topic 3 mp_decision_making
TRANSCRIPT
![Page 1: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/1.jpg)
3Chapter
Foundations of Decision Making
Copyright ©2013 Pearson Education 4-1
![Page 2: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/2.jpg)
Learning Objectives
• Describe the decision making process.• Explain the three approaches managers can
use to make decisions.• Describe the types of decisions and decision-
making conditions managers face.• Discuss group decision making.• Discuss contemporary issues in managerial
decision making.
Copyright ©2013 Pearson Education 4-2
![Page 3: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/3.jpg)
Copyright ©2013 Pearson Education 4-3
![Page 4: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/4.jpg)
How Do Managers Make Decisions?
Copyright ©2013 Pearson Education 4-4
![Page 5: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/5.jpg)
Decision making process
8 steps1. Identify problems2. Identify decision criteria (critical success factors)
3. Weight the criteria (set priority)4. Develop alternatives5. Analyze alternatives6. Select alternative7. Implement alternative8. Evaluate decision effectiveness
![Page 6: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/6.jpg)
What Defines a Decision Problem?
Problem – A discrepancy between an existing and a desired state of affairs.
Copyright ©2013 Pearson Education 4-6
![Page 7: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/7.jpg)
Factors in the Decision-Making Process
Relevant decision criteria:• Price• Model (two-or four-door)• Size • Manufacturer • Optional equipment• Fuel economy, or• Repair records.
Copyright ©2013 Pearson Education 1-7
![Page 8: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/8.jpg)
Weighing Criteria and Analyzing AlternativesTo weigh criteria:
1. Give the most important criterion a weight of 10.
2. Compare remaining criteria against that standard to indicate their relative degrees of importance.
Copyright ©2013 Pearson Education 4-8
![Page 9: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/9.jpg)
Weighing Criteria and Analyzing Alternatives (cont.)
Copyright ©2013 Pearson Education 4-9
![Page 10: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/10.jpg)
Weighing Criteria and Analyzing Alternatives (cont.)
Copyright ©2013 Pearson Education 4-10
![Page 11: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/11.jpg)
Determining the Best Choice
Copyright ©2013 Pearson Education 4-11
![Page 12: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/12.jpg)
Implementing Decisions
Copyright ©2013 Pearson Education 4-12
• Putting a decision into action; includes conveying the decision to the persons who will be affected by it and getting their commitment to it.
![Page 13: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/13.jpg)
The Last Step in the Decision Process
Copyright ©2013 Pearson Education 4-13
The last step in the decision-making process, managers appraise the result of the decision to see whether the problem was resolved.
![Page 14: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/14.jpg)
Common Errors in the Decision Making Process
Copyright ©2013 Pearson Education 4-14
![Page 15: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/15.jpg)
• Overconfidence: when they think they know more than they do/hold unrealistic positive views of themselves.
• Immediate Gratification: decision makers tend to want immediate reward and to avoid immediate costs.
• Anchoring: decision makers fixate on initial information as a starting point, and then, once set, fail to adequately adjust for subsequent information.
• Selective perception: decision makers selectively organize and interpret events based on their biased perceptions.
Copyright ©2013 Pearson Education 4-15
Common Errors
![Page 16: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/16.jpg)
Common Errors
• Confirmation: decision makers seek out information that reaffirms their past choices and discount information that contradicts past judgment.
• Framing: decision makers select and highlight certain aspects of a situation while excluding others.
• Availability: Decision makers tend to remember events that are the most recent and vivid in their memory.
• Representation: decision makers assess the likelihood of an event based on how closely it resembles other events.
Copyright ©2013 Pearson Education 4-16
![Page 17: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/17.jpg)
Common Errors
• Randomness: decision makers try to create meaning out of random events.
• Sunk costs: decision makers forget that current choices can’t correct the past.
• Self-serving: decision makers who are quick to take credit for their successes and blame failure on outside factors.
• Hindsight: decision makers tend to falsely believe that they would have accurately predicted the outcome of an event once that outcome is actually known.
Copyright ©2013 Pearson Education 4-17
![Page 18: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/18.jpg)
Copyright ©2013 Pearson Education 4-18
![Page 19: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/19.jpg)
Copyright ©2013 Pearson Education 4-19
![Page 20: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/20.jpg)
(1) The Rational Model
• Rational decision making – Choices that are consistent and maximize value within specified constraints
Copyright ©2013 Pearson Education 4-20
IT can enhance an org’s decision-making capabilities.
![Page 21: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/21.jpg)
• Rational Model assumes – that managers’ decision making will be rational
logical and consistent choices to maximize value– The problem faced would be clear and
unambiguous – the decision maker would have a clear and
specific goal – know all possible alternatives
Copyright ©2013 Pearson Education 4-21
![Page 22: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/22.jpg)
(2) Bounded Rationality
• Bounded rationality – Decisions that are rational within the limits of a manager’s ability to process information
• Satisfice – Accepting solutions that are “good enough”
• Escalation of commitment – An increased commitment to a previous decision despite evidence that it may have been a poor one
Copyright ©2013 Pearson Education 4-22
![Page 23: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/23.jpg)
(3) Intuition in Decision Making
Copyright ©2013 Pearson Education 4-23
![Page 24: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/24.jpg)
• Intuitive Decision Making– making decisions on the basis of experience,
feelings and accumulated judgment– described as “unconscious reasoning.”
Copyright ©2013 Pearson Education 4-24
![Page 25: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/25.jpg)
Copyright ©2013 Pearson Education 4-25
![Page 26: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/26.jpg)
Types of Problems
• Structured problem – A straightforward, familiar, and easily defined problem
• Unstructured problem – A problem that is new or unusual for which information is ambiguous or incomplete
Copyright ©2013 Pearson Education 4-26
![Page 27: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/27.jpg)
Types of Decisions: Programmed
Programmed decisions – Repetitive decisions that can be handled using a routine approach
Copyright ©2013 Pearson Education 4-27
![Page 28: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/28.jpg)
Types of Decisions: Nonprogrammed
Nonprogrammed decisions – Unique and nonrecurring decisions; require a custom-made solution
Copyright ©2013 Pearson Education 4-28
![Page 29: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/29.jpg)
Problems, Decision Types, and Organizational Levels
Copyright ©2013 Pearson Education 4-29
![Page 30: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/30.jpg)
Decision-Making Conditions
Copyright ©2013 Pearson Education 4-30
• Risk – A situation where a decision maker estimates the likelihood of certain outcomes
• Certainty – A situation where a manager can make accurate decisions because the outcome of every alternative is known
• Uncertainty – A situation where a decision maker has neither certainty nor reasonable probability estimates available
![Page 31: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/31.jpg)
Copyright ©2013 Pearson Education 4-31
![Page 32: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/32.jpg)
How Do Groups Make Decisions?
Important decisions are often made by groups who will be most affected by those decisions:• Committees• Task forces• Review panels• Work teams
Copyright ©2013 Pearson Education 4-32
![Page 33: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/33.jpg)
Group Decision Making: Benefits
• Provides more information
• Generates more alternatives
• Increases acceptance of a solution
• Increases legitimacy of the decision
Copyright ©2013 Pearson Education 4-33
![Page 34: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/34.jpg)
Group Decision Making: Drawbacks
• Time-consuming• Infrequent and often inefficient interaction• Minority domination• Groupthink• Ambiguous responsibility
Copyright ©2013 Pearson Education 4-34
![Page 35: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/35.jpg)
When Are Groups Most Effective?
Individual• Faster decision making• More efficient use of
work hours
Group• More accurate decisions• More heterogeneous
representation• More time-consuming• More creative• More effective in
accepting final solution
Copyright ©2013 Pearson Education 4-35
![Page 36: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/36.jpg)
Improving Group Decision Making
Three ways of making group decisions more creative:• Brainstorming• Nominal group technique• Electronic meetings
Copyright ©2013 Pearson Education 4-36
![Page 37: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/37.jpg)
How Can You Improve Group Decision Making?• Brainstorming
– An idea-generating process that encourages alternatives while withholding criticism
– Ideas construction -> decision• Nominal Group Technique
– group members are physically present but operate independently
– Secretly write list of general prob. & solutions• Electronic Meeting
- nominal group tech. - participants are linked by computer
Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall
![Page 38: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/38.jpg)
Copyright ©2013 Pearson Education 4-38
![Page 39: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/39.jpg)
Contemporary Issues
• National culture – Influences the way in which decisions are made and the degree of risk a decision maker will take
• Creativity – The ability to produce novel and useful ideas
Copyright ©2013 Pearson Education 4-39
![Page 40: Topic 3 mp_decision_making](https://reader035.vdocuments.us/reader035/viewer/2022062404/554919deb4c9055d458c5b34/html5/thumbnails/40.jpg)
Creativity in Decision Making
Creativity allows the decision maker to:• Appraise and understand a problem more fully• “See” problems others can’t see • Identify all viable alternatives
Copyright ©2013 Pearson Education 4-40