1. Decision Making, Learning, Creativity and Entrepreneurship
Chapter 5
Decision Making, Learning, Creativity and Entrepreneurship

2. Learning Objectives
Differentiate between programmed and nonprogrammed decisions, and explain why nonprogrammed decision making is a complex, uncertain process
Describe the six steps that managers should take to make the best decisions

3. The Nature of Managerial Decision Making
The process by which managers respond to opportunities and threats by analyzing options, and making determinations about specific organizational goals and courses of action

4. Decision Making Programmed Decision
Routine, virtually automatic decision making that follows established rules or guidelines.
Managers have made the same decision many times before
There are rules or guidelines to follow based on experience with past decisions
Little ambiguity involved

5. Decision Making Non-Programmed Decisions
Nonroutine decision making that occurs in response to unusual, unpredictable opportunities and threats.

6. Comparaison chart

7. Question?
What are feelings, beliefs, and hunches that come readily to mind and require little effort?
Reasoned Judgment
Intuition
Wild Guess
Scientific Deduction

8. Decision Making Intuition
feelings, beliefs, and hunches that come readily to mind, require little effort and information gathering and result in on-the-spot decisions

9. Decision Making Reasoned judgment
decisions that take time and effort to make and result from careful information gathering, generation of alternatives, and evaluation of alternatives

10. The Classical Model Classical Model of Decision Making
A prescriptive model of decision making that assumes the decision maker can identify and evaluate all possible alternatives and their consequences and rationally choose the most appropriate course of action

11. The Classical Model Optimum decision
The most appropriate decision in light of what managers believe to be the most desirable future consequences for their organization

12. The Classical Model of Decision Making
Figure 5.1

13. The Administrative Model
Administrative Model of Decision Making
An approach to decision making that explains why decision making is inherently uncertain and risky and why managers usually make satisfactory rather than optimum decisions

14. The Administrative Model
Bounded rationality
Cognitive limitations that constrain one’s ability to interpret, process, and act on information
Incomplete information

15. Why Information Is Incomplete
Figure 5.2

16. Causes of Incomplete Information
Risk
The degree of probability that the possible outcomes of a particular course of action will occur
Uncertainty
Probabilities cannot be given for outcomes and the future is unknown

17. Causes of Incomplete Information
Young Woman or Old Woman
Ambiguous Information
Information that can be interpreted in multiple and often conflicting ways.
Figure 5.3

18. Causes of Incomplete Information
Time constraints and information costs
managers have neither the time nor money to search for all possible alternatives and evaluate potential consequences

19. Causes of Incomplete Information
Satisficing
Searching for and choosing an acceptable, or satisfactory response to problems and opportunities, rather than trying to make the best decision
Managers explore a limited number of options and choose an acceptable decision rather than the optimum decision

20. `Comparaison chart Classical Model Administrative model
Can perfectly define problem
Decision make lacks info to completely define problem
Identify and weigh all decision criteria
Cannot be knowledgeable about all criteria
Know and assess all alternatives based on criteria
Due to time or money cannot assess all alternatives
Review all solutions until optimal choice is made
“Satifices” by taking first good alternative

21. Six Steps in Decision Making
Figure 5.4

22. Discussion Question?
Which is the most important step in the decision making process?
Recognize the need for a decision
Generate Alternatives
Assess Alternatives
Choose among Alternatives
Implement the Chosen Alternative
Learn from Feedback

23. Decision Making Steps Step 1. Recognize Need for a Decision
Sparked by an event such as environment changes.
Managers must first realize that a decision must be made.

24. Decision Making Steps Step 2. Generate Alternatives
Managers must develop feasible alternative courses of action
If good alternatives are missed, the resulting decision is poor
It is hard to develop creative alternatives, so managers need to look for new ideas

25. Decision Making Steps Step 3. Evaluate Alternatives
What are the advantages and disadvantages of each alternative?
Managers should specify criteria, then evaluate.

26. General Criteria for Evaluating Possible Courses of Action
Figure 5.5

27. Decision Making Steps Step 4. Choose Among Alternatives
Rank the various alternatives and make a decision
Tendency is for managers to ignore critical information, even when available

28. Decision Making Steps Step 5. Implement Chosen Alternative
Managers must now carry out the alternative
Often a decision is made and not implemented

29. Decision Making Steps Step 6. Learn From Feedback
Compare what happened to what was expected to happen
Explore why any expectations for the decision were not met
Derive guidelines that will help in future decision making