Decisions

4 Conditions for a Decision zGap between Reality and Ideal zNoticeable zMotivated to Reduce zCan Be Reduced

Decisions: Are They??? zYours to make? zEffective? zTimely? zPertinent zDid you decide not to decide?

Types of Decision Making Programmed Decisions: routine, almost automatic process. Non-programmed Decisions: unusual situations that have not been often addressed. Structured Decisions: Set way to solve Non- Structured Decisions

The Classical Model List alternatives & consequences Rank each alternative from low to high Select best alternative Assumes all information is available to manager Assumes manager can process information Assumes manager knows the best future course of the organization Figure 6.1

The Administrative Model lBounded rationality: There is a large number of alternatives and information is vast so that managers cannot consider it all. lIncomplete Information

Incomplete Information Factors Incomplete information exists due to many issues: yRisk: managers know a given outcome can fail or succeed and probabilities can be assigned. y Uncertainty: probabilities cannot be given for outcomes and the future is unknown. yAmbiguous information: information whose meaning is not clear.

Incomplete Information Factors zTime constraints and Information costs: Managers do not have the time or money to search for all alternatives. zSatisficing: Managers explore a limited number of options and choose an acceptable decision rather than the optimum decision. yManagers assume that the limited options they examine represent all options.

Human Behavior zRegress toward Mean zAnchoring zQuantrophrenia Obsessed With Numbers zMIS vs OR zPolitical Considerations

Decision Making Steps zRecognize the Need zFrame the Problem zGenerate and Assess Alternatives zChoose Among Alternatives zImplement zLearn from Feedback

Creating Senge’s Learning Organization Personal Master Mental Models: challenge employees to find new, better methods Team Learning Build a Shared Vision Systems Thinking: know that actions in one area of the firm impacts all others.

Evaluating Alternatives zIs it legal? zIs it ethical? zIs it economically feasible? zIs it practical?

Types of Cognitive Biases Prior Hypothesis Representativeness Illusion of Control Escalating Commitment CognitiveBiases Figure 6.6

Improved Group Decision Making zDevil’s Advocacy: one member of the group acts as the devil’s advocate and critiques the group zDialectical inquiry: two different groups are assigned to the problem and each group evaluates the other group’s alternatives. zPromote diversity: by increasing the diversity in a group, a wider set of alternatives may be considered.

Building Group Creativity zBrainstorming: managers meet face-to- face to generate and debate many alternatives. xGroup members are not allowed to evaluate alternatives until all alternatives are listed. xBe creative and radical in stating alternatives. xWhen all are listed, then the pros and cons of each are discussed and a short list created. zProduction blocking is a potential problem with brainstorming. xMembers cannot absorb all information being presented during the session and can forget their own alternatives.

Building Group Creativity zNominal Group Technique: Provides a more structured way to generate alternatives in writing. xAvoids the production blocking problem. xSimilar to brainstorming except that each member is given time to first write down all alternatives he or she would suggest. xAlternatives are then read aloud without discussion until all have been listed. xThen discussion occurs and alternatives are ranked.

Building Group Creativity zDelphi Technique: provides for a written format without having all managers meet face-to-face. xProblem is distributed in written form to managers who then generate written alternatives. xResponses are received and summarized by top managers. xThese results are sent back to participants for feedback, and ranking. xThe process continues until consensus is reached. yDelphi allows distant managers to participate.