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ch4 Foundations of Decision Making (4-2 Explain the three approaches…
ch4 Foundations of Decision Making
4-2 Explain the three approaches managers can use to make decisions
Rational model
Rational decision making:Make logical and consistent choices to maximize values.
Clear and specific goal regarding decision
All possible alternatives and consequences known
Problem is clear and unambiguous
Alternative selected maximizes likelihood of achieving goal
Fully objective and logical
Organization's best interests are considered
Not a very realistic approach
Bounded rationality:
Managers make rational decisions, but are limited(bounded) by their ability to process information.
No one can possibly analyze all information on all alternatives
satisfice: Accepting solutions that are "good enough"
Most decisions managers make don't fit the assumption of perfect rationality
influenced by
Internal politics
Power considerations
Organization's culture
Escalation of commitment
Hate to admit that initial decision may have been flawed
Don't want to search for new alternatives
Intuition and managerial decision making
Intuition decision making: Making decisions on the basis of experience, feelings, and accumulate judgement
Intuition
Subconscious mental processing
Use data from subconscious mind
Values or ethics-based decisions
Ethical values
Culture
Experience-based decisions
Past experiences
Affect-initiated decisions
Feelings
Emotions
Cognitive-based decisions
Skills
Knowledge
Training
4-1 Describe the decision-making process
The decision-making process
Identification of a problem
Identification of decision criteria
Allocation of weights to criteria
Development of alternatives
Analysis of alternatives
Selection of an alternatives
Implementation of the alternative
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Problem
A discrepancy between an existing and a desired state of affairs.
Common decision-making errors and biases
Anchoring effect
Selective perception
Immediate gratification
Confirmation
Overconfidence
Framing
Availability
Representation
Randomness
Suck costs
Self-serving
Hindsight
4-3 Describe the types of decisions and decision-making conditions managers face
Types of decisions
Structured problems: A straightforward, familiar, and easily defined problem
Programmed decision: A repetitive decision that can be handled using a routine approach
Rules
An explicit statement
Must or must-not do
Ensure consistency
Policies
Provides guidelines
We promote from within, whenever possible
Establishes parameters for the decision maker
Procedures
A series of interrelated sequential steps
Only real difficulty is identifying the problem
Unstructured problems: A unique nonrecurring decision that requires a custom-made soluiton
Nonprogrammed decision
The creation of a new organizational strategy
A different set of environmental factors exists
Unique solution
Other conditions have changed
Decision-making conditions
Certainty
Outcome of every alternative is known
Risk
Estimate the likelihood of certain outcomes
Historical data from past personal experiences or secondary information
Uncertainty
Limited amount of available information and by the psychological orientation of decision maker
4-4 Discuss group decision making
Adventages
More alternatives generated
Increased acceptance of a solution
Diversity of experiences and perspectives
Increased degitimacy
More complete information
Disadvantages
Minority domination
Ambiguous responsibility
Time-consuming
Pressures to conform
Improve group decision making
Nominal group technique
Requiring to operate independently
The chief advantage of this technique is that permits the group to meet formally
Not restrict independent thinking or lead to groupthink
Electronic meetings
Making blends the nominal group technique with information technology
The major advantages of electronic meetings are anonymity, honesty, and speed
Brainstorming
A relatively simple idea-generating process
The group leader states the problem in a clear manner
Members shout out, offer up, fire off, "freewheel" as many alternatives
4-5 Discuss contemporary issues in managerial decision making
Creativity and design thinking
"Seeing" problems others can't see
Helping the decision maker identify all viable alternatives
Creativity: The ability to produce novel and useful idea
Big data
The vast amount of quantifiable information that can be analyzed by highly sophisticated data processing
Decision makers have very powerful tools
Math modeling, predictive algorithms, and artificial intelligence software
National culture
Dealing with employees from diverse culture