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8/2/2019 chapter6-decisionmakingtheessenceofthemanagersjob-090411125722-phpapp01

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Chapter 6

DECISION MAKING:

THE ESSENCE OFTHE MANAGERS

JOB

6.1 2003 Pearson Education Canada Inc.


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2003 Pearson Education Canada Inc.

LEARNING OBJECTIVESl You should be able to:

Outline the steps in the decision-making process

Explain why decision-making ability is so important fora manager

Describe the rational decision maker

Contrast the perfectly rational and bounded rationalityapproaches to decision making

Explain the role that intuition plays in the decision-

making process

6.2


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LEARNING OBJECTIVES

(continued)l You should be able to: (continued)

Identify the two types of decision problems and

the two types of decisions that are used to solvethem

Differentiate the decision conditions of

certainty, risk, and uncertainty

Describe the different decision-making styles

6.3


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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 existingand a desired state of affairs

6.4


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DECISION MAKING (continued)

Decision-Making Process (continued)

Step 2 - Identifying Decision Criteria

decision criteria - whats 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

6.5


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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 thoseconsidered

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

6.6


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THE DECISION-MAKING PROCESS

Identifying aProblem

Identifyingthe DecisionCriteria

AllocatingWeightsTo Criteria

PriceManufacturer and modelWarrantiesSupportReliabilityRepair Record

ReliabilityServiceWarranty PeriodOn-site ServicePriceCase Style

1085543

My salesrepresentatives

need newcomputers.

6.3

6.7

Exhibit 6.1


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DevelopingAlternatives Fujitsu AST

Sharp IBM HP TI

NEC

AnalyzingAlternatives NEC

AST

HP

Fujitsu

IBM

Sharp

TI

Selecting anAlternative

ImplementingDecision

Evaluation of

Decision Effectiveness

ReliabilityServiceWarranty PeriodOn-site ServicePrice

Case Style

The Fujitsuis the best.

Compaq

Compaq

6.8

Exhibit 6.1

(continued)


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ASSESSED VALUES OF NOTEBOOK COMPUTERALTERNATIVES AGAINST DECISION CRITERIA

(Exhibit 6.3)



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EVALUATION OF LAPTOP COMPUTER

ALTERNATIVES AGAINST CRITERIA AND

WEIGHTS (Exhibit 6.4)



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DECISIONS IN THE MANAGEMENT

FUNCTIONS (Exhibit 6.5)



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THE MANAGER AS DECISION

MAKER

Rational Decision MakingDecisions 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 ofachieving the goal

make decision in the firms best economic interests

Managerial decision making seldom meets all the tests



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Good Enough

versusOptimizing

Lacks

CompleteInformation

CannotAssess AllAlternatives

CannotWeighAll Criteria

BoundedRationality

6.13


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THE MANAGER AS

DECISION MAKER (continued)

Bounded Rationality

Behave rationally within the parameters of a

simplified decision-making process that is limited

by an individuals ability to process information

Accept solutions that are good enough

Escalation of commitment - increased commitment

to a previous decision despite evidence that it mayhave been wrong



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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



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WHAT IS INTUITION?Managers make

decisions based

on experienceManagers make

decisions based

on feelings and

emotions

Managers make

Decisions basedon ethical values

or culture

Managers make

decisions based

on

subconscious

data

Manager make

decisions based

on skills,

knowledge,

or training

Intuition

Affect-

initiated

decisions

Experienced-

based decisions

Values or

ethics-based

decisions

Subconscious

mental

processing

Cognitive-

based

decisions



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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



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THE MANAGER AS A

DECISION MAKER (continued) Types of Problems and Decisions

(continued)

Poorly-Structured Problems - new, unusualproblems for which information is ambiguousor incomplete

Non-programmed Decisions - used to address

poorly- structured problemsfew decisions in the real world are either fully

programmed or non-programmed


TYPES OF PROBLEMS TYPES OF


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TYPES OF PROBLEMS, TYPES OF

DECISIONS, AND LEVEL IN THE

ORGANIZATION (Exhibit 6.8)

Programmed

Decisions

Non-programmedDecisionsLevel in

Organization

Top

LowerWell structured

Poorly structured

Type of

Problem



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THE MANAGER AS A

DECISION MAKER (continued) Decision-Making Conditions

Certainty - outcome of every alternative

is knownRisk - able to estimate the probability of

outcomes stemming from each alternative

Uncertainty - not certain about outcomesand unable to estimate probabilities



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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 consistencyand order to the ability to process many thoughtssimultaneously

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


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DECISION-MAKING STYLES

(Exhibit 6.12)

Analytic

Directive Behavioural

Rational IntuitiveWay of Thinking

Conceptual

High

Low

Tolerancefor

Ambiguity



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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 ambiguousdecision-making process

may have difficulty in reaching agreement


OVERVIEW OF MANAGERIAL


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OVERVIEW OF MANAGERIAL

DECISION MAKING (Exhibit 6.13)

Decision-Making

Process

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


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