© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2 Decision making is the process of identifying opportunities Decision is a choice made from available alternatives

© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Programmed Decisions  Recurring problems  Apply rule  Nonprogrammed Decisions  Unique situations  Poorly defined  Unstructured  Important consequences 3

© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Difference between programmed and unprogrammed decisions  Certainty – Situation in which all information is fully available  Risk – Future outcomes associated with an alternative are subject to chance  Uncertainty - Depends on the amount and value of information available 4

© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5

 Ambiguity - Making decisions in difficult situations  The goals and the problem are unclear  Wicked decisions involve conflict over goals and have changing circumstances, fuzzy information, and unclear links  There is often no “right” answer 6

© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Rational economic assumptions drive decisions  Operates to accomplish established goals, problem is defined  Decision maker strives for information and certainty, alternatives evaluated  Criteria for evaluating alternatives is known; select alternative with maximum benefit  Decision maker is rationale and uses logic  Normative ─ how a decision maker should make a decision 7

© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Administrative/descriptive approach  How managers really make decisions  Recognize human and environmental limitations  Bounded rationality – People have limits or boundaries on how rational they can be  Satisficing – Decision makers choose the first solution that satisfies minimal decision criteria 8

© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Goals are often vague  Rational procedures are not always used  Managers’ searches for alternatives are limited  Most managers settle for satisficing  Intuition – Quick apprehension of situation based on practice and experience 9

© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Decisions involve managers with diverse interests  Managers must engage in coalition building  Informal alliance to support specific goal  Without a coalition, powerful groups can derail the decision-making process  Political model resembles the real environment 10

© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Assumptions of the political model  Organizations are made up of groups with diverse interests, goals, and values  Information is ambiguous and incomplete  Lack of time, resources, or mental capacity to process all information regarding a problem  Decisions are the result of bargaining and discussion among coalition members 11

© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12

© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Recognition of Decision Requirement – Identify problem or opportunity  Diagnosis and Analysis – Analyze underlying causal factors  Develop Alternatives – Define feasible alternatives  Selection of Desired Alternative – Alternative with most desirable outcome  Implementation of Chosen Alternative – Use of managerial, administrative, and persuasive abilities to execute chosen alternative  Evaluation and Feedback – Gather information about effectiveness 13

© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 14

© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 15

© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 16

© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Directive style – People who prefer simple, clear-cut solutions to problems  Analytic style – Managers prefer complex solutions based on a lot of data  Conceptual style – Managers like a broad amount of information  Behavioral style – Managers with a deep concern for others 17

© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Being influenced by initial impressions  Justifying past decisions  Seeing what you want to see  Perpetuating the status quo  Being influenced by problem framing  Overconfidence 18

© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Mechanisms to help reduce bias-related decision errors:  Start with brainstorming  Use hard evidence  Engage in rigorous debate  Avoid groupthink  Know when to bail  Do a postmortem 19