Management, Hitt, Black, Porter, Vahdi Boydaş, Mensur Boydaş

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Management, Hitt, Black, Porter, Vahdi Boydaş, Mensur Boydaş

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  • Management, Hitt, Black, Porter, Vahdi Boydaş, Mensur Boydaş

    1. 1. PowerPoint slides by Susan A. Peterson, Scottsdale Community College Chapter 4: Individual and Group Decision Making m a n a g e m e n t 2e H i t t / B l a c k / P o r t e r
    2. 2. © 2008 Prentice-Hall Business Publishing 2 Learning Objectives After studying this chapter, you should be able to:  Explain the traditional model of decision making  Recognize and account for the limits of rationality in the decision process  Describe the role of risk and uncertainty in decision making
    3. 3. © 2008 Prentice-Hall Business Publishing 3 Learning Objectives  List under what conditions decisions are best made individually and when they are best made collectively  Name the steps to facilitate group participation in decision making  Describe the barriers to effective decision making and ways to overcome them
    4. 4. © 2008 Prentice-Hall Business Publishing 4 Decision Making Concepts Decision Making Process  Specifying the nature of a particular problem or opportunity; and  Selecting among available alternatives to solve a problem or capture an opportunity
    5. 5. © 2008 Prentice-Hall Business Publishing 5 SolutionFormulation Two Phases of Decision Making Decision Making  Identifying a problem or opportunity  Acquiring information  Developing desired performance expectations  Diagnosing factors affecting the problem  Generating alternatives  Selecting preferred solution  Implementing the decided course of action
    6. 6. © 2008 Prentice-Hall Business Publishing 6 Individual Decision Making  Rational/classic model  Administrative, or bounded rationality model  Retrospective decision making model‑
    7. 7. © 2008 Prentice-Hall Business Publishing 7 Rational (Classical) Decision-Making Model Step 1: Identify decision situations  Problems  Opportunities  Role of perception Identify Decision SituationsIdentify Decision Situations Adapted from Exhibit 4.1
    8. 8. © 2008 Prentice-Hall Business Publishing 8 Rational (Classical) Decision-Making Model Step 2: Develop objectives and criteria  Specific criteria  Relative weightings  Criteria (what is important in the outcome) Identify Decision SituationsIdentify Decision Situations Develop Objectives and CriteriaDevelop Objectives and Criteria Adapted from Exhibit 4.1
    9. 9. © 2008 Prentice-Hall Business Publishing 9 Rational (Classical) Decision-Making Model Step 3: Generate alternatives  Past solutions  Creative new solutions Identify Decision SituationsIdentify Decision Situations Develop Objectives and CriteriaDevelop Objectives and Criteria Generate AlternativesGenerate Alternatives Adapted from Exhibit 4.1
    10. 10. © 2008 Prentice-Hall Business Publishing 10 Rational (Classical) Decision-Making Model Step 4: Analyze Alternatives  Minimally acceptable results  Feasibility  Best results Identify Decision SituationsIdentify Decision Situations Develop Objectives and CriteriaDevelop Objectives and Criteria Generate AlternativesGenerate Alternatives Analyze AlternativesAnalyze Alternatives Adapted from Exhibit 4.1
    11. 11. © 2008 Prentice-Hall Business Publishing 11 Rational (Classical) Decision-Making Model Step 5: Select Alternative  Subjectively expected utility Identify Decision SituationsIdentify Decision Situations Develop Objectives and CriteriaDevelop Objectives and Criteria Generate AlternativesGenerate Alternatives Analyze AlternativesAnalyze Alternatives Select AlternativeSelect Alternative Adapted from Exhibit 4.1
    12. 12. © 2008 Prentice-Hall Business Publishing 12 Rational (Classical) Decision-Making Model Step 6: Implement Decision  Sources and reasons for resistance  Chronology and sequence of actions  Required resources  Delegation of tasks Identify Decision SituationsIdentify Decision Situations Develop Objectives and CriteriaDevelop Objectives and Criteria Generate AlternativesGenerate Alternatives Analyze AlternativesAnalyze Alternatives Select AlternativeSelect Alternative Implement DecisionImplement Decision Adapted from Exhibit 4.1
    13. 13. © 2008 Prentice-Hall Business Publishing 13 Rational (Classical) Decision-Making Model Step 7: Monitor and Evaluate Results  Gather information  Compare results to objectives and standards set at the beginning Identify Decision SituationsIdentify Decision Situations Develop Objectives and CriteriaDevelop Objectives and Criteria Generate AlternativesGenerate Alternatives Analyze AlternativesAnalyze Alternatives Select AlternativeSelect Alternative Implement DecisionImplement Decision Monitor and Evaluate ResultsMonitor and Evaluate Results Adapted from Exhibit 4.1
    14. 14. © 2008 Prentice-Hall Business Publishing 14 Assumptions of Classical Model  Problems are clear  Objectives are clear  People agree on criteria and weights  All alternatives are known  All consequences can be anticipated  Decision makers are rational
    15. 15. © 2008 Prentice-Hall Business Publishing 15 Applying Criteria in Analyzing Alternatives Candidate Criteria Rating X Weight = ScoreCandidate Criteria Rating X Weight = Score Martha Motivation 8 x .30 = 2.40 Interpersonal 6 x .25 = 1.50 Sales Knowledge 7 x .25 = 1.75 Product Knowledge 6 x .20 = 1.20 Total Score= 6.85 Jane Motivation 9 x .30 = 2.70 Interpersonal 8 x .25 = 2.00 Sales Knowledge 6 x .25 = 1.50 Product Knowledge 5 x .20 = 1.00 Total Score= 7.20 Adapted from Exhibit 4.2
    16. 16. © 2008 Prentice-Hall Business Publishing 16 Factors that Inhibit Accurate Problem Identification and Analysis Information Bias A reluctance to give or receive negative information You favor Jane as the candidate; dismiss information about performance problem on her last job Uncertainty Absorption A tendency for information to lose its uncertainty as it is passed along Not clear how well Martha did in previous job. When feedback gets to you, she is described as a poor performer Adapted from Exhibit 9.3: Factors that Inhibit Accurate Problem Identification and Analysis Factor Description Illustration Adapted from Exhibit 4.3
    17. 17. © 2008 Prentice-Hall Business Publishing 17 Factors that Inhibit Accurate Problem Identification and Analysis (cont.) Selective Perception Tendency to ignore or avoid certain information Jane has employment alternatives and is considering going back to school, but you ignore this in making her the offer Stereotyping Deciding about an alternative on the basis of characteristics ascribed by others Not clear how well Martha did. Jane graduated from a private high school and went to a highly rated college on a partial scholarship, so you figure she must be a great hire Adapted from Exhibit 9.3: Factors that Inhibit Accurate Problem Identification and Analysis Factor Description Illustration Adapted from Exhibit 4.3
    18. 18. © 2008 Prentice-Hall Business Publishing 18 Factors that Inhibit Accurate Problem Identification and Analysis (cont.) Cognitive Complexity Limits on the amount of information people can process at one time You initially have 200 applicants for the position but decide to eliminate anyone with less than three years sales experience Stress Reduction of people’s ability to cope with informational demands Your company’s market share is slipping because you don’t have enough sales people in the field, so you feel you just can’t look at every bit of information on every candidate Adapted from Exhibit 9.3: Factors that Inhibit Accurate Problem Identification and Analysis Factor Description Illustration Adapted from Exhibit 4.3
    19. 19. © 2008 Prentice-Hall Business Publishing 19 Bounded Rationality Model First Mechanism Possible solutions examined one at a time  If alternative is unworkable it is discarded  When acceptable (not necessarily best) solution is found, it is likely to be accepted  Thus search and analysis effort is likely to stop at first acceptable solution
    20. 20. © 2008 Prentice-Hall Business Publishing 20 Bounded Rationality Model Second Mechanism  Explicit criteria and weights not used to evaluate alternatives  Decision makers use heuristics  A rule that guides the search for alternatives into areas that have a high probability for yielding success
    21. 21. © 2008 Prentice-Hall Business Publishing 21 Bounded Rationality Model Third Mechanism Satisficing  Selection of a minimally acceptable solution  Rather than being an optimizer, this model sees him or her as being a satisficer
    22. 22. © 2008 Prentice-Hall Business Publishing 22 Retrospective Decision Model  Implicit favorite is identified early in decision process  Perceptual distortion  Decision rules are adopted that favor the implicit favorite  Positive features of the implicit favorite highlighted over the alternative  Intuitive decision making  Outcomes tend to be very good
    23. 23. © 2008 Prentice-Hall Business Publishing 23 Types of Decisions Programmed Decision  Simple/routine problem  High levels of certainty  Rules and procedures  Standard operating procedures (SOP) Non-programmed Decision  Poorly defined or novel problem  No alternative is clearly correct  Past decisions of little help  Gresham’s law of planning Decisions
    24. 24. © 2008 Prentice-Hall Business Publishing 24 Decision-Maker Level and Type of Decision Non-programmed Decisions Programmed Decisions Middle Managers Lower-Level Managers Top Managers Adapted from Exhibit 4.4
    25. 25. © 2008 Prentice-Hall Business Publishing 25 Many important decisions are here, but Gresham’s Law pushes you out of this cell into especially the bottom two cells Many important decisions are here, but Gresham’s Law pushes you out of this cell into especially the bottom two cells Gresham’s Law and Decisions Adapted from Exhibit 9.5: Gresham’s Law and Decisions Programmed Decisions Non-programmed Decisions Not UrgentUrgent Adapted from Exhibit 4.5
    26. 26. © 2008 Prentice-Hall Business Publishing 26 Influences on Effective Decision Making DECISION MAKER CHARACTERISTI CS Knowledge Ability Motivation Effective Decisions Adapted from Exhibit 9.6: Influences on the Decision Process PROBLEM CHARACTERISTIC S Unfamiliarity Ambiguity Complexity Instability DECISION ENVIRONMENT CHARACTERISTICS Irreversibility Significance Accountability Time and monetary constraints Adapted from Exhibit 4.6
    27. 27. © 2008 Prentice-Hall Business Publishing 27 Impact of Groups on Decision Making  Social interaction makes process more complex  Groups have superior cumulative knowledge  Groups arrive at decisions more slowly
    28. 28. © 2008 Prentice-Hall Business Publishing 28 Assets and Liabilities of Group Decision Making Assets +  Groups can accumulate more knowledge  Groups have a broader perspective and consider more alternatives  Individuals who participate in group decisions are more satisfied with the decision and are more likely to support it  Group decision processes serve an important communication function, as well as a useful political function Adapted from Exhibit 4.7
    29. 29. © 2008 Prentice-Hall Business Publishing 29 Liabilities -  Groups often work more slowly than individuals  Group decisions involve considerable compromise that may lead to less than optimal decisions  Groups are often dominated by one individual or a small clique, thereby negating many of the virtues of group processes  Over-reliance on group decision making can inhibit management’s ability to act quickly and decisively when necessary Assets and Liabilities of Group Decision Making Adapted from Exhibit 4.7
    30. 30. © 2008 Prentice-Hall Business Publishing 30 Problems in Group Decision Making: Groupthink When groups are... • Highly cohesive • Insulated from outside input • Dominated by leader ...leading to decisions characterized by... • Limited search for information • Limited analysis of alternatives • Rejection of expert opinions • Few, if any, contingency plans ...they often experience... • Illusion of invulnerability • Illusion of morality • Illusion of unanimity • Self-censorship • Peer pressure for conformity • Stereotyping of opponents • Rationalization • Mindguards ...that result in... • Decisions of poor quality • Poor group performance • Wasted resources • Lost opportunities Adapted from Exhibit 4.8
    31. 31. © 2008 Prentice-Hall Business Publishing 31 Symptoms of Groupthink  Illusion of invulnerability  Collective rationalization  Illusion of morality  Stereotyping  Self-censorship  Illusion of unanimity  Mindguards
    32. 32. © 2008 Prentice-Hall Business Publishing 32 Consequences of Groupthink  Limited search for alternatives  Failure to reexamine chosen actions  Failure to consider nonobvious advantages to alternative courses of action  Limited attempts to seek experts' advice either inside or outside their own organization  Pursue facts that support their preferred alternative (disregard negative facts)  Ignore possible roadblocks to preferred alternative
    33. 33. © 2008 Prentice-Hall Business Publishing 33 Guidelines for Overcoming Groupthink Adapted from Exhibit 4.9 For the company Establish several independent groups to examine the same problem. Train managers in groupthink prevention techniques. For the leader Assign everyone the role of critical evaluator. Use outside experts to challenge the group. Assign a devil’s advocate role to one member of the group. Be impartial and refrain from stating your own views. For group members Try to retain your objectivity and be a critical thinker. Discuss group deliberations with a trusted outsider and report back to the group. For the deliberation process At times, break the group into subgroups to discuss the problem. Take time to study what other companies or groups have done in similar situations. Schedule second-chance meeting to provide an opportunity to rethink the issues before making a final decision.
    34. 34. © 2008 Prentice-Hall Business Publishing 34 Problems in Group Decision Making: Escalating Commitment Adapted from Exhibit 9.14: Contributing Factors to Escalation of Commitment to Decisions Escalation of Commitmen t to Decisions Norm for Consistency Probability of Future Outcomes Justification of Previous Decisions Positive Value of Expected Outcomes Prospective Rationality Adapted from Exhibit 4.10
    35. 35. © 2008 Prentice-Hall Business Publishing 35 Overcoming Escalation of Commitment 1. Stress that investments made in the past are sunk costs, which should be ignored 2. Create atmosphere in which consistency does not dominate 3. Evaluate the prospects of future outcomes and their expected positive value critically 4. Use devil’s advocate to challenge the majority position
    36. 36. © 2008 Prentice-Hall Business Publishing 36 Participative Decision Makers Individuals who participate in decisions believe:  They have relevant content knowledge  Their participation will help bring about change  The resulting change will produce outcomes they value or prefer  Their participation is valued by the organization and fits with its goals and objectives
    37. 37. © 2008 Prentice-Hall Business Publishing 37 Degree of Involvement and the Decision Process Identify Decision Situations Develop Objectives and Criteria Generate Alternatives Analyze Alternatives Select Alternatives Implement Decision Monitor and Evaluate Results Degree of Involvement Low High DecisionProcess Adapted from Exhibit 4.11
    38. 38. © 2008 Prentice-Hall Business Publishing 38 Contingency Factors for Effective Participative Decision Making 1. Do potential group members have sufficient content knowledge? 2. Do potential members have sufficient process knowledge? 3. Do members have a desire to participate? 4. Do members believe that their participation will result in changes? 5. Do members positively value the expected outcomes? 6. Do members see participation as legitimate and congruent with other aspects of the organization? 7. If the answer to any of the above questions is no, is it possible to change the conditions? Adapted from Exhibit 4.12
    39. 39. © 2008 Prentice-Hall Business Publishing 39 Factors of Fast Decision Making 1. Real-time information.Fast decision makers must have access to and be able to process real-time information. 2. Multiple simultaneous alternatives. Fast decision makers examine several possible alternative courses of action simultaneously, not sequentially.This adds complexity and richness to the analysis and reduces the time involved in information processing. 3. Two-tiered advice process. Fast decision makers make use of a two-tiered advisory system, whereby all team members are allowed input but greater weight is given to the more experienced coworkers. 4. Consensus with qualification. Fast decision makers attempt to gain widespread consensus on the decision as it is being made, not after. 5. Decision integration. Fast decision makers integrate tactical planning and issues of implementation within the decision process itself. Adapted from Exhibit 4.13
    40. 40. © 2008 Prentice-Hall Business Publishing 40 Influences on Effective Decision Making Decision-Maker Characteristics 1. Do you have an implicit favorite solution? 2. Do you have a tendency to satisfice and go with the first workable solution? 3. Do you feel overwhelmed by the amount of information you are having to process? 4. Do you feel a lack of knowledge about the problem? 5. Are you particularly unfamiliar or familiar with the problem? Adapted from Exhibit 4.14
    41. 41. © 2008 Prentice-Hall Business Publishing 41 Influences on Effective Decision Making Adapted from Exhibit 9.7 Problem Characteristics 1. Does the problem seem quite ambiguous? 2 Is the problem substantially complex? 3. Does the problem seem stable or volatile? Adapted from Exhibit 4.14
    42. 42. © 2008 Prentice-Hall Business Publishing 42 Influences on Effective Decision Making Adapted from Exhibit 9.7 Decision Environment Characteristics 1. Are you under significant time pressures to make the decision? 2. Do you face substantial resource limitations (e.g., people, money, equipment, etc.) relative to the problem and its solution? 3. Is the decision irreversible? 4. Are the problem and your decision of substantial importance? Adapted from Exhibit 4.14
    43. 43. © 2008 Prentice-Hall Business Publishing 43 Strategies for Improving Decision Making: Problem Formulation Devil’s Advocate Devil’s Advocate Group member is chosen to disagree In order to force the group to defend its position Group member is chosen to disagree In order to force the group to defend its position Structured Debate Techniques Multiple Advocacy Multiple Advocacy Similar to devil’s advocate except that more than one group member questions decisions Similar to devil’s advocate except that more than one group member questions decisions Dialectical Inquiry Dialectical Inquiry Individual questions the underlying assumptions of problem formulation Individual questions the underlying assumptions of problem formulation
    44. 44. © 2008 Prentice-Hall Business Publishing 44 Strategies for Improving Decision Making: Problem Formulation (cont.) BrainstormingBrainstorming Generating many creative solutions but not immediately evaluating their merit Generating many creative solutions but not immediately evaluating their merit Creative Stimulants Nominal Group Technique Nominal Group Technique • Generate ideas individually first • Individuals present ideas to group • Ideas recorded and discussed as group • Silently rank ideas and summarize outcome • Generate ideas individually first • Individuals present ideas to group • Ideas recorded and discussed as group • Silently rank ideas and summarize outcome Delphi Technique Delphi Technique • Individuals never meet but generate ideas • Ideas collected, then distributed to individuals • Individuals asked for opinions or new ideas • Individuals never meet but generate ideas • Ideas collected, then distributed to individuals • Individuals asked for opinions or new ideas
    45. 45. © 2008 Prentice-Hall Business Publishing 45 Strategies for Improving Decision Making: Role of Technology  Increase decision makers’ capabilities on routine but complex tasks  Improve decisions by group members in different locations  Increase virtual group decision effectiveness (compared to face-to-face groups)
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