Managerial Decision Making Developed by Cool Pictures Multi

Decision Making is not Easy ÖIt must be done amid ever-changing factors: • Unclear information. • Often conflicting points of view. Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Types of Decisions Decision making the process of identifying problems and opportunities, then resolving them. Programmed decisions: • situations that occur often enough to enable decision rules to be developed. Nonprogrammed decisions: • are made in response to situations that are unique, are poorly defined and largely unstructured. • many involve strategic planning. Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Programmed and Nonprogrammed Decision Differences þ Certainty – all the information the decision maker needs is fully available. þ Risk – decision has clear-cut goals. – good information is available. – future outcomes associated with each alternative are subject to chance. þ Uncertainty – managers know which goals they with to achieve. – information about alternatives and future events is incomplete. – managers may have to come up with creative approaches to alternatives. þ Ambiguity – by far the most difficult decision situation. – goals to be achieved or the problem to be solved is unclear. – alternatives are difficult to define. – information about outcomes is unavailable. Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Conditions that Affect the Possibility of Decision Failure Organizational Problem Low Possibility of Failure Certainty Risk Uncertainty Programmed Decisions High Ambiguity Nonprogrammed Decisions Problem Solution Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Selecting a Decision Making Model • Depends on the manager’s personal preference. • Whether the decision is programmed or nonprogrammed. • Extent to which the decision is characterized by risk, uncertainty, or ambiguity. Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Three Decision Making Models Political Model Administrative Model Classical Model Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Classical Model Ä Based on economic conditions Ä Is considered to be normative Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Classical Model Ä Accomplishes goals that are known and agreed upon. Ä Strives for certainty by gathering complete information. Ä Criteria for evaluating alternatives are known. Ä Decision maker is rational and uses logic. Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Administrative Model ð How managers actually make decisions in situations characterized by non -programmed decisions, uncertainty, and ambiguity. ð Focuses on organizational, rather than economic. ð Two concepts are instrumental in shaping the administrative model. – bounded rationality: means that people have limits or boundaries on how rational they can be. – satisficing: means that decision makers choose the first solution alternative that satisfies minimal decision criteria. ð Is considered to be descriptive. ð It is considered intuitive. Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Political Model Ö Closely resembles the real environment in which most managers and decision makers operate. Ö Decisions are complex. Ö Disagreement and conflict over problems and solutions are normal. Ö Coalition building is important. Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Comparisons of: Classical, Political, & Administrative Models Classical Model Administrative Model Clear-cut problem and goals. Vague problem and goals. Pluralistic; conflicting goals. Condition of certainty. Condition of uncertainty/ambiguity. Full information about alternatives and their outcomes. Limited information about alternatives and their outcomes. Inconsistent viewpoints; ambiguous information. Rational choice by individual for maximizing outcomes. Satisfying choice for resolving problem using intuition. Bargaining and discussion among coalition members. Developed by Cool Pictures & Multi. Media Presentations Political Model Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Six Steps in the Managerial Decision Making Process Developed by Cool Pictures & Multi.

Diagnosis Questions (Kepner & Tregoe) ý What is the state of disequilibrium affecting us? ý When did it occur? ý Where did it occur? ý How did it occur? ý To whom did it occur? ý What is the urgency of the problem? ý What is the interconnectedness of events? ý What result came from what activity? Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Personal Decision Framework Situation: · Programmed/non-programmed · Classical, administrative, political · Decision steps Personal Decision Style: ·Directive ·Analytical ·Conceptual ·Behavioral Decision Choice: ·Best Solution to Problem F Directive Style: used by people who prefer simple, clear-cut solutions. F Analytical Style: used by managers who like to consider complex solutions based on as much data as they can gather. F Conceptual Style: used by people who like to consider a broad amount of information, more socially oriented. F Behavioral Style: often the style adopted by managers having a deep concern for others. Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Participation in Decision Making Vroom-Jago Model Ü Helps gauge the appropriate amount of participation for subordinates. Leader Participation Styles Ü Five styles available, depending on the situation. Ü Participation in decision making ranging from highly autocratic to highly democratic. Diagnostic Questions Ü Decision participation depends on a number of situational factors. Ü Questions deal with the problem, the required level of decision quality, and the importance of having subordinates commit to the decision. Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Participation in Decision Making Diagnostic Questions Decision significance Importance of commitment Leader expertise Likelihood of commitment Group support for goals Group expertise Team competence Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

New Decision Making Approaches ! Lean, Don’t Punish ! Know When to Bail ! Practice the Five Whys ! Build Collective Intuition ! Engage in Constructive Conflict Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Information Technology • The hardware, software, telecommunications, database management, and other technologies used to store, process, and distribute information. Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Characteristics of High-Quality Information Timeliness Currency Frequency Time Period Form Clarity Detail Order Presentation Media Content Accuracy Relevance Completeness Conciseness Scope Performance Source: Adapted from James A. O’Brien, Introduction to Information Systems, 8 th ed. (Burr Ridge, Ill, Irwin, 1997), 284 -285. Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Types of Information Systems Operations Information Systems Transaction-processing systems. Process control systems. Office automation systems. Management Information Systems Information-reporting systems. Decision support systems. Group decision support systems. Executive information systems. Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Basic Elements of Management Information Systems Operations Information Systems SOURCE: Adapted from Ralph M. Stair and George W. Reynolds, Principles of Information Systems: A Managerial Approach, 4 th ed. (Cambridge, Mass. : Course Technology, 1999), 391. Developed by Cool Pictures & Multi. Media Presentations Corporate and External Databases Decision Support Systems Management Information Systems Executive Information Systems Reporting Systems Group Decision Support System Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Strategies for Integrating Bricks and Clicks In-House Division Partnership Spin-Off Company Integration Separation • Brand recognition • Focus • Purchasing leverage • Flexibility • Shared information • Responsiveness • Distribution efficiencies • Entrepreneurial culture SOURCE: Based on Ranjay Gulati and Jason Garino, “Get the Right Mix of Bricks and Clicks, ” Harvard Business Review (May-June 2000), 107 -114. Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Management and Technology Implications Improved employee effectiveness. Increased efficiency. Empowered employees. Information overload. Enhanced collaboration. Organizational learning. Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.