Slides

1. © Prentice Hall, 2002 7 - 1
Modern Management9th
edition
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2. © Prentice Hall, 2002 7 - 2
 Objectives
• A fundamental understanding of the term decision
• An understanding of each element of the decision situation
• An ability to use the decision-making process
• An appreciation for the various situations in which decisions are
made
• An understanding of probability theory and decision trees as
decision-making tools
• Insights into groups as decision makers
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3. © Prentice Hall, 2002 7 - 3
FUNDAMENTALS OF DECISIONS
Definition of a Decision
Types of Decisions
Programmed
Nonprogrammed
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4. © Prentice Hall, 2002 7 - 4
FUNDAMENTALS OF DECISIONS
Table 7.1
Traditional and Modern Ways of Handling
Programmed and Nonprogrammed Decisions
Decision-Making Techniques
Types of Decisions Traditional Modern
Programmed:
Routine, repetitive decisions 1. Habit 1. Operations research:
Organization develops specific 2. Clerical routine: Mathematical analysis models
processes for handling them Standard operating procedures Computer simulation
3. Organization structure: 2. Electronic data processing
Common expectations
A system of subgoals
Well-defined information channels
Nonprogrammed:
One-shot, ill-structured, 1. Judgment, intuition, 1. Heuristic problem-solving
novel policy decisions and creativity techniques applied to:
Handled by general makers 2.Rules of thumb Training human decision
problem-solving processes 3.Selection and training Constructing heuristic
of executives computer programs
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5. © Prentice Hall, 2002 7 - 5
FUNDAMENTALS OF DECISIONS
Figure 7.1Decision programming continuum
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6. © Prentice Hall, 2002 7 - 6
FUNDAMENTALS OF DECISIONS
The Responsibility for Making
Organizational Decisions
Scope of the decision
Broader scope
Consensus
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7. © Prentice Hall, 2002 7 - 7
FUNDAMENTALS OF DECISIONS
Figure 7.2
Level of managers responsible for making decisions
as decision scope increases from A to B to C
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8. © Prentice Hall, 2002 7 - 8
FUNDAMENTALS OF DECISIONS
Figure 7.3How scope of decision affects management level
making decision at DuPont
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9. © Prentice Hall, 2002 7 - 9
FUNDAMENTALS OF DECISIONS
Elements of the Decision Situation
The Decision Makers
Goals To Be Served
Relevant Alternatives
Ordering of Alternatives
Choice of Alternatives
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10. © Prentice Hall, 2002 7 - 10
THE DECISION-MAKING PROCESS
Figure 7.4Model of the decision-making process
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11. © Prentice Hall, 2002 7 - 11
THE DECISION-MAKING PROCESS
Identifying an Existing Problem
Managers learn of problems by:
Orders from superiors
Situations relayed by subordinates
Normal activity
Listing Alternative Solutions
Authority factors
Biological or human factors
Physical factors
Technological factors
Economic factors
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12. © Prentice Hall, 2002 7 - 12
THE DECISION-MAKING PROCESS
Figure 7.5
Additional factors that limit
a manager’s number of acceptable alternatives
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13. © Prentice Hall, 2002 7 - 13
THE DECISION-MAKING PROCESS
Selecting the Most Beneficial Alternative
Implementing the Chosen Alternative
Gathering Problem-Related Feedback
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14. © Prentice Hall, 2002 7 - 14
DECISION-MAKING CONDITIONS
Complete Certainty Condition
Complete Uncertainty Condition
Risk Condition
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15. © Prentice Hall, 2002 7 - 15
DECISION-MAKING TOOLS
Probability Theory
Expected value (EV = I × P)
Decision Trees
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16. © Prentice Hall, 2002 7 - 16
DECISION-MAKING TOOLS
Figure 7.6
Expected values from locating surfboard rental store
in each of three possible locations
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17. © Prentice Hall, 2002 7 - 17
DECISION-MAKING TOOLS
Figure 7.7
A basic decision tree illustrating
the decision facing Stygian management
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18. © Prentice Hall, 2002 7 - 18
GROUP DECISION MAKING
Advantages and Disadvantages of Using
Groups to Make Decisions
Advantages:
More and better alternatives than individual
Implementation supported more fervently
Disadvantages:
Takes longer
Costs the organization more
Lower quality if contaminated (Groupthink)
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19. © Prentice Hall, 2002 7 - 19
GROUP DECISION MAKING
Processes for Making Group Decisions
Brainstorming
Nominal Group Technique
1. Writes down individual ideas
2. Presents individual ideas orally
3. Entire group discusses ideas
4. Secret ballot is taken
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20. © Prentice Hall, 2002 7 - 20
GROUP DECISION MAKING
Processes for Making Group Decisions (con’t)
Delphi Technique
1. Identify problem
2. Offer solutions anonymously
3. Compile and send responses
4. Generate new solutions
5. Repeat 3 and 4 until consensus reached
Evaluating Group Decision-Making Processes
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21. © Prentice Hall, 2002 7 - 21
GROUP DECISION MAKING
Figure 7.8The brainstorming process
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22. © Prentice Hall, 2002 7 - 22
Chapter Seven
Questions