PowerPoint Presentation by Charlie Cook The University of West Alabama Managerial Decision Making Adapted by Dr. Ajay Kr. Singh Chapter 6 Part 2 Planning Challenges in the 21st Century © 2007 Thomson/South-Western. All rights reserved.

6–2 Sources of Organizational and Entrepreneurial Decisions Decision makingDecision making  The process through which managers and leaders identify and resolve problems and capitalize on opportunities. ProblemProblem  A condition that occurs when some aspect of organizational performance is less than desirable. OpportunityOpportunity  Any situation that has the potential to provide additional beneficial outcomes.

.6–3 Figure 6.1 Seven Steps in the Decision-Making Process Identifying opportunities and diagnosing problems Identifying objectives Generating alternatives Evaluating alternatives Choosing implementation strategies Monitoring and evaluating Reaching decisions

.6–4 Figure 6.3 Two Contrasting Decision Models

6–5 Ethics and Decision Making Ethical DilemmaEthical Dilemma  A situation in which a person must decide whether or not to do something that, although benefiting oneself or the organization, may be considered unethical and perhaps illegal.  Have you accurately assessed the problem?  Do you have all the necessary information?  Where are your loyalties?  Have you generated a list of possible alternatives and considered how each will affect the other parties involved?  Have you tested each alternative by asking whether it is legal, fair, and just to all parties involved?  Would your decision change if you were to disclose it to your family, your boss, or society as a whole?  Does your decision have any symbolic potential?  Could it be misunderstood?

6–6 Behavioral Decision Model Acknowledges the human limitations that make rational decisions difficult to achieve.Acknowledges the human limitations that make rational decisions difficult to achieve.  A manager’s cognitive ability to process information is limited.  Managers usually attempt to behave rationally within their limited perception of a situation.  The complexity of most organizational situations forces managers to view problems within sharply restricted bounds.  The behavior of managers can be considered rational, but only in terms of their simplified view of the problem.

.6–7 Concepts Important to the Behavioral Decision Model Bounded RationalityBounded Rationality  Recognizes that people are limited by organizational constraints such as time, information, resources, and their own mental capabilities. IntuitionIntuition  An unconscious analysis based on past experience. SatisficingSatisficing  The search and acceptance of something that is satisfactory rather than perfect or optimal.

6–8 Concepts Important to the Decision Model (cont’d) Escalation of CommitmentEscalation of Commitment  The tendency to increase commitment to a previously selected course of action beyond the level that would be expected if the manager followed an effective decision-making process.

6–9 Fostering Quality in the Decision-Making Process VigilanceVigilance  Being concerned for and attentive to the correct decision-making procedures can make a good decision more likely.

.6–10 Group Considerations in Decision Making Group decision making is becoming more common as organizations focus on improving customer service and push decision making to lower levels.Group decision making is becoming more common as organizations focus on improving customer service and push decision making to lower levels.

.6–11 Participative Models Vroom and Yetton ModelVroom and Yetton Model  Helps managers determine when group decision making is appropriate.  Postulates that there are five decision-making styles arranged along a continuum.  The decision methods become progressively more participative as one moves from the highly autocratic style (AI) to the group style (GII), where the manager allows the group to decide.

.6–12 Situational Contingencies Affecting Decision Making Participation Decision significanceDecision significance Importance of commitmentImportance of commitment Leader expertiseLeader expertise Likelihood of commitmentLikelihood of commitment Team supportTeam support Team expertiseTeam expertise Team competenceTeam competence

6–13 Participative Models (cont’d) Vroom and Jago ModelVroom and Jago Model  The nature of the decision itself determines the appropriate degree of participation—diagnostic questions help managers select the appropriate level. A participative decision style is desirable when:A participative decision style is desirable when:  Subordinates have useful information and share the organization’s goals.  Subordinates commitment to the decision is essential.  Timeliness is not crucial.  Conflict is unlikely.

6–14 What is Groupthink? An agreement-at-any-cost mentality that results in ineffective group decision making.An agreement-at-any-cost mentality that results in ineffective group decision making. Characteristics of GroupthinkCharacteristics of Groupthink  Illusions of invulnerability  Collective rationalization  Belief in the morality of group decisions  Self-censorship  Illusion of unanimity in decision making  Pressure on members who express arguments

Group Decision Making Strengths   More complete information   Increased diversity of views   Higher quality of decisions   Increased acceptance of solutions Weaknesses   More time consuming   Increased pressure to conform   Domination by one or a few members   Ambiguous responsibility

6–16 Techniques for Quality in Group Decision Making BrainstormingBrainstorming Nominal Group TechniqueNominal Group Technique Delphi TechniqueDelphi Technique Devil’s Advocacy ApproachDevil’s Advocacy Approach Dialectical InquiryDialectical Inquiry

. 6–17 Brainstorming BrainstormingBrainstorming  A technique to enhance creativity by encouraging group members to generate as many novel ideas as possible on a given topic without evaluating them. Rules of BrainstormingRules of Brainstorming  Freewheeling is encouraged.  Ideas are not criticized as they are being generated.  Quality is encouraged.  The wilder the ideas, the better.  Piggyback on previously stated ideas.  Ideas are evaluated after alternatives are generated.

6–18 Other Decision-Making Techniques Nominal Group Technique (NGT)Nominal Group Technique (NGT)  A structured process designed to stimulate creative group decision making where agreement is lacking or the members have incomplete knowledge concerning the nature of the problem. Delphi TechniqueDelphi Technique  Uses experts to make predictions and forecasts about future events without meeting face-to-face.

Delphi Technique The Delphi technique was developed at the RAND corporation in 1948 to gain expert consensus without introducing the adverse side effects of group meetings.

6–20 Other Decision-Making Techniques (cont’d) Devil’s AdvocacyDevil’s Advocacy  An individual or subgroup appointed to critique a proposed course of action and identify problems to consider before the decision is final. Dialectical InquiryDialectical Inquiry  Approaches a decision from two opposite points and structures a debate between conflicting views.

6–21 Classifying Decision Situations Programmed decisionProgrammed decision  A decision made in response to a situation that is routine or recurring.  Example: starting your automobile Nonprogrammed decisionNonprogrammed decision  A decision made in response to a situation that is unique, unstructured, or poorly defined.  Example: deciding to get a tattoo