CHAPTER 3 INFORMATION AND DECISIONMAKING Business Leadership Management

CHAPTER 3: INFORMATION AND DECISION-MAKING Business Leadership: Management Fundamentals John R. Schermerhorn, Jr. , Barry Wright, and Lorie Guest © John Wiley & Sons Canada, Ltd.

MANAGERS AS PROBLEM-SOLVERS • Problem solving: – The process of identifying a ? between actual and desired performance and taking action to resolve it • A decision: – A ? among possible alternative course of action • A performance ? : – Actual performance being less than desired performance • A performance ? : – Actual performance being better than desired performance 2

PROBLEM-SOLVING APPROACHES OR STYLES • Problem ? : Inactive in information gathering and solving problems • Problem ? : Reactive in gathering information and solving problems • Problem ? : Proactive in anticipating problems and opportunities and taking appropriate action to gain an advantage 3

TYPES OF THINKING Systematic Thinkers • ? Intuitive Thinkers • ? Multidimensional Thinkers • Multidimensional thinking applies both ? thinking 4

PROGRAMMED DECISIONS • Apply solutions that are readily available from ? to solve structured problems • Structured problems are ones that are ? with respect to information needs • Best applied to ? problems that can be anticipated

NONPROGRAMMED DECISIONS • Develop novel solutions to meet the demands of unique situation that present unstructured problems • Unstructured problems are ones that are full of ? and information ? • Commonly faced by higher-level management 6

CRISIS DECISION-MAKING • A crisis involves an ? that can lead to ? if not resolved quickly and appropriately • Rules for crisis management: – Figure out what is going on – Remember that speed matters – Remember that slow counts, too – Respect the danger of the unfamiliar – Value the skeptic – Be ready to “fight fire with fire”

DECISION ENVIRONMENTS • ? environments: – Offer complete information about possible action alternatives and their outcomes • ? environments: – Lack complete information about action alternatives and their consequences, but offer some estimates of probabilities of outcomes for possible action alternatives • ? environments: – Information is so poor that probabilities cannot be assigned to likely outcomes of known action alternatives

FIGURE 3. 7 THREE ENVIRONMENTS FOR MANAGERIAL DECISION-MAKING AND PROBLEM SOLVING

FIVE-STEP DECISION-MAKING PROCESS 1. 2. 3. 4. 5. ? ? ?

FIGURE 3. 8 STEPS IN MANAGERIAL DECISION- MAKING AND PROBLEM SOLVING

DECISION-MAKING PROCESS Step 1: Identify and define the problem • Focuses on information ? , and deliberation • Decision objectives should be established • Common mistakes in defining problems: – Defining the problem too broadly or too narrowly – Focusing on symptoms instead of causes – Choosing the wrong problem

DECISION-MAKING PROCESS Step 2: Generate and evaluate possible solutions • Potential solutions are ? and more information is ? , data are ? , the ? and ? of alternative solutions are identified • Approaches for evaluating alternatives: – Stakeholder analysis – Cost-benefit analysis

DECISION-MAKING PROCESS Step 2: Generate and evaluate possible solutions (cont. ) • Criteria for evaluating alternatives: –? –? –? • Common mistakes: – Selecting a particular solution too ? – Choosing a ? alternative that may have damaging side effects or may not be as good as other alternatives

DECISION-MAKING PROCESS Step 3: Decide on a preferred course of action • Classical decision model – Managers act rationally in a certain world – Managers face clearly defined problems and have complete knowledge of all possible alternatives and their consequences – Results in an optimizing decision

DECISION-MAKING PROCESS Step 3: Decide on a preferred course of action (cont. ) • Behavioural decision model – Managers act in terms of what they perceive about a given situation – Recognizes limits to human information-processing capabilities

FIGURE 3. 9 DIFFERENCES IN THE CLASSICAL AND BEHAVIOURAL MODELS OF MANAGERIAL DECISION MAKING

DECISION-MAKING PROCESS Step 4: Implement the decision solution • Involves ? to make sure the solution decided upon becomes a reality • Managers need to have ? and ? to ? action plans • Lack-of-participation error should be avoided

DECISION-MAKING PROCESS Step 5: Evaluate results • Involves comparing ? and ? results • ? and ? consequences of chosen course of action should be examined • If actual results fall short of desired results, the manager returns to earlier steps in the decision-making process