Decision Making and Problem Solving Chapter 8 Decision Making and Problem Solving

Chapter Learning Objectives After studying this chapter you should be able to: Describe the nature of decision making and distinguish it from problem solving. Discuss the decision-making process for a variety of perspectives. Identify and discuss related behavioral aspects of decision making. Discuss the nature of creativity and relate it to decision making and problem solving. © 2012 South-Western, a part of Cengage Learning

The Nature of Decision Making The process of choosing from among several alternatives Problem Solving A special form of decision-making in which the issue is unique— it requires developing and evaluating alternatives © 2012 South-Western, a part of Cengage Learning

8.1 Elements of Decision Making © 2012 South-Western, a part of Cengage Learning

Decisions Based on Frequency Programmed Decision One that recurs often enough for a decision rule to be developed Decision Rule A statement that tells a decision-maker which alternative to choose based on the characteristics of the decision situation Nonprogrammed decision One that recurs infrequently and for which there is no previously established decision rule © 2012 South-Western, a part of Cengage Learning

8.1 Characteristics of Programmed and Nonprogrammed Decisions © 2012 South-Western, a part of Cengage Learning

Decisions Based on Information Conditions Information Required for Decision Making Information ranges across endpoint conditions Condition of Certainty Outcomes of each alternative are known Condition of Risk Certainty of an outcome is unknown but there is enough information to estimate probabilities of various outcomes Condition of Uncertainty There is insufficient information to estimate the probability of possible outcomes © 2012 South-Western, a part of Cengage Learning

8.2 Alternative Outcomes Under Different Information Conditions © 2012 South-Western, a part of Cengage Learning

The Decision-Making Process (cont’d) Rational Approach Personal Approach Behavioral Approach Practical Approach Approaches to Decision Making © 2012 South-Western, a part of Cengage Learning

The Decision-Making Process (cont’d) The Rational Approach A systematic, step-by-step process for making decisions State the situational goal Identify the problem Determine the decision type Generate alternatives Evaluate alternatives Choose an alternative Implement the plan Control: measure and adjust © 2012 South-Western, a part of Cengage Learning

8.3 The Rational Decision-Making Process © 2012 South-Western, a part of Cengage Learning

The Decision-Making Process (cont’d) The Rational Approach (cont’d) Strengths Forces decision in a logical, sequential manner In-depth analysis enables choose on the basis of information rather than emotion or social pressure Weaknesses Rigid underlying assumptions often unrealistic Information limited by time or cost constraints, manager’s ability to process information Not all alternatives easily quantified Outcomes unknown due to unpredictability of future © 2012 South-Western, a part of Cengage Learning

The Decision-Making Process (cont’d) The Behavioral Approach Assumes decision makers operate with bounded rationality rather than with perfect rationality Bounded rationality: decision making based upon a meaningful subset of relevant information Characteristics Procedures and rules of thumb reduce uncertainty Sub-optimizing—accepting less than best outcome Satisficing—choosing first-encountered alternative that solves the problem © 2012 South-Western, a part of Cengage Learning

The Decision-Making Process (cont’d) The Practical Approach Combines the steps of the rational approach with the conditions in the behavioral approach to create a more realistic approach Hybrid Approaches Managers use a combination of rational, behavioral, and practical approaches to make decisions Research has shown that speed in decision making is not indicative of the consideration of fewer alternatives by managers. © 2012 South-Western, a part of Cengage Learning

8.4 Practical Approach to Decision Making with Behavioral Guidelines © 2012 South-Western, a part of Cengage Learning

The Decision-Making Process (cont’d) The Personal Approach Individual decision making can be viewed as a process of conflict resolution The Janis-Mann “Conflict Model” Characteristics Deals only with important life decisions Procrastination and rationalization are human mechanisms for avoiding decision making The fear of making an unsound decision can be a deterrent to making any decision It provides for self-reactions Decision makers can be ambivalent about alternatives © 2012 South-Western, a part of Cengage Learning

8.5 Janis-Mann Conflict Model of Decision Making Reference: Adapted with the permission of The Free Press, a Division of Simon & Schuster Adult Publishing Group, from Decision Making: A Psychological Analysis of Conflict, Choice, and Commitment, by Irving L. Janis and Leon Mann. Copyright ©1977 by The Free Press. All rights reserved. © 2012 South-Western, a part of Cengage Learning

Related Behavioral Aspects of Decision Making Political Forces Intuition Risk Propensity Escalation of Commitment Ethics © 2012 South-Western, a part of Cengage Learning

Creativity, Problem Solving, and Decision Making The ability to generate new ideas or to conceive of new perspectives on existing ideas Key issues Creativity and the individual The creative process Steps in the Creative Process Preparation Incubation Insight Verification © 2012 South-Western, a part of Cengage Learning

8.6 The Creative Process © 2012 South-Western, a part of Cengage Learning

Creativity, Problem Solving, and Decision Making Descriptors of Creative Individuals Background Experiences Personal Traits Cognitive Abilities Enhancing Creativity in Organizations Methods Using explicit goals to make creativity a part of the organizational culture Rewarding creative successes © 2012 South-Western, a part of Cengage Learning

Organizational Behavior in Action After reading the chapter: What are some people “problem solvers” and others are not? What is your most often used programmed decision? How can it be determined that a rational approach rather than another approach to a decision is required? How would you explain dropping a course in terms of decision-making behavior? © 2012 South-Western, a part of Cengage Learning