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Chapter 6 Decision Making Slide 2 Learning Objectives After reading this chapter, you should be able to: Recognize the nature of management decisions: programmability, uncertainty, risk, conflict, decision scope, and crisis situations. Utilize the six steps of decision making. Apply the criteria of quality and acceptance to a decision. Reap the benefits and avoid the problems of group decision making. Develop time management skills to generate adequate time to make decisions. Know when to delegate, and how to do so wisely. Slide 3 Google Decides about China Critical Thinking Questions focus on Characterize the nature of Googles decision to enter China programmability, uncertainty, risk, conflict, and scope? Did Google approach this decision in a manner different from Yahoo and Microsoft? Slide 4 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. Slide 5 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. Slide 6 Characteristics of Management Decision Making Programmability Uncertainty Risk Conflict Decision Scope Crisis Slide 7 Programmability Uncertainty Characteristics of Management Decision Making (Cont) Non-programmed Decisions Certainty Uncertainty Programmed Decisions Slide 8 Risk occurs when the outcome of management decision is uncertain Risk has both positive and negative aspects Decision 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) Slide 9 Decision Scope the effect and time horizon of a decision Strategic Decisions long term perspective of 2-5 years and affect on the organization Tactical Decisions short term perspective of 1 year or less and focus on subunits Operational Decisions shortest time perspective, generally less than a year, often measured on a daily or weekly basis Characteristics of Management Decision Making (Cont) Slide 10 Crisis situations Highly ambiguous circumstances Rare and extraordinary events that can threaten survival of organization, i.e. high impact Small amount of time to respond Element of surprise Outcomes are unclear Characteristics of Management Decision Making (Cont) Slide 11 Stages of Decision Making Identifying and diagnosing the problem Generating alternative solutions Evaluating alternatives Selecting the best alternative Implementing the decision Evaluating the decision Slide 12 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. Slide 13 Identifying and diagnosing the problem What is the problem? Gather information Ask why several times Slide 14 Generating Alternative Solutions Resort to programmed solutions? Novel situation? Creativity Use participation to achieve diversity and buy-in Slide 15 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 Slide 16 Evaluating Alternatives (cont) 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 peoples feelings. Slide 17 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. Slide 18 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. Slide 19 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. Slide 20 Assumptions of the Rational Decision Making Process (cont) 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. Slide 21 Factors That Limit Rational Decision Making Organization Politics Emotions and Personal Preferences Illusion of Control Slide 22 Factors That Limit Rational Decision Making Intuition Gut Escalation of commitment Slide 23 Nonrational Decision Making Models Administrative 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. Slide 24 Nonrational Decision Making Models (cont) Garbage Can Model This model suggests that managers have a set of pre-established 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 structure This can lead to serious difficulties Slide 25 Personal Decision-Making Styles Slide 26 AnalyticalConceptual DirectiveBehavioral Tasks and Technical Concerns People and Social Concerns Value Orientation LowHigh Tolerance for Ambiguity Decision Making Styles Slide 27 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 Slide 28 Managing Group Decision Making Leadership Style Devils Advocate Role Stimulating Creativity Slide 29 Leader Decision Making Styles Decide and persuade Discover facts and decide Consult and decide Consult with group and decide Group decision Slide 30 Decision Making Techniques to Stimulate Group Creativity BrainstormingStoryboarding Nominal Group Technique (NGT) Delphi Technique Slide 31 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. Slide 32 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. Slide 33 Effective Time Management Practices (cont) 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. Slide 34 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. Slide 35 Effective Delegation (cont) 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. Slide 36 Google Decides about China Responses to Critical Thinking Questions: Entering a specific country, specially China, is not a day to day decision, therefore nonprogrammable, high in uncertainty and risk, and clearly leads to conflict to and within Google Googles approach differed because they had a chance to benefit from the experience of Yahoo and Microsoft, who went in ahead, and they had a shorter time frame because of competition Slide 37 Individual/Collaborative Learning Case 6.1 (p. 258) Work with a small group on Collaborative Learning Exercise Individually write your conclusions Slide 38 Video Summary: Economic... New Orleans