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Managerial Decision Making Learning
Managerial Decision Making Learning
Objectives
Objectives
After studying this slides 3, you will know:
the kinds of decisions you will face as a manager
how to make “rational” decisions
the pitfalls you should avoid when making decisions
the pros and cons of using a group to make decisions
the procedures to use in leading a decision-making group
how to encourage creative decisions
the processes by which decisions are made in organizations
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Lack of
Structure
Risk
Conflict
Uncertainty
Characteristics Of Managerial Decisions
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Characteristics Of Managerial Decisions
Characteristics Of Managerial Decisions
(cont.)
(cont.)
Lack of structure
the usual state of affairs in managerial decision making
programmed decisions
- decisions that have been encountered
and made in the past
have objectively correct answers
are solvable by using simple rules, policies, or numerical
computations
nonprogrammer decisions
- new, novel, complex decisions
having no proven answers
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Comparison Of Types Of Decisions
Comparison Of Types Of Decisions
Programmed Decisions
Nonprogrammer Decisions
Problem
Procedure
Business
example
Frequent, repetitive, routine.
Much certainty regarding
cause and effect relationships.
Dependence on policies,
rules, and definite procedures.
Periodic reorders of inventory.
Novel, unstructured. Much
uncertainty regarding cause and
effect relationships.
Necessity for creativity, intuition,
tolerance for ambiguity, creative
problem solving.
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Characteristics Of Managerial Decisions
Characteristics Of Managerial Decisions
(cont.)
(cont.)
Uncertainty and risk
certainty
- have sufficient information to predict precisely the
consequences of one’s actions
uncertainty
- have
in
sufficient information to know the
consequences of different actions
cannot estimate the likelihood of various consequences of their
actions
risk
- available information permits estimation of the likelihood
of various consequences
probability of an action being successful is less than 100 percent,
and losses may occur
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Conflict
opposing pressures from different sources
occurs at two levels
psychological conflict - individual decision makers:
perceive several attractive options
perceive no attractive options
conflict between individuals or groups
few decisions are without conflict
Characteristics Of Managerial Decisions
Characteristics Of Managerial Decisions
(cont.)
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Identifying and
diagnosing
the problem
Generating
alternative
solutions
Evaluating
alternatives
Evaluating
the decision
Implementing
the decision
Making the
choice
The Stages Of Decision Making
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Stages Of Decision Making
Stages Of Decision Making
Identifying and diagnosing the problem
recognize that a problem exists and must be solved
problem - discrepancy between current state and:
past
performance
current
performance of other organizations
future
expected performance
decision maker must want to resolve the problem and have the
resources to do so
Generating alternative solutions
ready-made solutions
- ideas that have been tried before
may follow the advice of others who have faced similar problem
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Stages Of Decision Making (cont.)
Stages Of Decision Making (cont.)
Evaluating alternatives
determining the value or adequacy of the alternatives
predict the consequences that will occur if the various options
are put into effect
managers should consider several types of consequences
success or failure of the decision will affect the track record of
the decision maker
contingency plans
- alternative courses of action that can be
implemented based on how the future unfolds
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Stages Of Decision Making (cont.)
Stages Of Decision Making (cont.)
Making the choice
maximize
- a decision realizing the best possible outcome
requires searching thoroughly for a complete range of alternatives
each alternative is carefully assessed
compare one alternative to another
satisfies
- choose an option that is acceptable although not
necessarily the best or perfect
compare the choice with the goal, not against other options
search for alternatives ends when an okay solution is found
optimizing
- achieving the best possible balance among several
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Stages Of Decision Making (cont.)
Stages Of Decision Making (cont.)
Implementing the decision
those who implement the decision must:
understand
the choice and why it was made
be
committed
to its successful implementation
can’t assume that things will go smoothly during
implementation
identify potential problems
identify potential opportunities
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List the resources and
activities required to
implement each step
Estimate the time needed
for each step
Determine how things will
look when the decision
is fully operational
Implementation
Plan
Order the steps necessary
to achieve a fully
operational decision
Assign responsibility for
each step to specific
individuals
Steps In The Implementation Plan
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Stages Of Decision Making (cont.)
Stages Of Decision Making (cont.)
Evaluating the decision
collecting information on how well the decision is working
evaluation is useful whether the feedback is positive or negative
if decision appears inappropriate, the process cycles back to the
first stage
The best decision
nothing can guarantee a “best” decision
must be confident that the
procedures
used are likely to
produce the best decision given the circumstances
vigilance
- decision maker carefully and conscientiously executes
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Barriers To Effective Decision Making
Barriers To Effective Decision Making
Psychological biases
biases that interfere with objective rationality
illusion of control
- a belief that one can influence events
even when one has no control over what will happen
framing effects
- how problems or decision alternatives are
phrased or perceived
subjective influences can override objective facts
discount the future
- weigh short-term costs and benefits
more heavily than longer-term costs and benefits
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Barriers To Effective Decision Making
Barriers To Effective Decision Making
(cont.)
(cont.)
Time pressures
today’s economy places a premium on acting quickly and
keeping pace
in order to make timely and high-quality decisions one must:
focus on real-time information
involve people more effectively and efficiently
rely on trusted experts
take a realistic view of conflict
Social realities
many decisions result from intensive social interactions,
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Potential Advantages
1. Larger pool of information
1. More perspectives and
approaches
3. Intellectual stimulation
3. People understand the
decision
5. People are committed to
the decision
Pros And Cons Of Using A Group To
Pros And Cons Of Using A Group To
Make Decisions
Make Decisions
Potential Disadvantages
1. One person dominates
1. Satisfying
1. Groupthink - team spirit
discourages disagreement
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Leadership
1. Avoid domination
2. Encourage input
3. Avoid groupthink
and satisfying
4. Remember goals
Effective Group
Decision Making
Constructive Conflict
1. Air legitimate
differences
2. Stay task-focused
3. Be impersonal
4. Play devil’s advocate
Managing Group Decision Making
Managing Group Decision Making
Creativity
1. Brainstorm
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Managing Group Decision Making
Managing Group Decision Making
Leadership style
leader should attempt to minimize process-related problems
leader should:
avoid dominating the discussion
encourage less vocal members to express themselves
mitigate pressures for conformity
stay alert to groupthink and satisfying
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Managing Group Decision Making
Managing Group Decision Making
(cont.)
(cont.)
Constructive conflict
a certain amount of
constructive
conflict should exist
cognitive conflict
- issue-based differences in perspectives or
judgments
a constructive type of conflict
can air legitimate differences of opinion and develop better ideas
affective conflict
- emotional disagreement directed toward other
people that is likely to be destructive conflict
two techniques used to purposely program cognitive conflict
devil’s advocate
- has the job of criticizing others
dialectic
- structured debate comparing two conflicting courses of
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Managing Group Decision Making
Managing Group Decision Making
(cont.)
(cont.)
Encouraging creativity
creativity is essential to survival and involves:
creation
- bringing a new thing into being
synthesis
- joining two previously unrelated things
modification
- improving something or giving it new application
to become creative one must:
recognize creative potential in little opportunities
obtain sufficient resources
escape from work once in awhile and read widely
brainstorming
- group generates ideas about a problem
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Organizational Decision Making
Organizational Decision Making
Constraints on decision makers
organizations cannot do whatever they wish
Market
Human
Financial
Constraints
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Organizational Decision Making (cont.)
Organizational Decision Making (cont.)
Models of organizational decision processes
bounded rationality
- decision makers cannot be truly rational
because:
they have imperfect, incomplete information about alternatives
the problems they face are so complex
human beings cannot process all the information to which they are
exposed
time is limited
people in the organization have conflicting goals
when the conditions above hold, perfectly rational decision
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Organizational Decision Making (cont.)
Organizational Decision Making (cont.)
Models of organizational decision processes (cont.)
incremental model
- major decisions arise through a series of
smaller decisions
piecemeal approach to larger solutions
coalitional model
- groups with differing preferences use power
and negotiation to influence decisions
used when people disagree about goals or compete for resources
garbage can model
- a chaotic process leading to seemingly
random decisions
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Organizational Decision Making (cont.)
Organizational Decision Making (cont.)
Negotiations and politics
negotiations necessary to galvanize the preferences of
competing groups and individuals
organizational politics
- people try to influence decisions to
promote their own interests
use power to pursue hidden agendas
create common goals
- helps to make decision making a
collaborative rather than a competitive process
Decision making in a crisis
stress and time constraints make decisions less effective
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Mistaken Assumptions: How Not To
Mistaken Assumptions: How Not To
Handle Crisis Management
Handle Crisis Management
We don’t have a crisis.
We can handle a crisis.
Crisis management is a luxury we can’t afford.
If a major crisis happens, someone else will rescue us.
Accidents are just a cost of doing business.
Most crises are the fault of bad individuals; therefore, there’s not much
we can do to prevent them.
Only executives need to be aware of our crisis plans; why scare our
employees or members of the community?
We are tough enough to react to a crisis in an objective and rational
manner.
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Plan For Crisis Management
Plan For Crisis Management
Evaluation and
Diagnostic Actions
Communication
Actions
Strategic
Actions
Crisis
Management
Technical and
Structural Actions
Psychological and
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Organizational Decision Making (cont.)
Organizational Decision Making (cont.)
Emergent strategies
the strategy that evolves from all the activities engaged in by
people throughout the organization
result from dynamic processes in which people engage in
discovery, implement decisions, and reconsider the initial
decision after discovering new things by chance
emergent strategies may start at any organizational level
emergent strategies are generally the result of constructive
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Choice
• Set objectives
• Generate options
• Evaluate and select
acceptable, feasible,
suitable option
Discovery
• Systematic gathering
and analysis of
