The Nature of Managerial Decision Making The process by which managers respond to opportunities and threats by analyzing options, and making determinations about specific organizational goals and courses of action. Decisions in response to opportunities—occurs when managers respond to ways to improve organizational performance. Decisions in response to threats—occurs when managers are impacted by adverse events to the organization.

Decision Making Programmed Decision Routine, virtually automatic decision making that follows established rules or guidelines. Managers have made the same decision many times before There are rules or guidelines to follow based on experience with past decisions Little ambiguity involved

Decision Making Non-Programmed Decisions Nonroutine decision making that occurs in response to unusual, unpredictable opportunities and threats.

Decision Making Intuition – feelings, beliefs, and hunches that come readily to mind, require little effort and information gathering and result in on-the-spot decisions

Decision Making Reasoned judgment – decisions that take time and effort to make and result from careful information gathering, generation of alternatives, and evaluation of alternatives

The Classical Model of Decision Making Figure 5.1

The Administrative Model Administrative Model of Decision Making An approach to decision making that explains why decision making is inherently uncertain and risky and why managers usually make satisfactory rather than optimum decisions.

The Administrative Model Administrative Model of Decision Making Bounded rationality There is a large number of alternatives and available information can be so extensive that managers cannot consider it all. Decisions are limited by people’s cognitive abilities. Incomplete information Most managers do not see all alternatives and decide based on incomplete information.

Why Information Is Incomplete Figure 5.2

Satisficing Searching for and choosing an acceptable, or satisfactory response to problems and opportunities, rather than trying to make the best decision. Managers explore a limited number of options and choose an acceptable decision rather than the optimum decision. Managers assume that the limited options they examine represent all options. This is the typical response of managers when dealing with incomplete information.

Six Steps in Decision Making Figure 5.4

Group Decision Making Superior to individual making Choices less likely to fall victim to bias Able to draw on combined skills of group members Improve ability to generate feasible alternatives

Group Decision Making Allows managers to process more information Managers affected by decisions agree to cooperate

Group Decision Making Groupthink A pattern of faulty and biased decision making that occurs in groups whose members strive for agreement among themselves at the expense of accurately assessing information relevant to a decision

Improved Group Decision Making Devil’s Advocacy Critical analysis of a preferred alternative to ascertain its strengths and weaknesses before it is implemented

Organizational Learning and Creativity Managers seek to improve a employee’s desire and ability to understand and manage the organization and its task environment so as to raise effectiveness. The Learning Organization Managers try to maximize the people’s ability to behave creatively to maximize organizational learning.

Senge’s Principles for Creating a Learning Organization Figure 5.6

Organizational Learning and Creativity A decision maker’s ability to discover original and novel ideas that lead to feasible alternative courses of action