PowerPoint Presentation by Charlie Cook The University of West Alabama Copyright © 2005 Prentice Hall, Inc. All rights reserved. Chapter 4 Foundations of Decision Making 4 PART II: Planning

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–2 Decision-making Decision-making process  A set of eight steps that includes identifying a problem, selecting a solution, and evaluating the effectiveness of the solution Problem  A discrepancy between an existing and a desired state of affairs Decision criteria  Factors that are relevant in a decision

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–3 Decision-making (cont’d) Decision implementation  Putting a decision into action; includes conveying the decision to the persons who will be affected by it and getting their commitment to it.

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–4 Making Decisions: The Rational Model Certainty  The implication that the outcome of every possible alternative is known. Uncertainty  A condition under which there is not full knowledge of the problem and reasonable probabilities for alternative outcomes cannot be determined. Risk  The probability that a particular outcome will result from a given decision.

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–5 What Is Creative Potential? Expertise  Understanding, abilities, knowledge, proficiencies, necessary in the field of creative endeavor. Creative-thinking skills  The personality characteristics associated with creativity, the ability to use analogies, as well as the talent to see the familiar in a different light. Intrinsic task motivation  The desire to work on something because it’s interesting, involving, exciting, satisfying, or personally challenging.

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–6 Making Decisions: The Rational Model Rational  Describes choices that are consistent and value- maximizing within specified constraints. Bounded rationality (Herbert Simon)  Behavior that is rational within the parameters of a simplified model that captures the essential features of a problem. Satisfice  Making a “good enough” decision: choosing the first- identified alternative that satisfactorily and sufficiently solves the problem.

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–7 Common Decision-making Errors Heuristics: Using judgmental shortcuts  Availability heuristic  The tendency to base judgments on information that is readily available.  Representative heuristic  The tendency to base judgments of probability on things (objects or events) that are familiar  Escalation of commitment  An increased commitment to a previous decision despite negative information about the decision’s present outcomes.

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–8 How Do Problems Differ? Well-structured problems  Straightforward, familiar, easily defined problems Ill-structured problems  New problems in which information is ambiguous or incomplete Programmed decision  A repetitive decision that can be handled by a routine approach Nonprogrammed decisions  Decisions that must be custom-made to solve unique and nonrecurring problems

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–9 Programmed Decision-Making Aids Policy  A general guide that establishes parameters for making decisions about recurring problems. Procedure  A series of interrelated sequential steps that can be used to respond to a well-structured problem (policy implementation). Rule  An explicit statement that tells managers what they ought or ought not to do (limits on procedural actions).

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–10 Technology And Decision Making Expert systems  Software that acts like an expert in analyzing and solving ill-structured problems  Use specialized knowledge about a particular problem area rather than general knowledge  Use qualitative reasoning rather than numerical calculations  Perform at a level of competence higher than that of nonexpert humans. Neural networks  Software that is designed to imitate the structure of brain cells and connections among them

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–11 Decision Making: Styles Directive style  Characterizes the low tolerance for ambiguity and a rational way of thinking of individuals who are logical and efficient and typically make fast decisions that focus on the short term. Analytic style  Characterizes the high tolerance for ambiguity combined with a rational way of thinking of individuals who prefer to have complete information before making a decision.

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–12 Decision Making: Styles (cont’d) Conceptual style  Individuals who tend to be very broad in outlook, to look at many alternatives, and to focus on the long run and often look for creative solutions. Behavioral style  Individuals who think intuitively but have a low tolerance for uncertainty; they work well with others, are open to suggestions, and are concerned about the individuals who work for them.

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–13 Group Decision Making Advantages  Make more accurate decisions  Provides more complete information  Offers a greater diversity of experiences and perspectives  Generates more alternatives  Increases acceptance of a solution  Increases the legitimacy of a decision. Disadvantages  Is more time-consuming and less efficient  Minority domination can influence decision process  Increased pressures to conform to the group’s mindset (groupthink)  Ambiguous responsibility for the outcomes of decisions

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–14 When Are Groups Most Effective? Creativity  Groups tend to be more creative than individuals. Acceptance of the final solution  Groups help increase the acceptance of decisions. Effectiveness of group decision making  Groups of five to seven members are optimal for decision process speed and quality.

Copyright © 2005 Prentice Hall, Inc. All rights reserved.4–15 Improving Group Decision Making Brainstorming  An idea-generating process that encourages alternatives while withholding criticism. Nominal group technique  A decision-making technique in which group members are physically present but operate independently. Electronic meeting  A type of nominal group technique in which participants are linked by computer.