3 LEARNING OBJECTIVES/OUTCOMES Explain why decision making is an important component of good management.Discuss the difference between programmed and non-programmed decision and the decision characteristics of certainty and uncertainty.Explain the process by which managers actually make decisions in the real world.Identify the six steps used in managerial decision making.Describe four personal decision styles used by managers and explain the biases that frequently cause managers to make bad decisions.Identify and explain techniques for innovative group decision making.
4 DECISION – is a choice made from available alternatives. DECISION MAKING – is the process of identifying problems and opportunities and then resolving them
5 TYPES OF DECISIONS AND PROBLEMS Programmed DecisionsNon-programmed Decisions
6 Nonprogrammed Decisions Programmed DecisionsNonprogrammed DecisionsProblemsituations that occur often to enable rulessituations that are unique or poorly defined and unstructuredProcedureDependence on policies, rules, and definite procedures.Necessity for certainty, intuition, tolerance for ambiguity, creative problem solving.ExamplesBusiness firmPeriodic reorders of inventory.Diversification into new products and markets.UniversityNecessary grade-point average for good academic standing.Construction into new classrooms and facilities.Health careProcedure for admitting patients.Purchase of experimental equipment.GovernmentMerit system for promotion of state employees.Reorganization of state government agencies.
9 FACING CERTAINTY AND UNCERTAINTY Certainty: the information needed is availableRisk: the future outcome is subject to chance regardless of the information availableUncertainty: goals are clear but information about future events are incompleteAmbiguity: the goals and/or problem are unclear and difficult to define
10 CONDITIONS THAT AFFECT THE POSSIBILITY OF DECISION FAILURE Organizational ProblemLOW Possibility of Failure HIGHCertainty Risk Uncertainty AmbiguityProgrammed Nonprogrammed Decisions DecisionsProblem Solution
11 (2) Ambiguity behavior changes with age AGING AND DECISION MAKING: HOW AGING AFFECTS DECISIONS UNDER UNCERTAINTY (Research Study)(1) Older adults are less willing to take financial risks than young adults(2) Ambiguity behavior changes with age(3) Young and older subjects gamble less in ambiguity conditions than in risk conditions.
12 The study only partially confirms our hypotheses: As older adults seem to be equally willing to take risks as young adults are (refuting hypothesis)Ambiguity behavior effectively differs with age (confirming hypothesis 2)And young subjects do gamble less in ambiguous conditions than in risky conditions, but older adults show no significant difference between risk and ambiguity behavior (partially confirming hypothesis 3).
13 DECISION-MAKING MODELS CLASSICAL MODELADMINISTRATIVE MODELPOLITICAL MODEL
14 Classical Model - A decision-making model based on the assumption that managers should make logical decisions that will be in the organization’s best economic interests. Views the manager as acting rationally in a certain world. Decision maker is fully informed about the possible alternative.
15 Administrative Model - A decision-making model that describes how managers actually make decisions in situations characterized by non-programmed decisions, uncertainty, and ambiguity.Bounded Rationality - People have the time and cognitive ability to process only a limited amount of information on which to base decisions.Satisficing - To choose the first solution alternative that satisfies minimal decision criteria, regardless of whether better solutions are presumed to exist.Intuition - The immediate comprehension of a decision situation based on past experience but without conscious thought.
16 Political Model –is useful for making non-programmed decisions when conditions are uncertain, information is limited and there are manager conflicts, what goals to pursue or what course of action to take.Coalition – is an informal alliance among managers who support a specific goal.Coalition Building – is the process of forming alliances among managers.
17 THE DECISION - MAKING PROCESS Step 1: Identify and Define the ProblemStep 2: Generate and Evaluate Alternative SolutionsStep 3: Decide on Preferred Cause of ActionStep 4: Implement the DecisionStep 5: Evaluate ResultsDouble check on ethical reasoning
18 BARRIERS TO EFFECTIVE DECISION MAKING PSYCHOLOGICAL BIASESIllusion of controlFraming effectsDiscount the futureTIME PRESSURESSOCIAL REALITIES
19 PERSONAL DECISION FRAMEWORK Directive StyleAnalytical StyleConceptual StyleBehavioral Style
21 Being influenced by initial impressions. Seeing what you want to seeOverconfidenceRely Too Much on Past ExperienceAddicted to Corporate PoliticsLack Clarity of goalsMismanage ResourcesDon’t See the OpportunityDon’t Trust Themselves to Lead
22 I N A P P R O P RIAT E S E L F - I N T E REST WHAT CAN LEADERS DO TO INCREASE THEIR CHANCES OF AVOIDING PITFALLS? RED FLAG CONDITIONSM I S L E A D I NGE X P E R I ENCE SI N A P P R O P RIAT E S E L F - I N T E RESTM I S L E A D I NGP R E J U D G E MENT SI N A P P R O PRIA T EA T T A C H MENTS
24 METHODS AND TECHNIQUES ADVANTAGES AND PITFALLS OF GROUP DECISION MAKINGSTRUCTURED CONFLICTNOMINAL GROUP TECHNIQUEDELPHI TECHNIQUESTEPLADDER TECHNIQUEELECTRONIC BRAINSTORMING
25 ADVANTAGESGroup can think better than individuals because they can view problems in multiple perspectives because group members usually possess different knowledge, skills abilities and experiences. They can perform better on complex tasks and make better decisions than individuals.Group can find and access much more information than individuals alone.With groups we can generate more alternative solutionsPeople who participate in a group discussion are more likely to understand why the decision was made. They will have heard the relevant arguments both for the chosen alternative and against the rejected alternatives.Group discussion typically leads to a higher level of commitment to the decision. Buying into the proposed solution translates into high motivation to ensure that it is executed well.
26 PITFALLSGroupthink – a barrier to good decision making caused by pressure within the group for members to agree with each other. It occurs in a highly cohesive group when group members feel intense pressure to agree with each other so that the group can approve a proposed solution.Groupthink is most likely to occur under the following conditions.The group is insulated from others with different perspectiveSometimes one group member dominates the discussionThe group leader begins by expressing a strong preference for a particular decision.The group has to established procedure for systematically defining problems and exploring alternatives.Group members have similar backgrounds and experiencesGoal displacement often occurs in groups
27 STRUCTURED CONFLICTMost people view conflict negatively. Yet the right kind of conflict can lead to much better group decision making
28 Cognitive Conflict – C - Type conflicts - Focuses on problem and issue related differences of opinion.Two methods of introducing structured c-type conflict into the group decision making process.Devil’s AdvocacyDialectical InquiryAffective Conflict – A- Type Conflict -Refers to the emotional reaction that can occur when disagreements become personal rather than professional.
29 DELPHI TECHNIQUE A decision making method in which members of a panel of experts respond to questions and to each other until reaching agreement on an issue. STEPLADDER TECHNIQUE A decision making method in which group members are added to a group discussion one at a time (like a stepladder) the existing group members listen to each new members thought, ideas, and recommendations; then the group shares the ideas and suggestions that it had already considered, discusses the new and old ideas, and makes a decision.
30 ELECTRONIC BRAINSTORMING Brainstorming - a decision making method in which group members build on each other’s’ ideas to generate as many alternative solutions as possible.Electronic Brainstorming – a decision making method in which group members use computers to build on each other’s ideas and generate as many alternative solution as possible. This overcomes the disadvantages associated with face-to-face brainstorming.
31 Disadvantages:Production Blocking – a disadvantage or faced-to-faced brainstorming in which a group must wait to share an idea because another member is presenting an idea.Evaluation Apprehension – fears of what others will think of you.
32 ORGANIZATIONAL DECISION MAKING MANAGEMENT SCIENCE APPROACHTHE CARNEGIE MODELINCREMENTAL MODELGARBAGE SCAN MODEL
33 MANAGEMENT SCIENCE APPROACH Use of statistics to identify relevant variablesRemove human elementVery successful for military problemsGood tool for decisions where variables can be identified and measuredA drawback of management science is that quantitative data are not rich and lack tacit knowledge
35 INCREMENTAL MODELManagers select alternative courses of action that are only slightly, or incrementally, different from those used in the past.Focus on structured sequence of activities from discovery to solutionPerceived to lessen the chances of making a mistakeThey correct or avoid mistakes through a succession of incremental changesTries to explain how organizations improve their programmed decisions over timeLarge decisions are a collection of small choicesDecision interrupts are barriers– Identification Phase– Development Phase– Selection Phase– Dynamic Factors
36 GARBAGE CAN MODELModel of organizational decision making depicting a chaotic process and seemingly random decisionsDecision makers are as likely to start decision making from the solution side as the problem sideCreate decision-making opportunities that they can solve with ready-made solutions based on their competencies and skillsDifferent coalitions may champion different alternativesDecision making becomes a “garbage can” in whichproblems, solutions, and people all mix and contendfor organizational action.Selection of an alternative depends on whichperson’s or group’s definition of the current situation holds sway.
37 Consequences of the Garbage Can Model 1 Consequences of the Garbage Can Model 1. Solutions may be proposed even when problems do not exist 2. Choices are made without solving Problems 3. Problems may persist without being solved 4. A few problems are solved
38 REFERENCES:Williams, C. Effective Management: A Multimedia Approach, 5th Edition, 2012, South Western, Cengage Learning. Daft, Richard. New Era of Management, 9th Edition, 2010, South Western, Cengage Learning.Alec Sproten, Carsten Diener ,Christian Fiebach, Christiane Schwieren. University of Heidelberg Department of Economics Discussion Paper Series No. 508Aging and decision making: How aging affects decisions under uncertainty. December 2010Bateman, Thomas S. and Snell Scott A. Management Leading & Collaborating in a Competitive World, 7th Edition, 2007, Mc Graw-Hill International Edition John R. Schermerhorn . Management ,11th Edition, Oct 18, 2010, John Wiley & Sonsdecision case studies.doc&filename=decision_case_studies.doc.https://www.google.com.ph/search?q=DECISION+MAKING+CASE+STUDIES&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a&channel=sb&gfe_rd=cr&ei=nxoRVIP7C8uL8QeB34DYDA#Andrew Campbell and Jo Whitehead. The Ashridge Journal: Think again Spring Erin White. Wall Street Journal -Business :Why do managers make bad decisions? 2009