managers make Decisions based on ethical values or culture Managers make decisions based on subconscious data Manager make decisions based on skills, knowledge, or training Intuition Affect- initiated decisions Experienced- based decisions Values or ethics-based decisions Subconscious mental processing Cognitive- based decisions 6.16 © 2003 Pearson Education Canada Inc.

THE MANAGER AS A DECISION MAKER (continued)
Types of Problems and Decisions
Well-Structured Problems - straightforward, familiar, and easily defined
Programmed Decisions - used to address structured problems
procedure - series of interrelated sequential steps used to respond to a structured problem
rule - explicit statement of what to do or not to do
policy - guidelines or parameters for decision making

Types of Problems and Decisions (continued)
Poorly-Structured Problems - new, unusual problems for which information is ambiguous or incomplete
Non-programmed Decisions - used to address poorly- structured problems
few decisions in the real world are either fully programmed or non-programmed

TYPES OF PROBLEMS, TYPES OF DECISIONS, AND LEVEL IN THE ORGANIZATION (Exhibit 6.8) Programmed Decisions Non-programmed Decisions 6.19 © 2003 Pearson Education Canada Inc. Level in Organization Top Lower Well structured Poorly structured Type of Problem

Decision-Making Conditions
Certainty - outcome of every alternative is known
Risk - able to estimate the probability of outcomes stemming from each alternative
Uncertainty - not certain about outcomes and unable to estimate probabilities

Decision-Making Styles
Two dimensions define the approach to decision making
way of thinking - differs from rational to intuitive
tolerance for ambiguity - differs from a need for consistency and order to the ability to process many thoughts simultaneously
Define four decision-making styles
Directive - fast, efficient, and logical
Analytic - careful and able to adapt or cope with new situations
Conceptual - able to find creative solutions
Behavioural - seek acceptance of decisions

MANAGING WORKFORCE DIVERSITY
Diversity in Decision Making
Advantages - diverse employees:
provide fresh perspectives
offer differing interpretations of problem definition
increase the likelihood of creative and unique solutions
Disadvantages - diverse employees:
require more time to reach a decision
may have problems of communication
may create a more complex, confusing, and ambiguous decision-making process
may have difficulty in reaching agreement

OVERVIEW OF MANAGERIAL DECISION MAKING (Exhibit 6.13) Decision-Making Process 6.24 © 2003 Pearson Education Canada Inc.
Types of Problems and Decisions
Well-structured
- programmed
Poorly structured
- non-programmed
Decision-Making Conditions
Certainty
Risk
Uncertainty
Decision Maker Style
Directive
Analytic
Conceptual
Behavioural
Decision-Making Approach
Rationality
Bounded Rationality
Intuition
Decision
Choose best
alternative
- maximizing
- good enough
Implementing
Evaluating

Chapter 6 Decision Making The Essence Of The Manager S Job

by management 2

Accessibility

Categories

Upload Details

Usage Rights

1 Embed 47

Statistics