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Managing Information & Decision-making (Methods of Managerial Decision…
Managing Information & Decision-making
Methods of Managerial Decision Making
Rationality
Managerial decision making is assumed to be rational, intention of maximising benefit for their organisation
Rational decisions describe choices that are consistent and value-maximising
Assumes problems are: clear and unambiguous, a single, well-defined goal is to be achieved, all alternatives and consequences are known, preferences are clear, constant and stable, no time or cost constraints exist, final choice will maximise payoff
More so theoretical idea - assumptions unrealistic
Bounded Rationality
Decisions made within the parameters of a simplified model that captures the essential features of a problem
Bounded by the limitations and constraints, managers attempt to behave rationally
'Good enough' decisions - satisfactory
Intuition
Experienced managers tend to make better intuitive decisions (more experiene)
Critical to decision-making
A product of previous experience, gut feeling, accumulated judgement
Managerial problems and decisions
Well structured problems and programmed decisions
Structured programs are easily defined and result in programmed decisions, which are those handled by a routine approach
Unstructured problems and mom-prgorammed decisions
Unstructured problems are new or unusual which result in non-programmed decisions needs a custom approach
Decision-making style
Linear
-Preference for using external data and facts -process information through rational, logical thinking
Non-linear
-Preference to internal source of information -Process information through internal insights, feelings, and hunches
Decision-making errors
Overconfidence
Hindsight
self-serving
sunk cost
Randomness
Representation
Availability
Framing
Group decision making
Advantages:
more complete information & knowledge
More diverse alternatives
Increases acceptance of a solution
Increases legitimacy
Disadvantages: -Time consuming, minority domination, pressure to conform, ambiguous responsibility
Managing and Decision Making
Decision-making influenced by sources, quality and reliability of information
Ability to engage in critical thinking, analysis and reflection determines how well one makes decisions
The execution of the managerial functions of POLC results in decision-making, often daily