The Managerial DecisionMaking Process E FRANK HARRISON Fifth

The Managerial Decision-Making Process E. FRANK HARRISON Fifth Edition Copyright © 1999 Houghton Mifflin Company. All rights reserved. 5 -0

The Managerial Decision-Making Process Fifth Edition Author: E. Frank Harrison, Ph. D. Slides by Monique A. Pelletier, Ph. D. Copyright © 1999 Houghton Mifflin Company. All rights reserved. 5 -1

Chapter 5 Eclectic Approaches to Decision Making Copyright © 1999 Houghton Mifflin Company. All rights reserved. 5 -2

Decision-Making Models n Rational model n Organizational model n Political model n Process model Copyright © 1999 Houghton Mifflin Company. All rights reserved. 5 -3

Table 5. 1 A Typology of Decision-Making Models Model Primary Decision-Making Criterion Key Ingredients Rational Maximized information; no cog)classical) outcome constraints; Key Assumptions Objectives; specific states of nature; subjective probabilities; quantified utilities (payoffs); Fixed objectives; unlimited nitive limitations; no time and cost exhaustive alternatives; disregard of environment; quantifiable and transitive alternatives; controlled computational decision-making strategy; short- variables; closed system; quantitatively limited term horizon; highly structured process outcomes Organizational Satisficing Objectives; general states of nature; limited Attainable objectives; limited information; cogni)neoclassical) outcome subjective probabilities; partially quantified tive limitations; time and cost constraints; parutilities (payoffs); nonexhaustive alternatives; tially quantifiable and intransitive alternatives; sensitive environment; judgmental decisionopen system; qualitatively -- and quantitatively-making strategy; short-term horizon; moderately limited outcomes structured process Political Acceptable information; no cog)adaptive) outcome constraints; Objectives; general states of nature; no probabilities; unquantifiable utilities (payoffs); Limited objectives; unlimited nitive limitations; no time and cost nonexhaustive alternatives; dominant environ- nonquantifiable and generally transitive alternament; compromise or bargaining decision-making tives; open system; environmentally limited strategy; restricted number of outcomes; short- Copyright © 1999 Houghton Mifflin Company. All rights reserved. outcomes; no "right" decision 5 -4

The Rational Model n Founded on quantitative disciplines n Maximized outcome n Computational decision-making strategy n Closed decision-making process n Fixed objectives n No bounded rationality Copyright © 1999 Houghton Mifflin Company. All rights reserved. 5 -5

The Organizational Model n Attainable objectives n Bounded rationality n Short-term horizon n Qualitative orientation n Judgmental decision-making strategy n Open decision-making process n Satisficing outcome Copyright © 1999 Houghton Mifflin Company. All rights reserved. 5 -6

The Political Model n Acceptable outcomes n Compromise decision-making strategy n No bounded rationality n Ambiguous or nonexistent objectives n Incremental or marginal choices n Short-term horizon Copyright © 1999 Houghton Mifflin Company. All rights reserved. 5 -7

The Process Model n Dynamic objectives n Objectives-oriented outcomes n Long-term horizon n Accommodates innovation n Bounded rationality n Judgmental decision-making strategy n Open decision-making process Copyright © 1999 Houghton Mifflin Company. All rights reserved. 5 -8

Interdisciplinary Framework of Decision Making n Behavioral disciplines n Quantitative disciplines n Behavioral/quantitative fusion Copyright © 1999 Houghton Mifflin Company. All rights reserved. 5 -9

Figure 5. 1 The Interdisciplinary Framework of Decision Making • Philosophy Values and ethics • Economics • Statistics Utility and probability The decision. Individual • Psychology behavior making process • Sociology Group • Social behavior psychology Models and Environment simulation • Mathematics Copyright © 1999 Houghton Mifflin Company. All rights reserved. • Law • Anthropology • Political science 5 - 10