1. Decision Making and Problem Solving
Chapter 8
Decision Making and Problem Solving

2. Chapter Learning Objectives
After studying this chapter you should be able to:
Describe the nature of decision making and distinguish it from problem solving.
Discuss the decision-making process for a variety of perspectives.
Identify and discuss related behavioral aspects of decision making.
Discuss the nature of creativity and relate it to decision making and problem solving.
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3. The Nature of Decision Making
The process of choosing from among several alternatives
Problem Solving
A special form of decision-making in which the issue is unique— it requires developing and evaluating alternatives
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4. 8.1 Elements of Decision Making
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5. Decisions Based on Frequency
Programmed Decision
One that recurs often enough for a decision rule to be developed
Decision Rule
A statement that tells a decision-maker which alternative to choose based on the characteristics of the decision situation
Nonprogrammed decision
One that recurs infrequently and for which there is no previously established decision rule
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6. 8.1 Characteristics of Programmed and Nonprogrammed Decisions
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7. Decisions Based on Information Conditions
Information Required for Decision Making
Information ranges across endpoint conditions
Condition of Certainty
Outcomes of each alternative are known
Condition of Risk
Certainty of an outcome is unknown but there is enough information to estimate probabilities of various outcomes
Condition of Uncertainty
There is insufficient information to estimate the probability of possible outcomes
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8. 8.2 Alternative Outcomes Under Different Information Conditions
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9. The Decision-Making Process (cont’d)
Rational Approach
Personal Approach
Behavioral Approach
Practical Approach
Approaches to Decision Making
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10. The Decision-Making Process (cont’d)
The Rational Approach
A systematic, step-by-step process for making decisions
State the situational goal
Identify the problem
Determine the decision type
Generate alternatives
Evaluate alternatives
Choose an alternative
Implement the plan
Control: measure and adjust
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11. 8.3 The Rational Decision-Making Process
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12. The Decision-Making Process (cont’d)
The Rational Approach (cont’d)
Strengths
Forces decision in a logical, sequential manner
In-depth analysis enables choose on the basis of information rather than emotion or social pressure
Weaknesses
Rigid underlying assumptions often unrealistic
Information limited by time or cost constraints, manager’s ability to process information
Not all alternatives easily quantified
Outcomes unknown due to unpredictability of future
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13. The Decision-Making Process (cont’d)
The Behavioral Approach
Assumes decision makers operate with bounded rationality rather than with perfect rationality
Bounded rationality: decision making based upon a meaningful subset of relevant information
Characteristics
Procedures and rules of thumb reduce uncertainty
Sub-optimizing—accepting less than best outcome
Satisficing—choosing first-encountered alternative that solves the problem
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14. The Decision-Making Process (cont’d)
The Practical Approach
Combines the steps of the rational approach with the conditions in the behavioral approach to create a more realistic approach
Hybrid Approaches
Managers use a combination of rational, behavioral, and practical approaches to make decisions
Research has shown that speed in decision making is not indicative of the consideration of fewer alternatives by managers.
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15. 8.4 Practical Approach to Decision Making with Behavioral Guidelines
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16. The Decision-Making Process (cont’d)
The Personal Approach
Individual decision making can be viewed as a process of conflict resolution
The Janis-Mann “Conflict Model” Characteristics
Deals only with important life decisions
Procrastination and rationalization are human mechanisms for avoiding decision making
The fear of making an unsound decision can be a deterrent to making any decision
It provides for self-reactions
Decision makers can be ambivalent about alternatives
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17. 8.5 Janis-Mann Conflict Model of Decision Making
Reference: Adapted with the permission of The Free Press, a Division of Simon & Schuster Adult Publishing Group, from Decision Making: A Psychological Analysis of Conflict, Choice, and Commitment, by Irving L. Janis and Leon Mann. Copyright ©1977 by The Free Press. All rights reserved.
© 2012 South-Western, a part of Cengage Learning

18. Related Behavioral Aspects of Decision Making
Political Forces
Intuition
Risk Propensity
Escalation of Commitment
Ethics
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19. Creativity, Problem Solving, and Decision Making
The ability to generate new ideas or to conceive of new perspectives on existing ideas
Key issues
Creativity and the individual
The creative process
Steps in the Creative Process
Preparation
Incubation
Insight
Verification
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20. 8.6
The Creative Process
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21. Creativity, Problem Solving, and Decision Making
Descriptors of Creative Individuals
Background Experiences
Personal Traits
Cognitive Abilities
Enhancing Creativity in Organizations
Methods
Using explicit goals to make creativity a part of the organizational culture
Rewarding creative successes
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22. Organizational Behavior in Action
After reading the chapter:
What are some people “problem solvers” and others are not?
What is your most often used programmed decision?
How can it be determined that a rational approach rather than another approach to a decision is required?
How would you explain dropping a course in terms of decision-making behavior?
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