1. Introduction to Management Bob Fast
Chapter 5
Week 3B Sept 27
I M
Fall 2011
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2. 5 Decision Making Part Two: Planning CHAPTER
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3. Chapter Objectives After studying this chapter and the case exercises at the end, you should be able to:
Demonstrate the importance of decision- making in management jobs.
Explain the difference between programmed and non-programmed decisions.
Describe the steps a manager must take to work through the rational decision-making process.
Apply the suggestions for making better decisions to a real problem.
Develop a decision matrix for solving a management problem.
Avoid the decision traps that managers face.
Understand how to use groups more effectively in the decision-making process.
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4. Understanding Decision Making
A choice made between available alternatives.
Decision Making
The process of developing and analyzing alternatives and making a choice from among them.
Problem
A discrepancy between a desirable and an actual situation.
Judgment
The cognitive, or “thinking,” aspects of the decision-making process.
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5. Types of Decisions Programmed Decision Nonprogrammed Decision
A decision that is repetitive and routine and can be made by using a definite, systematic procedure.
Nonprogrammed Decision
A decision that is unique and novel.
The Principle of Exception
“Only bring exceptions to the way things should be to the manager’s attention. Handle routine matters yourself.”
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8. Decision-Making Models
The Classical Approach
Have complete or “perfect” information about the situation.
Distinguish perfectly between the problem and its symptoms.
Identify all criteria and accurately weigh all the criteria according to preferences.
Know all alternatives and can assess each one against each criterion.
Accurately calculate and choose the alternative with the highest perceived value.
Make an “optimal” choice without being confused by “irrational” thought processes.
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9. Decision-Making Models (cont’d)
The Administrative Approach
Bounded Rationality (Herbert Simon)
Managers’ decisions are only as rational as their unique values, capabilities, and limited capacity for processing information permit them to be.
Satisfice
To look for solutions until a satisfactory one is found.
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10. Steps in the Decision-Making Process
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11. Step 1. Define the Problem
It’s trickier than it appears.
Start by writing down your initial assessment of the problem.
Dissect the problem.
What triggered this problem (as I’ve assessed it)?
Why am I even thinking about solving this problem?
What is the connection between the trigger and the problem?
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12. Step 2. Clarify Your Objectives
Write down all the concerns you hope to address through your decision.
Convert your concerns into specific, concrete objectives.
Separate ends from means to establish your fundamental objectives.
Clarify what you mean by each objective.
Test your objectives to see if they capture your interests.
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13. Step 3. Identify Alternatives
Generate as many alternatives as you can yourself.
Expand your search, by checking with other people, including experts.
Look at each of your objectives and ask, “how?”
Know when to stop.
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14. Step 4. Analyze the Alternatives
Mentally put yourself into the future.
Process Analysis
Solving problems by thinking through the process involved from beginning to end, imagining, at each step, what actually would happen.
Eliminate any clearly inferior alternatives.
Organize your remaining alternatives into a table (matrix) that provides a concise, bird's-eye view of the consequences of pursuing each alternative.
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15. Consequence Matrix Figure 5.3
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16. Step 5. Make a Choice
Analyses are useless unless the right choice is made.
Under perfect conditions, simply review the consequences of each alternative, and choose the alternative that maximizes benefits.
In practice, making a decision—even a relatively simple one like choosing a computer—usually can’t be done so accurately or rationally.
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17. How to Make Better Decisions
Be creative
The process of developing original, novel responses to a problem
Cultivate creativity
Check your assumptions
Think through the process
Get more points of view
Provide physical support
Encourage anonymous input
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18. Looking at the Problem in Just One Way
Source: Lester A. Lefton and Laura Valvatine, Mastering Psychology, 4th ed. Copyright © 1992 by Allyn & Bacon. Reprinted by permission.
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FIGURE 5.4

19. The Advantage of Not Just Looking at the Problem in One Way
Source: Max H. Bazerman, Judgment in Managerial Decision Making. Copyright © 1994 Wiley, p. 93. Reprinted by permission of Wiley.
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FIGURE 5.5

20. Using Creativity to Find a Solution
Source: Applied Human Relations, 4th ed., by Benton/Halloran cW Reprinted by permission of Prentice-Hall, Upper Saddle River, NJ.
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FIGURE 5.6

21. How to Make Better Decisions (cont’d)
2. Increase Your Knowledge
Ask questions.
Who, What, Where, When, Why, and How
Get experience.
3. Use Your Intuition
A cognitive process whereby a person instinctively makes a decision based on his or her accumulated knowledge and experience.
Beware of the limitations
Be realistic about risks
Avoid over-confidence
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22. Are You More Rational or More Intuitive?
Source: Adapted and reproduced by permission of the Publisher, Psychological Assessment Resources. Inc., Odessa FL 33556, from the Personal Style Inventory by William Taggart, Ph.D., and Barbara Hausladen. Copyright 1991, 1993 by PAR, Inc.
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FIGURE 5.7

23. How to Make Better Decisions (cont’d)
Weigh the Pros and Cons
Quantify realities by sizing up your options, and taking into consideration the relative importance of each of your objectives.
Don’t Overstress the Finality of Your Decision
Remember that few decisions are forever.
Knowing when to quit is sometimes the smartest thing a manager can do.
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24. Decision Matrix Figure 5.8
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25. Decision-Making Shortcuts and Traps
Using a Heuristic
Applying a rule of thumb or an approximation as a shortcut to decision making.
Perception (Personal Bias)
The selection and interpretation of information we receive through our senses and the meaning we give to the information.
Managers’ experiences and functional roles mould and influence how problems are perceived
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26. Decision-Making Shortcuts and Traps (cont’d)
Inaccurate Framing of the Problem
Misdefining the problem may be the biggest barrier to making good decisions.
Anchoring
Unconsciously giving disproportionate weight to the first information you hear.
Adopting a Psychological Set
The tendency to rely on a rigid strategy or point of view when solving a problem.
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27. Decision-Making Shortcuts and Traps (cont’d)
Organizational Barriers
“Organizational politics”
Time pressure
Lack of involvement in decision-making
Escalation of Commitment
Increased commitment to a previously chosen course of action even though it has been shown to be ineffective
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28. Pros and Cons of Using Groups to Make Decisions
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29. Tools for Improving Group Decision-Making
Brainstorming
Devil’s-Advocate Approach
Delphi Technique
Nominal Group Technique
Stepladder Technique
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30. How to Lead a Group Decision-Making Discussion
Ensure that all group members participate.
Distinguish between idea generation and idea evaluation.
Do not respond to each participant or dominate the discussion.
See that effort is directed toward overcoming surmountable obstacles.
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31. Case Study 5 - 2 Make a Decision Now Page 160
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32. Next Class – October 4 Read: Due: Coming up: Chap 6 – Planning Process
Chap 7 – Strategic Management
Due:
Reading Assessment #1
“Values and organization”
Coming up:
Guest presenter – Oct 11th
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