1. Managerial Decision Making Chapter Three Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

2. 3-2 Learning Objectives LO1 Describe the kinds of decisions you will face as a manager. LO2 Summarize the steps in making “rational” decisions. LO3 Recognize the pitfalls you should avoid when making decisions. LO4 Evaluate the pros and cons of using a group to make decisions.

3. 3-3 Learning Objectives (cont.) LO5 Identify procedures to use in leading a decision-making group LO6 Explain how to encourage creative decisions LO7 Discuss the process by which decisions are made in organizations LO8 Describe how to make decisions in a crisis

4. 3-4 Characteristics of Managerial Decisions Figure 3.1

5. 3-5 Lack of Structure  Programmed decisions  Decisions encountered and made before, having objectively correct answers, and solvable by using simple rules, policies, or numerical computations.  Nonprogrammed decisions  New, novel, complex decisions having no proven answers.

6. 3-6 Uncertainty and Risk  Risk  The state that exists when the probability of success is less than 100 percent and losses may occur.

7. 3-7 Conflict  Conflict  Opposing pressures from different sources, occurring on the level of psychological conflict or of conflict between individuals or groups.

8. 3-8 Evaluating Alternatives  Evaluating alternatives  Involves determining the value or adequacy of the alternatives that were generated  Which solution will be the best?

9. 3-9 Evaluating Alternatives  Contingency plans  Alternative courses of action that can be implemented based on how the future unfolds.

10. 3-10 Making the Choice  Satisficing  Choosing an option that is acceptable, although not necessarily the best or perfect  Optimizing  Achieving the best possible balance among several goals

11. 3-11 The Best Decision  Vigilance  A process in which a decision maker carefully executes all stages of decision making

12. 3-12 Psychological Biases  Discounting the future  A bias weighting short-term costs and benefits more heavily than longer- term costs and benefits.

13. 3-13 Managing Group Decision Making

14. 3-14 Brainstorming  Brainstorming  A process in which group members generate as many ideas about a problem as they can; criticism is withheld until all ideas have been proposed.

15. 3-15 Models of Organizational Decision Processes  Bounded rationality  A less-than-perfect form of rationality in which decision makers cannot be perfectly rational because decisions are complex and complete information is unavailable or cannot be fully processed  Incremental model  Model of organizational decision making in which major solutions arise through a series of smaller decisions