1 Decision: A determination made from available choices and alternatives. How do we go about making decisions? What do we use as criteria? Programmed decisions: A decision made in response to a situation that has occurred often enough to enable decision rules to be developed and applied in the future. Non-Programmed decisions: A decision made in response to a situation that is unique poorly defined, largely unstructured, or involve important consequences for the organization. What are examples of each decision type? Would all managers classify a response to a situation the same? Decision Types

2 Certainty, Risk, Uncertainty and Ambiguity Certainty: All pertinent information is known by the decision maker. Risk: Outcomes are subject to chance. Uncertainty: Goals are known but information about alternatives and future events is incomplete or unpredictable. Ambiguity: Goals are unclear or unsolved problems prevail and alternatives are difficult to define and information about outcomes is unavailable, unstable or unpredictable. Which Decision Type would be associated with each of these levels of goal & information certainty? Which level(s) is(are) most decisions made ? How does a manager go about minimizing this lack of info and goal certainty?

3 Decision Making - Classical Model Based On economic assumptions Associated with high performance organizations in a stable environment Assumptions: 1. Goals are known and agreed upon. Problems are precisely formulated and defined. 2. Strives for certainty by gathering complete information where all alternatives and the potential results are calculated. 3. Criteria for evaluating alternatives are known. 4.Uses logic to assign values, order preferences, evaluate alternatives and attain organizational goals. Considered to be Normative (provides norms and guidelines to decisions) Requires extensive data collection, quantitative methods and analytical capability. Which decision model would the Classical Model support?

4 Decision Making - Administrative Model Focus on organizational factors that influence individual decisions of high performance organizations in unstable environments. Used when alternatives and outcomes are difficult to quantify and information is lacking. Bounded Rationality: People have limits and boundaries, on their cognitive abilities and on how rational they can be in a situation. Satisfice: Choose the first alternative that satisfies criteria minimums, even when better solutions are presumed to exist. Assumptions: 1. Decision goals are often vague, conflicting and lack consensus. 2. Rational procedures are not used. 3. Alternatives limited by human, informational or resource factors. 4. Settle for a satisficing, rather than a maximizing solution. Intuition: Quick apprehension of a situation using past experience, not conscious planning or thought. Considered to be Descriptive (Real-World)

5 Decision Making - Political Model Decision making through consensus building. (Coalition) Conditions are uncertain, information is limited and there is disagreement about what goals to pursue or conflicting goals. Care must be taken to prevent a powerful person from imposing their position on the group. Assumptions: 1. Organizations are made up of groups with diverse interests, goals and values. 2. Information is ambiguous and incomplete. 3. Neither time, resources or mental capacity to identify all dimensions of the problem and process the relevant information. 4. Managers engage in push and pull of debate to decide goals and opportunities. Can personal goals influence this model? How do you recognize a lack of mental capacity from mental laziness in formulating alternatives and outcomes?

6 Decision - Making Steps 1. Recognition of Problem or Opportunity. Definition of problem 2. Diagnosis and Analysis of Causes * what metric is failing * where in the process is failing * how wide spread is the problem * Urgency of solution * what is the impact * Symptom or cause 3. Development of Alternatives consider all alternatives 4. Selection of Alternatives establish metric(s) for defining the best solution meets established goals, fewest resources, timely, least risk 5. Implementation of Chosen Alternative Select a champion 6. Evaluation and Feed back Metric and info systems in place to collect data

7 Personal Decision Styles Decision style is based on personal experiences which lead to how they perceive problems and make decisions. Directive Style: Preference for simple, clear-cut solutions to problems. Analytical Style: Considers complex solutions based on as much data as can be gathered. Conceptual Style: Consider a broad amount of information and discuss alternatives and solutions with others but makes decision by themselves. Behavioral Style: Consensus building with decisions by impacted individual or group. (facilitator) Styles can vary by decision maker and decision.

8 Participation in Decision Making Vroom - Jago model attempts to gauge the amount of participation need by subordinates using a decision tree. Advantages of Participative Decision Making 1. Broader perspective for defining problem and diagnosis underlying causes. 2. Provide more knowledge and facts to identify potential solutions. 3. Greater group acceptance of solution and improved group morale. 4. Reduction in risk by decision maker. Disadvantages of Participative Decision Making 1. Tend to be time consuming. 2. May comprise to reach consensus. 3. Reluctance to express an original idea (Groupthink) 4. Group dynamics may limit solutions.

9 Improving Decision Making Brainstorming Decision making technique in which group members present spontaneous problem-solving suggestions to promote free, flexible, and creative solutions. (Post notes) Devil’s Advocate Decision making technique in which an individual is assigned to challenge the assumptions and assertions made by the group and prevent premature consensus. (Why Guy) Multiple Advocacy Involves several advocates and presentation of multiple points of view, including minority and unpopular opinions. (Soviet physics)

10 Use of Information Technology Used to store data and make data available in the form of information for organizational decision making. What is the difference between Information and Data? Useful Information 1. Current and Available when needed. 2. Accurate 3. Provided in a user friendly format at the appropriate level of detail. Firewall, Intranet, Extranet? What is good information and what is not?

11 Types of Information Systems Transaction - Processing systems Payroll Ordering or work order releases (e-procurement) Decision Support Systems: rely on decision models and specialized databases to support decision makers. Forecasting What-Ifs Executive Information Systems: Facilitate strategic decision making at the highest level of management. Simulations Group Decision Support Systems: Allow team members to interact and at the same time take advantage of support software Videoconferencing, bulletin boards, dedicated group websites, Blackboard.

12 Speed work processes, cut cost and improve coordination Reasons to include in Strategic Goals: Efficiency Improved Coordination and Flexibility Wired Executives How can Information Technology become a Competitive Advantage? Strategic Goals and Info Technology