chapter 6 decision making the essence of the manager s job

Chapter 6

DECISION MAKING:THE ESSENCE OFTHE MANAGER’S

JOB6.16.1© 2003 Pearson Education Canada Inc.

© 2003 Pearson Education Canada Inc.

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

6.26.2


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

6.36.3


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

6.46.4


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

6.56.5


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

6.66.6


THE DECISION-MAKING PROCESS

Identifying a Problem

Identifying the Decision

Criteria

Allocating Weights

To Criteria

•P r ic e• M a n u f a c t u r e r

a n d m o d e l•W a r r a n t ie s•S u p p o r t•R e lia b il it y• R e p a ir R e c o r d•R e lia b il it y•S e r v ic e• W a r r a n t yP e r io d• - O n s it e S e r v ic e•P r ic e• C a s e S t y le

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My salesrepresentatives

need newcomputers.

6.36.3

6.76.7

Exhibit 6.1


DevelopingAlternatives Fujitsu AST

Sharp IBM HP TI

NEC

AnalyzingAlternatives NEC

AST

HP

Fujitsu

IBM

Sharp

TI

Selecting anAlternative

ImplementingDecision

Evaluation ofDecision Effectiveness

•R e lia b il it y•S e r v ic e• W a r r a n t yP e r io d• - O n s it e

S e r v ic e•P r ic e• C a s e S t y le

The Fujitsuis the best.

Compaq

C o m p a q

6.86.8

Exhibit 6.1(continued)

ASSESSED VALUES OF NOTEBOOK COMPUTER ALTERNATIVES AGAINST DECISION CRITERIA

(Exhibit 6.3)

6.96.9© 2003 Pearson Education Canada Inc.

EVALUATION OF LAPTOP COMPUTER ALTERNATIVES AGAINST CRITERIA AND

WEIGHTS (Exhibit 6.4)


DECISIONS IN THE MANAGEMENT FUNCTIONS (Exhibit 6.5)



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 tests6.126.12© 2003 Pearson Education Canada Inc.


“Good Enough”versus

Optimizing

LacksComplete

Information

CannotAssess All

Alternatives

CannotWeigh

All Criteria

BoundedRationality

6.136.13

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 makedecisions basedon experience

Managers makedecisions basedon feelings and

emotions

Managers makeDecisions basedon ethical values

or culture

Managers makedecisions based

on subconscious

data

Manager makedecisions based

on skills,knowledge,or training

Intuition

Affect-initiateddecisions

Experienced-based decisions

Values orethics-based

decisions

Subconsciousmental

processing

Cognitive-based

decisions


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


THE MANAGER AS A DECISION MAKER (continued)• 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)

ProgrammedDecisions

Non-programmedDecisions Level in

Organization

Top

LowerWell structured

Poorly structured

Type ofProblem


THE MANAGER AS A DECISION MAKER (continued)• 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


THE MANAGER AS A DECISION MAKER (continued)

• 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


DECISION-MAKING STYLES (Exhibit 6.12)

Analytic

Directive Behavioural

Rational Intuitive

Way of Thinking

Conceptual

High

Low

Tol

eran

ce f

or A

mb

igu

ity


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-MakingProcess

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

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