McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved Chapter Eleven Decision Making

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved Learning Objectives Define the phases in the decision-making process Identify some models and styles of behavioral decision making Present the participative decision-making techniques Discuss the creative process and group decision-making techniques

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved Mintzberg’s Phases Of Decision Making In Organizations Phase 1 IDENTIFICATION 1. Recognition 2. Diagnosis Phase 2 DEVELOPMENT 1. Search 2. Design Phase 3 SELECTION 1. Judgment 2. Analysis 3. Bargaining Authorization

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved The Continuum Of Decision-Making Behavior Economic rationality Simon’s bounded rationality model Judgmental heuristics and biases model Social model

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved Assumptions Of The Economic Rationality Model 1. The decision will be completely rational in the means-end sense 2. There is a complete and consistent system of preferences that allows a choice among the alternatives 3. There is complete awareness of all the possible alternatives 4. There are no limits to the complexity of computations that can be performed to determine the best alternatives 5. Probability calculations are neither frightening nor mysterious

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved Biases Affecting Judgmental Heuristics The Representative Heuristic The Availability Heuristic The Anchoring and Adjustment Heuristic

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved Decision-Making Styles Tolerance for Ambiguity Low High Task and mechanical concerns People and social concerns Value Orientation AnalyticalConceptual DirectiveBehavioral

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved Inquiry Versus Innovative Observation Traditional Inquiry Innovative Observation People are often unreliable when it comes to explaining the types of goods and services they would be interested in purchasing People often give answers that they feel are acceptable to the questioner People are often unable to recall how they felt about a particular product or service that they received The questions that are asked can bias the responses Peoples’ routines are often interrupted by someone stopping them to ask questions When comparing two similar products, respondents often have difficulty explaining why they like one better than the other Observers can rely on how people act in drawing conclusions regarding what types of products and services they would be willing to buy in the future People give nonverbal clues through body language and spontaneous, unsolicited comments Observers can see how well people like a product or service based on their reactions There are no questions asked; all data are based on open-ended observation People continue doing whatever they are doing, oblivious to the fact they are being observed By giving people an opportunity to use two similar products, observers can determine which is better liked or easier to use by watching others behave