1. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-1 ©2013 John Wiley & Sons, Inc. All rights reserved. JOHN R. SCHERMERHORN, JR. MANAGEMENT 12 th Edition Chapter 7 Information and Decision Making

2. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-2 Planning Ahead — Chapter 7 Study Questions 1.What is the role of information in the management process? 2.How do managers use information to make decisions? 3.What are the steps in the decision-making process? 4.What are the current issues in managerial decision making?

3. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-3 Chapter 7 Learning Dashboard 1.Information, Technology, and Management 1.What is useful information? 2.Information systems and business intelligence 3.Information needs in organizations 4.How information technology is changing organizations 2.Information and Managerial Decisions 1.Managers as information processors 2.Managers as problem solvers 3.Types of managerial decisions 4.Decision conditions

4. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-4 Chapter 7 Learning Dashboard 3.The Decision-Making Process 1.Step 1 – Identify and Define the Problem 2.Step 2 – Generate and Evaluate Alternative Courses of Action 3.Step 3 – Decide on a Preferred Course of Action 4.Step 4 – Implement the Decision 5.Step 5 – Evaluate Results 6.At All Steps – Check Ethical Reasoning 4.Issues in Managerial Decision Making 1.Decision errors and traps 2.Creativity in decision making

5. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-5 Takeaway 1: Information, Technology, & Management Information, Technology, & Management – Managers must have Technological competency – Ability to understand new technologies and to use them to their best advantage Information competency – Ability to locate, gather, organize, and display information for decision making and problem solving Analytical competency – Ability to evaluate and analyze information to make actual decisions and solve real problems

6. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-6 Takeaway 1: Information, Technology, & Management What is useful information? – Data Raw facts and observations – Information Data made useful and meaningful for decision making – Information drives management functions

7. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-7 Takeaway 1: Information, Technology, & Management Characteristics of useful information: – Timely – High quality – Complete – Relevant – Understandable Analytics: systematic gathering and processing of data to make it useful as information

8. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-8 Takeaway 1: Information, Technology, & Management Information systems and business intelligence – Management information systems Use IT to collect, organize, and distribute data for use in decision making – Business intelligence Taps information systems to extract and report data in organized ways that are helpful to decision makers

9. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-9 Takeaway 1: Information, Technology, & Management Executive dashboards Visually update and display key performance indicators and information on a real-time basis

10. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-10 Takeaway 1: Information, Technology, & Management Information needs in organizations – Information exchanges with the external environment: Gather intelligence information Provide public information – Information exchanges within the organization: Facilitate decision making Facilitate problem solving

11. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-11 Takeaway 1: Information, Technology, & Management Implications of IT for relationships with external environment: Helps with customer relationship management Helps organizations with supply chain management Helps in monitoring outsourcing and other business contracts Implications of IT within organizations: Facilitation of communication and information sharing Operating with fewer middle managers Flattening of organizational structures Faster decision making Increased coordination and control

12. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-12 Figure 7.1 Internal and external information needs in organizations

13. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-13 Figure 7.2 Information technology is breaking barriers and changing organizations

14. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-14 Takeaway 2: Information and Managerial Decisions Information and Managerial Decisions – Managers as Information Processors Continually gather, give, and receive information Now as much electronic as it is face to face Always on, always connected

15. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-15 Figure 7.3 The manager as an information- processing nerve center

16. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-16 Takeaway 2: Information and Managerial Decisions Problem solving – The process of identifying a discrepancy between actual and desired performance and taking action to resolve it Decision A choice among possible alternative courses of action Performance threat Something is wrong or has the potential to go wrong Performance opportunity Situation offers the chance for a better future if the right steps are taken

17. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-17 Takeaway 2: Information and Managerial Decisions Problem-solving approaches or styles: Problem avoiders Inactive in information gathering and solving problems Problem solvers Reactive in gathering information and solving problems Problem seekers Proactive in anticipating problems and opportunities and taking appropriate action to gain an advantage

18. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-18 Takeaway 2: Information and Managerial Decisions Systematic versus intuitive thinking Systematic thinking approaches problems in a rational, step-by- step, and analytical fashion Intuitive thinking approaches problems in a flexible and spontaneous fashion

19. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-19 Takeaway 2: Information and Managerial Decisions Multidimensional thinking applies both intuitive and systematic thinking – Effective multidimensional thinking requires skill at strategic opportunism

20. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-20 Takeaway 2: Information and Managerial Decisions Managers use different cognitive styles

21. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-21 Takeaway 2: Information and Managerial Decisions Types of problems – Structured problems are ones that are familiar, straightforward, and clear with respect to information needs – Programmed decisions apply solutions that are readily available from past experiences to solve structured problems

22. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-22 Takeaway 2: Information and Managerial Decisions Types of problems – Unstructured problems are ones that are full of ambiguities and information deficiencies – Nonprogrammed decisions apply a specific solution to meet the demands of a unique problem – Commonly faced by higher-level management

23. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-23 Takeaway 2: Information and Managerial Decisions Crisis decision making – A crisis involves an unexpected problem that can lead to disaster if not resolved quickly and appropriately

24. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-24 Takeaway 2: Information and Managerial Decisions Rules for crisis management: Figure out what is going on Remember that speed matters Remember that slow counts, too Respect the danger of the unfamiliar Value the skeptic Be ready to “fight fire with fire ”

25. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-25 Takeaway 2: Information and Managerial Decisions Managers make decisions with various amounts of information offers complete information on possible action alternatives and their consequences Certain environment lacks complete information but offers probabilities of the likely outcomes for possible action alternatives Risk environment lacks so much information that it is difficult to assign probabilities to the likely outcomes of alternatives Uncertain environment

26. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-26 Figure 7.4 Three environments for managerial decision making and problem solving

27. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-27 Figure 7.5 Steps in managerial decision making and problem solving

28. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-28 Takeaway 3 : The Decision-Making Process Step 1 — Identify and define the problem – Focuses on information gathering, information processing, and deliberation – Decision objectives should be established – Common mistakes in defining problems: Defining the problem too broadly or too narrowly Focusing on symptoms instead of causes Choosing the wrong problem

29. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-29 Takeaway 3 : The Decision-Making Process Step 2 — Generate and Evaluate Alternative Courses of Action – Potential solutions are formulated and more information is gathered, data are analyzed, the advantages and disadvantages of alternative solutions are identified – Approaches for evaluating alternatives: Stakeholder analysis Cost-benefit analysis

30. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-30 Takeaway 3 : The Decision-Making Process Step 2 — Generate and Evaluate Possible Courses of Action (cont.) – Criteria for evaluating alternatives: Benefits Costs Timeliness Acceptability Ethical soundness

31. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-31 Takeaway 3 : The Decision-Making Process Step 2 — Generate and Evaluate Possible Courses of Action (cont.) – Common mistakes: Abandoning the search for alternatives too quickly

32. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-32 Takeaway 3 : The Decision-Making Process Step 3 — Decide on a Preferred Course of Action – Two different approaches Behavioral model leads to satisficing decisions Classical model leads to optimizing decisions

33. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-33 Figure 7.6 Differences in the classical and behavioral decision-making models

34. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-34 Takeaway 3 : The Decision-Making Process Step 4 — Implement the Decision – Involves taking action to make sure the solution decided upon becomes a reality – Managers need to have willingness and ability to implement action plans – Lack-of-participation error should be avoided

35. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-35 Takeaway 3 : The Decision-Making Process Step 5 — Evaluate Results – Involves comparing actual and desired results – Positive and negative consequences of chosen course of action should be examined – If actual results fall short of desired results, the manager returns to earlier steps in the decision- making process

36. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-36 Takeaway 3 : The Decision-Making Process At all steps, check ethical reasoning! – Ask these spotlight questions Does the decision satisfy all constituents or stakeholders? Utility Does the decision respect the rights and duties of everyone? Rights Is the decision consistent with the canons of justice? Justice Is the decision consistent with my responsibilities to care? Caring

37. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-37 Takeaway 4: Issues in Managerial Decision Making Issues in decision making – How do decision errors happen? – Heuristics are strategies for simplifying decision making

38. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-38 Takeaway 4: Issues in Managerial Decision Making Bases a decision on recent information or events Availability Bias Bases a decision on similarity to other situations Representativeness Bias Bases a decision on incremental adjustment from a prior decision point Anchoring and Adjustment Bias Trying to solve a problem in the context in a positive or negative context Framing Error Focusing on information that confirms a decision already made Confirmation Error Continuing a course of action even though it is not working Escalating Commitment

39. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-39 Takeaway 4: Issues in Managerial Decision Making Creative Decision making: – Creativity is the generation of a novel idea or unique approach that solves a problem or crafts an opportunity Big-C creativity occurs when extraordinary things are done by exceptional people Little-C creativity occurs when average people come up with unique ways to deal with daily events and situations

40. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-40 Takeaway 4: Issues in Managerial Decision Making Personal creativity drivers Creativity Task Expertise Task Motivation Creativity Skills

41. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 7-41 Takeaway 4: Issues in Managerial Decision Making Situational creativity drivers Creativity Team Creativity Skills Management Support Organizational Culture