MGT492: Managing People & Organizations : Creative Problem Solving and Decision Making (CONTD.) Lecture 5:Chapter 4: Creative Problem Solving and Decision Making (CONTD.) Instructor: Dr. Aisha Azhar COMSATS Virtual Campus

Last lecture overview When to Use Group or Individual Decision Making Stages in the Creative Process Characteristics of Useful Information Group Decision-Making Techniques That Foster Creativity 2

Responses That Kill Creativity Exhibit 4–8 3

Analyzing the Feasibility of Alternatives Quantitative Techniques – Break-even analysis – Capital budgeting Payback Discounted cash flow – Linear programming – Queuing theory – Probability theory 4

Break-even analysis – Allows calculation of the volume of sales or revenue that will result in a profit. – Involves forecasting the volume of sales and cost of production. – No profit or loss results Capital budgeting – Analyze alternative investments in assets, and the make/buy and rent/lease-or-buy decision. – Payback – Discounted cash flow 5

Linear programming – Used for programmed decisions under conditions of certainty or low risk, but LP is also widely applied to product mix decisions, such as minimizing transportation cost for truck fleets Queuing theory – Focuses on waiting time. – Used at reducing time for serving customers per employee Probability theory – Users assign probability of success or failure to each alternative. The user then calculates the expected value, which is the payoff or profit from each combination of alternatives and outcomes. 6

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The Kepner-Tregoe Method 1.Compare each alternative to the “must” alternative. 2.Rate each “want” criterion on a scale of 1 to 10 (10 being the most important). 3.Assign a value of 1 to 10 (10 being the highest) to how well each alternative meets the “want” criteria. 4.Compute the weighted score (WS) for each alternative. 5.Select the alternative with the highest total WS. 8

The Kepner-Tregoe Method for Analyzing Alternatives Exhibit 4–9 9

Cost-Benefit (Pros and Cons) Analysis Cost-Benefit Analysis – A technique for comparing the cost and benefit of each alternative course of action using subjective intuition and judgment along with math. The Alternative Analysis Techniques Continuum: Exhibit 4–10 10

Plan, Implement, and Control Plan – Develop a plan of action and a schedule of implementation. Implement the Plan – Communicate and delegate for direct action. Control – Use checkpoints to determine whether the alternative is solving the problem. – Avoid escalation of commitment to a bad alternative. 11

Decision Tree Exhibit 4–11 12

Situational Management: Decision Making Model 4–2a 13

Situational Management: Decision Making (cont’d) Model 4–2b 14