Lec6 chp8

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Lec6 chp8

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

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