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  • 1. Managerial Decision Making CHAPTER 8 0
  • 2.
    • Explain why decision making is an important component of good management.
    • Discuss the difference between programmed and nonprogrammed decision and the decision characteristics of certainty and uncertainty.
    • Describe the ideal, rational model of decision making and the political model of decision making .
    • Explain the process by which managers actually make decisions in the real world.
    • Identify the six steps used in managerial decision making.
    • Describe four personal decision styles used by managers and explain the biases that frequently cause managers to make bad decisions.
    • Identify and explain techniques for innovative group decision making .
    Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved. 0 Learning Outcomes
  • 3. How Do You Make Decisions?
    • People make decisions everyday without realizing their diverse decision-making styles
    • Managers are referred to as decision makers
    • Organizations grow and prosper based on decisions made by managers
    • Good decision making is a vital part of good management
    Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved. 0
  • 4. Types of Decisions and Problems
    • A decision is a choice made from available alternatives
    • Decision making is the process of identifying problems and opportunities and then resolving them
    • Programmed Decisions – situations that occur often to enable rules
    • Nonprogrammed – situations that are unique or poorly defined and unstructured
    Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved. 0
  • 5. Facing Certainty and Uncertainty
    • Programmed and nonprogrammed decisions differ because of uncertainty
      • Certainty: the information needed is available
      • Risk: the future outcome is subject to chance regardless of the information available
      • Uncertainty: information about future events are incomplete
      • Ambiguity and Conflict: the goals and/or problem are unclear and difficult to define
    • Managers attempt to obtain information about decision alternatives
    Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved. 0
  • 6. Conditions That Affect the Possibility of Decision Failure Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved. 0
  • 7. Decision-Making Models Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved. 0
  • 8. The Ideal, Rational Model
    • Strive to make economically sensible decisions
    • Four assumptions of the model:
      • The decision maker operates to accomplish goals that are known and agreed on.
      • Decision maker strives for conditions of certainty. All alternatives are calculated.
      • Criteria for evaluating alternatives are known.
      • The decision maker is rational and uses logic to assign values. Attempt to maximize organizational goals.
    Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved. 0
  • 9. Administrative Model
    • Descriptive approach that recognizes human and environmental limitations
    • Focus on organizational factors that influence decisions
    • Seek to find alternatives for complex problems instead of rational approach
      • Decision goals are vague and lack consensus .
      • Rational procedures are not always used.
      • Search for alternatives is limited because of human, information and resource constraints.
      • Managers will settle for satisficing rather than maximizing.
    Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved. 0
  • 10. Bounded Rationality and Satisficing
    • Bounded Rationality – people have limits and boundaries on how rational they can be
      • Organizations are complex systems
    • Satisficing – decision makers choose the first solution alternative that satisfies minimal decision criteria
    • Intuition – quick apprehension of a decision situation based on past experience but without conscious thought
    Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved. 0
  • 11. Political Model
    • Useful for nonprogrammed decisions
    • Resembles the real environment in which managers operate
    • Four basic assumptions:
      • Organizations are made up of diverse interests
      • Information is ambiguous and incomplete
      • Managers do not have the resources to identify all dimensions of the problem
      • Managers engage in the push and pull of debate to decide goals and alternatives
    Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved. 0
  • 12. Decision-Making Steps Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved. 0
  • 13. Recognition of Decision Requirement
    • When a problem or opportunity is presented, decisions must be made
    • Problem – occurs when organizational accomplishment is less than established goals
    • Opportunity – when managers see potential accomplishment that exceeds specified current goals
    Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved. 0
  • 14. Diagnosis and Analysis of Causes
    • Managers must understand the situation— diagnosis
    • Managers ask a series of questions:
      • What is the state of disequilibrium affecting us?
      • When did it occur?
      • Where did it occur?
      • How did it occur?
      • To whom did it occur?
      • What is the urgency of the problem?
      • What is the interconnectedness of events?
      • What result came from which activity?
    Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved. 0
  • 15. Develop of Alternatives
    • Generate possible alternative solutions
    • For programmed decisions, feasible alternatives are easy to identify
    • Nonprogrammed decisions, however require developing new courses of action
    Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved. 0
  • 16. Selection of Desired Alternative
    • Managers will choose the most promising of several alternative courses of action
    • The selection should fit the goals and objectives
    • The manager tries to select the choice with the least amount of risk and uncertainty
    Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved. 0
  • 17. Implementation of Chosen Alternative
    • Use managerial, administrative and persuasive abilities to ensure that the alternative is carried out
    • Success depends on the managers ability to translate alternative into action
    • Implementation requires communication, motivation, and leadership
    Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved. 0
  • 18. Decision Alternatives with Different Levels of Risk Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved. 0
  • 19. Evaluation and Feedback
    • How well was the alternative implemented?
    • Was the alternative successful?
    • Feedback is a continuous process
    • Large problems may involve several alternatives in sequence
    Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved. 0
  • 20. Personal Decision Framework
    • How individuals personally proceed through the decision making process
        • Directive Style
        • Analytical Style
        • Conceptual Style
        • Behavioral Style
    Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved. 0
  • 21. 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
    Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved. 0
  • 22. Innovative Group Decision Making
    • Start with Brainstorming
    • Engage in Rigorous Debate
    • Avoid Groupthink
    • Know When to Bail
    Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved. 0