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Managing Information and Decision-Making (How do managers arrive at…
Managing Information and Decision-Making
How do managers arrive at decisions?
Rationality
Managerial decision making is assumed to be rational
Rational decisions describe choices that are consistent and value-maximising
Maximise economic benefit for the organisation
Bounded Rationality
Decisions made within the parameters of a simplified model that captures the essential features of a problem
Bounded by limitations and constraints, managers attempt to behave rationally
"Good enough" decisions- "satisficing"
Intuition
A product of previous experience, gut-level feeling, accumulated judgment
Managerial Problems and Decisions
Well structured problems and programmed decisions
Structured problems are easily defined
Programmed decisions are those handled by a routine approach
Un-structured problems and non-programmed decisions
Un-structured problems are new or unusual
Non-programmed decisions need a custom approach
Group decision-making
Pros
Increases acceptance of a solution
Increase legitimacy
More diverse alternatives
More complete information & knowledge
Cons
Minority domination
Pressure to conform
Time consuming
Ambiguous responsibility
Decision-making conditions, styles and errors
Conditions of decision-making
Certainty
A manager can make accurate decisions because the outcome of every alternative is known
Risk
A manager can estimate the likelihood of certain outcomes
Uncertainty
A manager has neither certainty nor reasonable probability estiamtes
Decision making styles
Linear
Preference for using external data and facts
Process information through rational, logical thinking
Non-linear
Preference for internal sources of information
Process information through internal insights, feelings, and hunches
