Management Chapter 7

choice made from among available alternatives
Decision making
process of identifying and choosing alternative courses of action.
The stages of Rational Decision Making
Stage 1. identify the problem or opportunity Stage 2. Think up alternative solutions. Stage 3. evaluate alternatives and select a solution. Stage 4. Implement and evaluate the solution chosen.
Rational Model of Decision Making
explains how managers should make decisions, assumes manager will make logical decisions that will be optimum in furthering the organization’s interest. also called the classical model.
Successful implementation
plan carefully be sensitive to those affected.
what should you do if action is not working? give it more time, change it slightly, try another alternative, start over.
Assumptions of the rational model
Complete information, no uncertainty; logical, unemotional analysis; best decision for the organization.
Non rational models of decision making
assume that decision making is nearly always uncertain and risky, making it difficult for managers to make optimal decisions.
Bounded rationality
suggests that the ability of decision makers to be rational is limited by numerous constraints, complexity time and money, cognitive capacity.
Satisficing model
managers seek alternative until they find one that is satisfactory, not optimal
incremental model
managers take small, short-term steps to alleviate a problem.
making a choice without the use of conscious thought or logical inference, sources are expertise and feelings.
Implementation Principles of Evidence-Based Decision making
Treat your organization as an unfinished prototype, no brag, just facts, see yourself and your organization as outsiders do, evidence-based management is not just for senior executives. like everything else, you still need to sell it. If all else fails, slow the spread of bad practice. The best diagnostic question: What happens when people fail?
What makes it hard to be evidence based?
1. there is too much evidence. 2. there’s not enough good evidence. 3. the evidence doesn’t quite apply. 4. People are trying to mislead you. 5. you are trying to mislead you. 6. the side effect outweigh the cure. 7. Stories are more persuasive anyway.
sophisticated forms of business data analysis
portfolio analysis, time-series forecast
also called business analytics.
Key attributes among analytics competitors.
Use of modeling: going beyond simple descriptive statistics
Having multiple applications, not just one
Support from the top.
Risk propensity
the willingness to gamble or to undertake risk for the possibility of gaining an increased payoff
Decision-making style
reflects the combination of how an individual perceives and responds to information
value orientation
tolerance for ambiguity
Directive decision making style
people are efficient, logical, practical, and systematic in their approach to solving problems. action-oriented, decisive and likes to focus on facts.
considers more information and alternatives.
takes a broad perspective to problem solving like to consider many options and future possibilities
supportive, receptive to suggestions, show warmth, perfer verbal to written information.
Knowledge of your decision making style
helps you of you understand yourself, can increase your ability to influence others, gives you an awareness of how people can take the same information and yet arrive at different decisions.
Road map to Ethical decision making: A decision tree
Is the Proposed action legal? if yes, does the proposed action maximize shareholder value? if yes is the proposed action ethical? if no would it be ethical not to take the proposed action.
Ineffective responses to decision situation
relaxed avoidance, relaxed change, defensive change, panic.
Relaxed avoidance
– manager decides to take no action in the belief there will be no great negative consequences
Relaxed change
manager realizes that complete inaction will have negative consequences but opts for the first available alternative that involves low risk
Defensive avoidance
– manager can’t find a good solution and follows by procrastinating, passing the buck, or denying the risk of any negative consequences
– manager is frantic to get rid of the problem that he can’t deal with the situation realistically
Three Effective reactions: Deciding to decide
“How high priority is this situation?”
“How believable is the information about the situation?”
“How quickly must I act on the information about the situation?”
Common Decision-Making Biases
Availability bias
Confirmation bias
Representativeness bias
Sunk cost bias
Anchoring and adjustment bias
Escalation of commitment bias
Advantages of Group Decision Making
Greater pool of knowledge
Different perspectives
Intellectual stimulation
Better understanding of decision rationale
Deeper commitment to the decision
Disadvantages of Group Decision Making
A few people dominate or intimidate
Goal displacement
occurs when group members strive to agree for the sake of unanimity and thus avoid accurately assessing the decision situation
What managers need to know about Groups and decision making
They are less efficient.
Their size affects decision quality.
They may be too confident.
Knowledge counts.
Participative management
process of involving employees in setting goals, making decisions, solving problems, and making changes in the organization.
occurs when members are able to express their opinions and reach agreement to support the final decision
technique used to help groups generate multiple ideas and alternatives for solving problems.
Chauffeur-driven systems
ask participants to answer predetermined questions on electronic keypads or dials.
group-driven systems
involves a meeting within a room of participants who expresses their ideas anonymously on a computer network, for anonymous networking.