6 chapter decision making mcgraw-hill© 2004 the mcgraw-hill companies, inc. all rights reserved
TRANSCRIPT
6Chapter
Decision MakingDecision Making
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Learning ObjectivesAfter reading this chapter, you should be able to:
Know how to implement the six stages of management decision making.
Apply the criteria of quality and acceptance to a decision. Recognize the characteristics of management decisions:
programmability, uncertainty, risk, conflict, and decision scope.
Reap the advantages and avoid the disadvantages of group decision making.
Develop the skill of time management to allow adequate time to make decisions.
Know when to delegate, and do so wisely.
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Introduction
Making decisions under conditions of risk and uncertainty is one of the most important activities that managers engage in.
Generally, there is a lack of information and a limited amount of time available to make the decision.
Procrastinating and not making a decision sometimes has greater risk than making it.
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Decision Making
The process of identifying problems and opportunities and resolving them.
Management decisions can be made by managers, teams, or individual employees, depending on: The scope of the decision, and The design and structure of the
organization.
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Characteristics of Management Decision Making
ProgrammabilProgrammabilityity
UncertaintyUncertainty
RiskRiskConflictConflict
Decision Decision ScopeScope
Crisis
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Programmability
Uncertainty
Characteristics of Management Decision Making (Cont)
Non-programmed Decisions
Certainty
Uncertainty
Programmed Decisions
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Risk – occurs when the outcome of management decision is uncertain Risk has both positive and negative aspectsDecision environment for risk vary depending upon company
culture and size
Conflict – occurs when there are opposing goals, scares resources, or differences in priorities
Crisis – a situation that involves small amounts of time to make a decision that can impact the survival of the organization
Characteristics of Management Decision Making (Cont)
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Decision Scope – the effect and time horizon of a decisionStrategic Decisions – long term perspective of 2-5 years and
affect on the organizationTactical Decisions – short term perspective of 1 year or less and
focus on subunitsOperational Decisions – shortest time perspective, generally
less than a year, often measured on a daily or weekly basis
Characteristics of Management Decision Making (Cont)
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Stages of Decision Making
Identifying Identifying and and
diagnosing diagnosing the problemthe problem
Generating Generating alternative alternative solutionssolutions
Evaluating Evaluating alternativesalternatives
Selecting Selecting the best the best
alternativealternativeImplementing Implementing the decisionthe decision
Evaluating Evaluating the decisionthe decision
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Typical problems that require decisions
A high level of employee turnover.A reduction in firm profits.Unacceptable levels of “shrinkage” in a store.Lower than planned quality of finished goods.An unexpected increase in workplace injuries.The invention of a new technology that can
increase the productivity of the workforce.
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Evaluating Alternatives
Decision criteria should be related to the performance goals of the organization and its subunits.
Decision criteria can include: Costs Profits Timeliness Whether the decision will work Fairness
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Evaluating Alternatives (continued)
A practical way to apply decision criteria is to consider: Decision quality – aspect of decision making based on such
facts as costs, revenues, and product design specifications. Decision acceptance – aspect of decision making based on
people’s feelings.
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Approaches to selecting the best alternative
Optimizing – selecting the best alternative from among multiple criteria.
Satisficing – selecting the first alternative solution that meets a minimum criterion.
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Key factors for successful implementation
Providing resources (staff, budgets, office space) that will be needed for the activities that are required for successful implementation.
Exercising leadership to persuade others to move the implementation forward.
Developing communication and information systems that enable management to know if the decision alternative is meeting its planned objectives.
Recognition and rewards for individuals and teams that are successful with implementation.
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Assumptions of the Rational Decision Making Process
The problem is clear and unambiguous.
There is a single, well-defined goal that all parties agree to.
Full information is available about criteria.
All the alternatives and their consequences are known.
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Assumptions of the Rational Decision Making Process (continued)
The decision preferences are clear.
The decision preferences are constant and stable over time.
There are no time and cost constraints affecting the decision.
The decision solution will maximize the economic payoff.
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Factors That Limit Rational Decision Making
Organization PoliticsOrganization Politics
Emotions and Personal Emotions and Personal PreferencesPreferences
Illusion of ControlIllusion of Control
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Nonrational Decision Making Models
Satisficing Model
Bounded rationality – the ability of a manager to be perfectly rational is limited by factors such as cognitive capacity and time constraints
Therefore, decision makers apply heuristics , or decision rules, that quickly eliminate alternatives
By using the heuristic known as satisficing, a manager seeks out the first decision alternative that appears to be satisfactory
Satisficing is an accurate model many management decisions.
Nonrational Decision Making Models (continued)
Garbage Can Model
This model suggests that managers have a set of preestablished solutions to problems located in “garbage cans.”
The garbage can model is likely to be used when decision makers are undisciplined and have no clear immediate goals.
The decision making process lacks structureThis can lead to serious difficulties
Advantages and Disadvantages of Group Decision Making
Advantages Increased acceptance Greater pool of
knowledge Different perspectives Greater comprehension Training ground
Disadvantages Social pressure Minority domination Logrolling Goal displacement “Groupthink”
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Groupthink
Groupthink can occur in very cohesive teams where there is pressure to avoid conflict and reach agreement
Likelihood of groupthink increases when Peer pressure to conform is great A highly directive leader presses for a particular interpretation of
the problem and course of action The need to process a complex and unstructured issue under
crisis conditions exists The group is isolated
Politics of Decision Making
Dominant Coalition – members of the organization with access to important and scarce resources that pool their power base to control organizational strategy and decision making
Organizational slack – resources in excess of what is required by the organization to survive. Decisions must be made as to the use of organizational slack – dividends, pay raises, corporate jets, ski resorts, etc.
Side payments are used to ensure loyalty to the coalition and cooperation of organizational members not a part of the coalition
Managing Group Decision Making
Leadership StyleLeadership Style
Devil’s Advocate RoleDevil’s Advocate Role
Stimulating CreativityStimulating Creativity
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Leader Decision Making Styles
Decide and persuade
Discover facts and decide
Consult and decide
Consult with group and decide
Group decision
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Decision Making Techniques to Stimulate Group Creativity
BrainstormingBrainstorming StoryboardingStoryboarding
Nominal Group Nominal Group Technique Technique
(NGT)(NGT)
Delphi Delphi TechniqueTechnique
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Skills for decision making process
Time management skills To make good decisions, managers
need time to understand the problem and develop creative solutions.
Delegation skills Managers who know how to delegate are
able to accomplish more than those who feel the need to be involved in every decision, no matter how trivial.
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Effective Time Management Practices
Plan a list of things that need to be done today. Plan weekly, monthly, and annual schedules of
activities. Schedule difficult and challenging activities when
you are at your highest level of energy and alertness.
Set deadlines.
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Effective Time Management Practices (continued)
Answer phone messages and e-mail
in batches during a lull in your
work schedule.
Have a place to work uninterrupted.
Do something productive during non-productive
activities.
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Effective Delegation
Determine what you want done.
Match the desired task with the most appropriate employee.
Communicate clearly when assigning the task.
Ask questions to make sure the task is fully understood.
Set clear guidelines.
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Effective Delegation (continued)
Keep communication channels open. Allow employees to do the task the way they
feel comfortable doing it. Trust employees’ capabilities. Check on the progress of the assignment. Hold the employee responsible for the work. Recognize what the employee has done, and
show appropriate appreciation.
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Applications of Management Perspectives—For the Manager
Procrastination is a major barrier to effective decision making.
Managers need to establish clear priorities by: Determining which activities produce the greatest value. Setting dates for completion of these activities.
Setting priorities forces managers to make decisions and helps control procrastination.
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Applications of Management Perspectives—For Managing Teams
Overly relying on team meetings is a barrier to making effective team decisions.
A team should be able to manage its workflow if: Subgroups or individual team members are assigned tasks; and They are given responsibility for decision making associated with these
tasks.
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Applications of Management Perspectives—For Individuals
When you feel fearful, angry, anxious, or frustrated: You are not likely to think clearly and focus on the
problem. It is not a good time to make a decision.
It is better to postpone the decision until after you have coped with the source of the stress and are in a more comfortable emotional state.
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