The Process of Decision Making Much of a supervisor’s job is making decisions that cover all of the functions of management. In many cases, supervisors make decisions without giving any thought to the process of deciding. Even though making many decisions seems to be automatic, supervisors can improve the way they make them by understanding how the decision- making process works in theory and in practice. McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. 9-1

The Rational Model of Decision Making McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. 9-2

Human Compromises Simplicity Bounded rationality Subjective rationality Rationalization Personal perspective Recency syndrome Stereotyping McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. 9-3

Guidelines for Decision Making Consider the consequences Respond quickly in a crisis Inform the manager Be decisive yet flexible Avoid decision-making traps McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. 9-4

Decision-Making Traps McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. 9-5

Tools for Decision Making Probability theory A supervisor cannot be 100% sure of an outcome. To use this theory, a supervisor needs to know or be able to estimate the value of each possible outcome and the probability that this outcome will occur. McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. 9-6 Probability theory A body of techniques for comparing the consequences of possible decisions in a risk situation.

Example Probability Layout McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. 9-7 Possible Outcomes Five Years of Production Ten Years of Production Press A$5 million - $900,000 = $4.1 million $10 million - $900,000 = $9.1 million Press B $5 million - $800,000 = $4.2 million $10 million - $800,000 = $9.2 million Expected Value of Possibilities Press A$4.1 million x.10 = $410,000 $9.1 million x.90 = $8.2 million Press B$4.2 million x.30 = $1.3 million $9.2 million x.70 = $6.4 million

Tools for Decision-Making (continued) Decision trees In the real world, most decisions involving probability are very complex. A supervisor may find it helpful to use a decision tree for making decisions in risk situations. McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. 9-8 Decision tree A graph that helps decision makers use probability theory by showing the expected values of decisions under varying circumstances.

A Simple Decision Tree McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. 9-9

Tools for Decision-Making (continued) Computer software Decision-making software leads the user through the steps of the formal decision-making process. Examples: Spreadsheet software Database management software Computer software does not make decisions for supervisors, but helps them organize their thoughts and gather information. McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. 9-10

Group Decision Making Advantages Group members can contribute more ideas for alternatives than an individual could think of alone. People who are involved in coming up with a solution are more likely to support the implementation of that solution. Disadvantages An individual can usually settle on a decision faster than a group. There is a cost to the organization when employees spend their time in meetings instead of producing or selling. Groups sometimes fall victim to groupthink. McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. 9-11

Symptoms of Groupthink An illusion of being invulnerable Defending the group’s position against any objections A view that the group is clearly moral Stereotyped views of opponents Pressure against group members who disagree Self-censorship An illusion that everyone agrees Self-appointed “mindguards” McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. 9-12

Using Group Decision Making Encouraging participation A main benefit of group decision making is the variety of opinions and expertise available. Supervisors should: Avoid monopolizing the conversation. Focus on hearing participant’s opinions. Notice when participants are quiet and ask their opinion. React positively when people contribute ideas. Brainstorming Hearing other people’s ideas often stimulates the thinking of group members. McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. 9-13

The Brainstorming Process McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. 9-14

Creativity Creative thinking can lead to excellent solutions. When a problem seems unsolvable, the supervisor needs creativity to find a fresh approach. Thinking more creatively A fundamental way to become more creative is to be open to your own ideas. McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved Creativity The ability to bring about something imaginative or new.

Five-Step Technique for Generating Creative Ideas 1. Gather the raw materials by learning about the problem and developing your general knowledge. 2. Work over those materials in your mind. 3. Incubate; let your unconscious mind do the work. 4. Identify an idea. 5. Shape and develop the idea to make it practical. McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. 9-16

Creativity-Enhancing Suggestions See beyond the obvious. Don’t take “No” for an answer. Persist despite failure. Make your own opportunities. Find new uses for people and things and new ways of doing things. Stretch your creative skills. Read biographies of creative people. Start a file of “crazy” ideas. Have fun! McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. 9-17

Establishing and Maintaining a Creative Work Climate A supervisor should show that he or she values creativity. When employees offer suggestions, a supervisor should listen attentively and look for the positive aspects of the suggestions. A supervisor should attempt to implement employees’ ideas and should give them credit. When ideas fail, a supervisor should acknowledge that failure is a sign that people are trying. A supervisor should help employees see what can be learned from the failure. McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. 9-18

Overcoming Barriers to Creativity Accept that failures by employees will occur. If an idea fails, a supervisor should acknowledge the problem and not try to pass blame on to someone else. Allow time for creative thinking. Avoid isolation. McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. 9-19