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MANAGEMENT (DECISION MAKING (BIASES AND ERRORS (Heuristics
Using '…
MANAGEMENT
DECISION MAKING
TYPES
PROGRAMMED Decision
(Structured Problem)
Straightforward, familiar, routine decision that solves common problems.
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POLICY
Guideline and established parameters to solve structured problem. :warning: Contains some ambiguity
PROCEDURE
Interrelated steps that a manager use to apply policy in response to a structured problem.
NON-PROGRAMMED Decision (Unstructured Problem)
New and usual, custom made decision that solves ambiguous or incomplete new and unusual problems.
MODELS
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ADMINISTRATIVE Model
(Bounded Rationality)
Rational decision making but limited to one's ability to be rational.
Satisficing Decisions: Accepting decisions that satisfy minimal decision criteria rather due to limited time and cognitive ability.
(Influenced by organisation's culture, politics and values)
INTUITIVE Model
Based on experience, feelings and accumulated judgement.
(Not Arbitrary or Irrational)
POLITICAL (Evidence Based) Model
Coalition building, informal alliance.
(Based on expertise, external evidence, opinions and organisational factors)
IDEAL/ RATIONAL Model
Logical, objective and consistent choices that maximise value.
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UNDER UNCERTAINTY
Approaches that can be taken:
- Maximax: Maximize the maximum payoff
- Maximin: Maximize the minimum payoff
- Minimax: Minimize maximum regret
(Observed using payoff matrix)
STYLES
Linear Thinking
Using external data/ facts, rational and logical thinking
Non-linear Thinking
Using internal sources through insights, feelings and hunches
BIASES AND ERRORS
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Anchoring Effect
Fixated on initial information, ignoring subsequent ones
Selective Perception Bias
Selecting, organising and interpreting events based on the decision maker's biased perceptions
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Sunk-cost Errors
Too focused on future consequences and forgetting what's in the past cannot be influenced anymore
Self-serving Bias
Taking quick credit for successes, blaming outside factors for failures
Hindsight Bias
Believing that an event could have been predicted only when the actual outcome is known (after-the-fact)
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CONTROL
Monitoring, comparing and correcting work performance
PROCESS
1. MEASURE Actual Performance
- Personal Observation
- Statistical Reports
- Oral Reports
- Written Reports
(Each has its own benefit and drawbacks)
2. COMPARE with Standard3. ACT in Managerial Manner
- Correct actual performance OR
- Revise the standard
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CONTEMPORARY Issues
- Cross-cultural Differences and Global Turmoil
- Workplace Concerns (Eg. Privacy, Theft, Violence)
- Controlling Consumer Interactions
- Corporate Governance (Ensures owners' interests)
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MANAGER
Planner, organiser, leader and controller of organisational resources to meet organisational goals in an effective and efficient manner.
Managerial Hierarchy (Ascending):
Employee \(\rightarrow\) First-line/ Supervisor \(\rightarrow\) Middle \(\rightarrow\) Top
Views of a manager:
Omnipotent (Manager is in charge for every success or failure); Symbolic (Manager is in charge of mediating success and avoid failure)
CHANGES Managers Facing
Technology; Organisational & Managerial Ethics; Increased Competition; Changing Security Threats
ROLES
INTERPERSONAL Roles
Figurehead, leadership, liason
INFORMATIONAL Roles
Monitor, disseminator, spokesperson
DECISION Roles
Entrepreneur, disturbance handler, resource allocator, negotiator
THREE Lenses of strategic management
1. Economic Perspective: Learning from evidence
2. Learning Perspective: Learning from experience
3. Strategic Organisation
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SKILLS
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Top causes of managerial failure
- Ineffective communication
- Poor work relationship/ interpersonal skills
- Person-job mismatch
- Failure to clarify direction or expectations
- Failure to adapt
CORPORATE CULTURE AND THE ENVIRONMENT
Culture starts from the vision of founders, it continues through socialisation.
EXTERNAL Environment
All outside elements that affect the organisation.
Includes, Task Environment (Sectors with direct contact) and General Environment (Direct outer layer)
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TASK Environment
(Sectors in direct contact)
(Eg. Customers, Competitors, Suppliers, Labor Market)
WAYS Companies Adapt with Environment
- Boundary-Spanning Roles: Linking and coordinating with the external environment by seeking Business and Competitive intelligence.
- Interorganisational Partnership: Collaborating with other organisations.
- Mergers/ Joint Venture: Legal combination of operations or for specific project.
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GLOBAL Perspective
- Parochialism: Viewing the world through your own perspective, you ended up unable to recognise the differences in the people around you.
- Ethnocentric: Same like parochialism but emphasises more on your own country.
- Polycentric: Viewing that what the host country has to offer is always better than your own country's.
- Geocentric: World-oriented view that focuses on getting the best approaches no matter from where.
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PLANNING
FORMAL
PLANNING
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TYPES OF PLANS
BREADTH
STRATEGIC Plans
Apply to the whole organisation to reach overall goals
(Eg. Getting back on track after bankruptcy)
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TACTICAL Plans
Helps strategic plans to accomplish part of overall strategy.
(Eg. Enhance reputation by X pp. by next year)
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APPROACHES
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MANAGEMENT BY OBJECTIVES Approach (MBO)
Setting mutually agreed-upon goals that will also be used as evaluation of employees' performance.
:warning: Less effective in dynamic environments
TRADITIONAL Approach
Goals set from the top and trickles down to become subgoals for each organisational areas.
:warning: Hierarchy of which needs to be clearly defined to form means-ends (sub-goals support main goals) chain of goals.
Strategy maps need to be used to align goals.
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:warning: Limitations:
- Planning may create rigidity
- Can't be developed for dynamic environments;
- Cannot replace intuition and creativity;
- Can create false sense of certainty.
PURPOSE
- Provides direction
- Reduces uncertainty
- Minimizes waste and redundancy
- Sets the standards for controlling
STEPS
- Review mission statement
- Evaluate resources
- Determine goals
- Write down goals & communicate
- Review results
ORGANISATIONAL DESIGN
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KEY ELEMENTS
DEPARTMENTALISATION by Type
(Functional, Product, Geographical, Process, Customer)
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AFFECTED BY
- Overall Strategy - Strategy should support change
- Size - When growing, structure change from organic to mechanistic
- Technology used - Unit (Single), Mass (Large Batch) or Process (Continuous) Production. (Joan Woodward)
- Environmental Uncertainty - Mechanistic structures tend to be most effective in stable and simple environment. While Organic structures is most effective in the dynamic and complex environment.
Work SPECIALISATION
Separating jobs per division.
:warning: Overspecialisation can result in human diseconomies.
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TRADITIONAL Designs
FUNCTIONAL Structure
Departmentalised by function
:check:Cost-saving advantages
:warning: Lack of focus
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SIMPLE Structure
- Low departmentalisation
- Large span of control
- Centralised
- More organic
:check: Fast, Flexible, Inexpensive
:warning: Not appropriate in LR
CONTEMPORARY Designs
TEAM Structure
Made up of work teams
:check: Employees are more involved and empowered
:warning: No clear chain of command, Pressure to perform
MATRIX-PROJECT Structure
Specialists from each functional departments assigned to work on one or more projects.
:check: Fluid and flexible, Fast decision making
:warning: Complex, Prone to conflicts
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BOUNDARYLESS Organisation
Little to no predefined structure
:check: Flexible and responsive, Efficient
:warning: Lack of control, Miscommunications
VIRTUAL Organisation
Small core employees, hires temporary specialists to work on projects.
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LEARNING Organisation
With capacity to continuously learn, adapt & change
:check: Sustainable, Knowledge sharing
:warning: Reluctance in sharing, Retirement
COLLABORATIONS
INTERNAL
- Cross-functional Team: Individuals with different specialities
- Task force (ad hoc committee): Temporary team for short-term problem.
- Community of Practice: Group that interacts continuously to deepen their knowledge and expertise in certain areas.
EXTERNAL
Open Innovation: Opening up to new ideas beyond company's boundaries.
Strategic Partnership (Eg. Nokia & Quallcomm)
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MOTIVATION
One's energised, directed and sustained effort in attaining a goal.
THEORIES
MASLOW'S Hierarchy of Needs
Descending in importance:
- Physiological Needs
- Safety Needs
- Social Needs
- Esteem Needs
- Self-actualisation Needs
(Variation: Alderfer's ERG (Existence, Relatedness and Growth Needs) Theory
MCGREGOR'S X & Y Theories
- Theory X: Employees who dislike work, lazy, avoid responsibility need coercion
(Maslow's lower-order needs dominate)
- Theory Y: Employees who are creative, enjoy work, seek responsibility and have self-direction
(Maslow's higher-order needs dominate)
HERZBERG'S Two-Factor Theory
Believes that internal factors affect job satisfaction and motivation while external factors affect dissatisfaction
- Hygiene Factors: Eliminate dissatisfaction only
(Eg. Supervision, Policy, Security, Salary, etc.)
- Motivators: Increase job satisfaction and motivation
(Eg. Achievement, Recognition, Advancement, etc.)
MCCLELLAND'S Three (Acquired) Needs Theory
Believes that acquired needs determine motives
- Needs for Achievement (nAch): Perform, Do Better
- Need for Power (nPow): Impact, Impress
- Need for Affiliation (nAff): Befriend/ Be with someone
PROCESS
GOAL-SETTING Theory
Specific goals increase performance.
Difficult goals when accepted results in higher performance.Four conditions to be met:
- Goal Commitment (Public goals, internal control, self-set goals)
- Self-efficacy (One's own belief in performance capability)
- Feedback
- National Culture
REINFORCEMENT Theory
Behaviour is the result of consequences (reinforcers) of its action. This theory ignores goals, expectations and needs.
JOB-DESIGN Theory
- Job Design: The way tasks are combined to form complete jobs
- Job Scope: Number and frequency of tasks required in a job
- Job Enlargement: Horizontal expansion of job scope
- Job Enrichment: Vertical expansion of job scope
- Job Depth: How much one has control over his work
- Job Characteristics Model (JCM): Framework of job analysis and design that identifies five primary core job dimensions, interrelationships and impact on outcomes
JOB Dimensions
- Skill Variety: How many different activities needed?
- Task Identity: How much needs to be done?
- Task Significance: How much impact?
- Autonomy: How much freedom, independence, discretion?
- Feedback: How effective has my performance been?
EQUITY Theory (Stacy Adams)
Compares the job input to outcome ratio and corrects any inequityTerms
- Referents: Persons, systems or selves used to compare to
- Distributive Justice: Fairness of reward
- Procedural Justice: Fairness of the process
EXPECTANCY Theory
Act based on one's own expectation:
- Expectancy: Effort and Performance linkage
- Instrumentality: Performance and Reward linkage
- Valence: Attractiveness of the reward
(All are interlinked and usually in sequence)
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