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Managing Information & Decision Making (Decision-making errors…
Managing Information & Decision Making
Decision-making influenced by sources, quality, and reliability of information
Methods of managerial decision-making
Bounded Rationality
- Decisions made within the parameters of a simplified model that captures the essential features of a problem, Bounded by the limiatations and constraints, managers attemt to behave rationally, Good enough decisions- "satisficing"
Intuition
Gut-Level Feeling
Accumulated judgement
Previous experience
Rationality
- managerial decision making is assumed to be rational, Rational decisions describe choices that are consistent and value-maximising, Rational decisions made by managers "maximise" economic benefit for the organization
Types of problems and decisions
Well structured problems and Programmed decisions
Un-structured problems and non-programmed decisions
Group Decision-Making
Advantages
More diverse alternatives
Increases acceptance of a solution
More complete information & knowledge
Increase legitimacy
Disadvantages
Minority domination
Pressure to conform
Ambiguous responsibility
Time consuming
Conditions of decision-making
Uncertainty
- manager has neither certainty nor reasonable probability estimates
Certainty
- manager can make accurate decisions because the outcome of every alternative is known
Risk
- manager can estimate the likelihood of certain outcomes
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
Decision-making errors
Anchoring error
Randomness
Hindsight
Confirmation
Overconfidence
Conditions of decision-making
Risk
Uncertainty
Certainty