Principles of Management

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BUS102ECh06.pdf

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© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2

Decision making is the

process of

identifying

opportunities

Decision is a

choice made

from

available

alternatives

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❖ Programmed Decisions

❖Recurring problems

❖Apply rule

❖ Nonprogrammed Decisions

❖Unique situations

❖Poorly defined

❖Unstructured

❖Important consequences

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❖ Difference between programmed and

unprogrammed decisions

❖ Certainty – Situation in which all information

is fully available

❖ Risk – Future outcomes associated with an

alternative are subject to chance

❖ Uncertainty - Depends on the amount and

value of information available

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© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

❖ Ambiguity - Making decisions in difficult

situations

❖The goals and the problem are unclear

❖ Wicked decisions involve conflict over goals

and have changing circumstances, fuzzy

information, and unclear links

❖There is often no “right” answer

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❖ Rational economic assumptions drive

decisions

❖Operates to accomplish established goals,

problem is defined

❖Decision maker strives for information and

certainty, alternatives evaluated

❖Criteria for evaluating alternatives is known;

select alternative with maximum benefit

❖Decision maker is rationale and uses logic

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❖ Administrative/descriptive approach

❖How managers really make decisions

❖Recognize human and environmental

limitations

❖ Bounded rationality – People have limits or boundaries on how rational they can be

❖ Satisficing – Decision makers choose the first solution that satisfies minimal decision

criteria

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❖ Goals are often vague

❖ Rational procedures are not always used

❖ Managers’ searches for alternatives are

limited

❖ Most managers settle for satisficing

❖ Intuition – Quick apprehension of situation based on practice and experience

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❖ Decisions involve managers with diverse

interests

❖ Managers must engage in coalition

building

❖Informal alliance to support specific goal

❖ Without a coalition, powerful groups can

derail the decision-making process

❖ Political model resembles the real

environment

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❖ Assumptions of the political model

❖Organizations are made up of groups with

diverse interests, goals, and values

❖Information is ambiguous and incomplete

❖Lack of time, resources, or mental capacity

to process all information regarding a

problem

❖Decisions are the result of bargaining and

discussion among coalition members

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© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

❖ Recognition of Decision Requirement – Identify problem or opportunity

❖ Diagnosis and Analysis – Analyze underlying causal factors

❖ Develop Alternatives – Define feasible alternatives

❖ Selection of Desired Alternative – Alternative with most desirable outcome

❖ Implementation of Chosen Alternative – Use of managerial, administrative, and persuasive abilities to execute chosen alternative

❖ Evaluation and Feedback – Gather information about effectiveness

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© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 16

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

❖ Directive style – People who prefer simple, clear-cut solutions to problems

❖ Analytic style – Managers prefer complex solutions based on a lot of data

❖ Conceptual style – Managers like a broad amount of information

❖ Behavioral style – Managers with a deep concern for others

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❖ Being influenced by initial impressions

❖ Justifying past decisions

❖ Seeing what you want to see

❖ Perpetuating the status quo

❖ Being influenced by problem framing

❖ Overconfidence

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❖ Mechanisms to help reduce bias-related

decision errors:

❖ Start with brainstorming

❖ Use hard evidence

❖ Engage in rigorous debate

❖ Avoid groupthink

❖ Know when to bail

❖ Do a postmortem

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