1. 1 PowerPoint Presentation to Accompany Management Third Canadian Edition John R. Schermerhorn, Jr. Barry Wright Prepared by: Jim LoPresti University of Colorado, Boulder Revised by: Dr. Shavin Malhotra Ryerson University, Toronto, Ontario

2. 2 Management 3e - Chapter 13 2 Chapter 13: Information and Decision Making

3. 3 Management 3e - Chapter 13  13.1 Understand the role of information in the management process.  13.2 Understand how managers use information to make decisions.  13.3 Understand the steps in the decision-making process.  13.4 Understand the current issues in managerial decision making. Chapter 13 Learning Objectives 3

4. 4 Management 3e - Chapter 13  Information and knowledge — basic linkages: Knowledge and knowledge workers provide a decisive competitive factor in today’s economy. Knowledge worker Someone whose value to the organization rests with intellect, not physical capabilities. Intellectual capital Shared knowledge of a workforce that can be used to create wealth. Information, Technology and Management 4

5. 5 Management 3e - Chapter 13  Information and knowledge — basic linkages (cont.) Knowledge and intellectual capital are irreplaceable organizational resources. The productivity of knowledge and knowledge workers depends on: Computer competency. Information competency. 5 Information, Technology and Management

6. 6 Management 3e - Chapter 13  What is useful information? Data - Raw facts and observations. Information - Data made useful for decision making. Information drives management functions. Characteristics of useful information: Timely High quality Complete Relevant Understandable 6 Information, Technology and Management

7. 7 Management 3e - Chapter 13 Figure 13.1 Internal and external information needs of an organization 7

8. 8 Management 3e - Chapter 13  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. 8 Information, Technology and Management

9. 9 Management 3e - Chapter 13  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. 9 Information, Technology and Management

10. 10 Management 3e - Chapter 13 Figure 13.3 Information technology is breaking barriers and changing organizations. 10

11. 11 Management 3e - Chapter 13  Information needs of 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 Information, Technology and Management

12. 12 Management 3e - Chapter 13  Basic information system concepts: Information system - Use of the latest IT to collect, organize, and distribute data for use in decision making. Management Information System (MIS) - Specifically designed to meet the information needs of managers in daily decision making. 12 Information, Technology and Management

13. 13 Management 3e - Chapter 13  Managerial advantages of IT utilization: Planning advantages. Better and more timely access to useful information. Involving more people in planning. Organizing advantages. More ongoing and informed communication among all parts of the organization. Improved coordination and integration. 13 Information and Managerial Decisions

14. 14 Management 3e - Chapter 13  Managerial advantages of IT utilization (cont.): Leading advantages. Improved communication with staff and stakeholders. Keeping objectives clear. Controlling advantages. More immediate measures of performance results. Allows real-time solutions to performance problems. 14 Information and Managerial Decisions

15. 15 Management 3e - Chapter 13 Figure 13.4 The manager as an information-processing nerve center. 15

16. 16 Management 3e - Chapter 13  A performance deficiency Actual performance being less than desired performance.  A performance opportunity Actual performance being better than desired performance.  Problem solving The process of identifying a discrepancy between actual and desired performance and taking action to resolve it.  A decision A choice among possible alternative course of action. 16 Information and Managerial Decisions

17. 17 Management 3e - Chapter 13  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. 17 Information and Managerial Decisions

18. 18 Management 3e - Chapter 13  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. Multidimensional thinking applies both intuitive and systematic thinking. Effective multidimensional thinking requires skill at strategic opportunism. 18 Information and Managerial Decisions

19. 19 Management 3e - Chapter 13  Cognitive styles Sensation Thinkers emphasize the impersonal rather than the personal and take a realistic approach to problem solving. Intuitive Thinkers are comfortable with abstraction and tend to be idealistic. spontaneous fashion. Intuitive Feelers prefer broad and global issues and are comfortable with intangibles. Sensation Feelers emphasize analysis and human relations and tend to be realistic and prefer facts. 19 Information and Managerial Decisions

20. 20 Management 3e - Chapter 13  Programmed decisions Apply solutions that are readily available from past experiences to solve structured problems. Structured problems are ones that are familiar, straightforward, and clear with respect to information needs. Best applied to routine problems that can be anticipated. 20 Information and Managerial Decisions

21. 21 Management 3e - Chapter 13  Non-programmed decisions Develop novel solutions to meet the demands of unique situation that present unstructured problems. Unstructured problems are ones that are full of ambiguities and information deficiencies. Commonly faced by higher-level management. 21 Information and Managerial Decisions

22. 22 Management 3e - Chapter 13  Crisis decision making A crisis involves an unexpected problem that can lead to disaster if not resolved quickly and appropriately. 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.” 22 Information and Managerial Decisions

23. 23 Management 3e - Chapter 13  Decision environments: Certain environments - Offer complete information about possible action alternatives and their outcomes. Risk environments - Lack complete information about action alternatives and their consequences, but offer some estimates of probabilities of outcomes for possible action alternatives. Uncertain environments - Information is so poor that probabilities cannot be assigned to likely outcomes of known action alternatives. 23 Information and Managerial Decisions

24. 24 Management 3e - Chapter 13 Figure 13.7 Three environments for managerial decision making and problem solving. 24

25. 25 Management 3e - Chapter 13 Five-step decision-making process: Identify and define the problem. Generate and evaluate possible solutions. Choose a preferred course of action and conduct the “ethics double check.” Implement the decision. Evaluate results. The Decision-Making Process 25

26. 26 Management 3e - Chapter 13 Figure 13.8 Steps in managerial decision making and problem solving. 26 The Decision-Making Process

27. 27 Management 3e - Chapter 13  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. 27 The Decision-Making Process

28. 28 Management 3e - Chapter 13  Step 2 — generate and evaluate possible solutions. 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. 28 The Decision-Making Process

29. 29 Management 3e - Chapter 13  Step 2 — generate and evaluate possible solutions (cont.). Criteria for evaluating alternatives: Benefits. Costs. Timeliness. Acceptability. Ethical soundness. Common mistakes: Selecting a particular solution too quickly. Choosing a convenient alternative that may have damaging side effects or may not be as good as other alternatives. 29 The Decision-Making Process

30. 30 Management 3e - Chapter 13  Step 3 — decide on a preferred course of action. Classical decision model: Managers act rationally in a certain world. Managers face clearly defined problems and have complete knowledge of all possible alternatives and their consequences. Results in an optimizing decision. 30 The Decision-Making Process

31. 31 Management 3e - Chapter 13  Step 3 — decide on a preferred course of action (cont.) Behavioural decision model Managers act in terms of what they perceive about a given situation. Recognizes limits to human information- processing capabilities. Cognitive limitations. Bounded rationality. Results in a satisfying decision. 31 The Decision-Making Process

32. 32 Management 3e - Chapter 13  Step 4 — implement the decision solution. 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. 32 The Decision-Making Process

33. 33 Management 3e - Chapter 13 Figure 13.9 Differences in the classical and behavioural models of managerial decision making. 33

34. 34 Management 3e - Chapter 13  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. 34 The Decision-Making Process

35. 35 Management 3e - Chapter 13  Types of heuristics for simplifying decision making: Availability heuristic People use information “readily available” from memory as a basis for assessing a current event or situation. Representativeness heuristic People assess the likelihood of something happening based upon its similarity to a stereotyped set of occurrences. Anchoring and adjustment heuristic People make decisions based on adjustments to a previously existing value or starting point. Issues in Managerial Decision-Making 35

36. 36 Management 3e - Chapter 13  Framing Error The tendency to evaluate and resolve a problem in the context in which it is perceived – either positively or negatively.  Confirmation Error the tendency to focus only on information that confirms a decision already made. 36 Issues in Managerial Decision-Making

37. 37 Management 3e - Chapter 13  Escalating commitment The tendency to increase effort and apply more resources to a course of action that is not working.  Ways to avoid the escalation trap: Set advance limits and stick to them. Make your own decisions. Carefully determine why you are continuing a course of action. Remind yourself of the costs. Watch for escalation tendencies. 37 Issues in Managerial Decision-Making

38. 38 Management 3e - Chapter 13  Creative Decision making: Creativity is the generation of a novel idea or unique approach that solves a problem or crafts an opportunity. creativity is more likely when decision makers are highly task motivated. Organizations should create an environment that supports and encourages creativity. 38 Issues in Managerial Decision-Making

39. 39 Management 3e - Chapter 13  Potential advantages of group decision making: Greater amounts of information, knowledge, and expertise are available. More action alternatives are considered. Increased understanding and acceptance of outcomes. Increased commitment to implement final plans. 39 Issues in Managerial Decision-Making

40. 40 Management 3e - Chapter 13  Potential disadvantages of group decision making: Pressure to conform. Minority domination may occur. Decision making takes longer. 40 Issues in Managerial Decision-Making

41. 41 Management 3e - Chapter 13  When group decision making works best: Individual lacks expertise or information. Problem is unclear and hard to define. Acceptance by others needed for effective implementation Time is sufficient for group involvement. 41 Issues in Managerial Decision-Making

42. 42 Management 3e - Chapter 13  Ethical decision making. Any decision should meet ethics double check. mentioned in step 3 of the decision- making process. How would I feel if my family found out about this decision? How would I feel if this decision were published in the local newspaper? Any discomfort in answering these questions indicates the decision has ethical shortcomings. 42 Issues in Managerial Decision-Making

43. 43 Management 3e - Chapter 13  Ethical decision making (cont.) Considering the ethics of a proposed decision may result in better decisions and prevention of costly litigation. Ethical decisions satisfy the following criteria: Utility. Rights. Justice. Caring. 43 Issues in Managerial Decision-Making

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