4 Chapter Foundations of Decision Making Pearson Education

4 Chapter Foundations of Decision Making © Pearson Education Limited 2015 4 -1

Learning Outcomes • Describe the decision-making process. • Explain the three approaches managers can use to make decisions. • Describe the types of decisions and decisionmaking conditions managers face. © Pearson Education Limited 2015 4 -2

Learning Outcomes (cont. ) • Discuss group decision-making. • Discuss contemporary issues in managerial decision making. © Pearson Education Limited 2015 4 -3

4. 1 Describe the decision-making process. © Pearson Education Limited 2015 4 -4

How Do Managers Make Decisions? © Pearson Education Limited 2015 4 -5

Identifying a Decision Problem: a discrepancy between an existing and a desired state of affairs. © Pearson Education Limited 2015 4 -6

Identifying Decision Criteria Relevant Factors: • Price • Model • Size • Manufacturer • Options • Repair record © Pearson Education Limited 2015 4 -7

Weighting Criteria 1. 2. Most important criterion assigned a weight of 10. Other weights assigned against this standard. © Pearson Education Limited 2015 4 -8

Developing Alternatives © Pearson Education Limited 2015 4 -9

Analyzing Alternatives © Pearson Education Limited 2015 4 -10

Selecting the Best Alternative © Pearson Education Limited 2015 4 -11

Implementing the Decision implementation: putting a decision into action. © Pearson Education Limited 2015 4 -12

Evaluating the Decision Appraising the outcome of the decision: Was the problem resolved? © Pearson Education Limited 2015 4 -13

Common Errors © Pearson Education Limited 2015 4 -14

4. 2 Explain the three approaches managers can use to make decisions. © Pearson Education Limited 2015 4 -15

Three Approaches Used to Make Decisions: Types of Decisions © Pearson Education Limited 2015 4 -16

Rational Model Rational decision making: choices that are consistent and value-maximizing within specified constraints. © Pearson Education Limited 2015 4 -17

Bounded Rationality Satisfice Escalation of commitment © Pearson Education Limited 2015 4 -18

Intuitive Decision Making © Pearson Education Limited 2015 4 -19

4. 3 Describe the types of decisions and decision-making conditions that managers face. © Pearson Education Limited 2015 4 -20

Types of Problems 1. 2. Structured problem Unstructured problem © Pearson Education Limited 2015 4 -21

Types of Decisions Programmed: Repetitive decisions that can be handled using a routine approach. © Pearson Education Limited 2015 4 -22

Types of Decisions (cont. ) Nonprogrammed: Repetitive decisions that can be handled using a routine approach © Pearson Education Limited 2015 4 -23

Problems, Decision Types, and Organizational Levels © Pearson Education Limited 2015 4 -24

Decision-Making Conditions • Certainty • Risk • Uncertainty © Pearson Education Limited 2015 4 -25

4. 4 Discuss group decision-making. © Pearson Education Limited 2015 4 -26

How Do Groups Make Decisions? Decisions are often made by groups representing the people who will be most affected by those decisions. • Committees • Task forces • Review panels • Work teams © Pearson Education Limited 2015 4 -27

Advantages of Group Decision Making • • • More complete information Diversity of experiences/perspectives More alternatives generated Increased acceptance of solution Increased legitimacy © Pearson Education Limited 2015 4 -28

Disadvantages of Group Decision Making • • Time-consuming Minority domination Ambiguous responsibility Pressures to conform © Pearson Education Limited 2015 4 -29

Groupthink When a group exerts extensive pressure on an individual to withhold his or her different views in order to appear to be in agreement. • What it does • How it occurs • How to minimize it © Pearson Education Limited 2015 4 -30

When Are Groups Most Effective? Individual • Faster decision making • More efficient use of work hours Group • More accurate decisions • More creative • More heterogeneous representation • Greater acceptance of final solution © Pearson Education Limited 2015 4 -31

Improving Group Decision Making Make group decisions more creative by: 1. Brainstorming 2. The nominal group technique 3. Electronic meetings © Pearson Education Limited 2015 4 -32

4. 5 Discuss contemporary issues in managerial decision making. © Pearson Education Limited 2015 4 -33

Contemporary Issues National culture influences the way decisions are made and the degree of risk involved. © Pearson Education Limited 2015 4 -34

Contemporary Issues Creativity lets the decision maker: • Understand a problem more fully • See problems others can’t • Identify all viable alternatives © Pearson Education Limited 2015 4 -35

Contemporary Issues Design thinking: approaching management problems as designers approach design problems © Pearson Education Limited 2015 4 -36

Contemporary Issues Big data The vast amounts of quantifiable information that can be analyzed by highly sophisticated data processing. © Pearson Education Limited 2015 4 -37

© Pearson Education Limited 2015 4 -38