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Managers and decision making, (Rationality) - Coggle Diagram
Managers and decision making
group level decision making
advantages
more complete information and knowledge
More diverse alternatives
increase acceptance of a solution
increase legitimacy of decision making
disadvantages
time consuming
possible minority domination - best ideas may not always come to life
pressure to conform to the group
ambiguous responsibility - is there are a formal leader within the group and what are the role of everyone in the group. can increase the time of this decsion making
not suitable in certain situations
Decision-making process
CONDITIONS OF DECISION MAKING:
Risk
A manager can estimate the likelihood of certain outcomes.
Uncertainty
A manager has neither certainty nor reasonable probability estimates.
Certainty
A manager can make accurate decisions because the outcome of every alternative is known
decision making styles
Linear
preference for using external data and facts
processing information through rational and logical thinking
Non-Linear
preference for internal sources of information
process information through internal insights, feelings and hunches
decision making errors and bias
overconfidence
immediate gratification
Anchoring effect
selective perception
confirmation
framing
availability
representation
rancomness
sunk costs
self-serving
hindsight
Rationality
Assumes:
○ The problem is clear and unambiguous
○ A single, well-defined goal is to be achieved
○ All alternatives and consequences are known
○ Preferences are clear
○ Preferences are constant and stable
○ No time or cost constraints exist
○ Final choice will maximise payoff
• Managerial decision making is assumed to be rational
• Rational decisions describe choices that are consistent and value-maximising