Chapter 3: Information and Decision-Making Please note that in order to use the embedded videos in this presentation, you must select “Enable Content” in your security settings for the file. Business Leadership: Management Fundamentals John R. Schermerhorn, Jr., Barry Wright, and Lorie Guest © John Wiley & Sons Canada, Ltd.

Planning Ahead — Chapter 3 Learning Goals Understand the role of information in the management process Understand how managers use information to make decisions Use the steps in the decision-making process Understand the current issues in managerial decision-making

Information and Knowledge— basic linkages Knowledge and knowledge workers provide a decisive competitive factor in today’s economy Knowledge worker: Someone whose value to the organization rests with intellect, not physical capabilities Intellectual capital: Shared knowledge of a workforce that can be used to create wealth

Information and knowledge — basic linkages (cont.) Knowledge and intellectual capital are irreplaceable organizational resources The productivity of knowledge and knowledge workers depends on: Computer competency Information competency

What is useful information? Data Raw facts and observations Information Data made useful for decision-making Information drives management functions Characteristics of useful information: Timely High quality Complete Relevant Understandable

What is information technology? Helps to acquire, store, process and transmit information

Figure 3.1 Internal and external information needs of an organization

Implications of IT within organizations Facilitation of communication and information sharing Operating with fewer middle managers Flattening of organizational structures Faster decision making Increased coordination and control

Implications of IT for relationships with external environment Helps with customer relationship management Helps organizations with supply chain management Helps in monitoring outsourcing and other business contracts

Implications of IT for relationships with Internal environment Quick decision-making at lower levels translate into higher profit margins Top level management well informed

Ceo john chambers (harvard Business) Teamwork and Collaboration, Harvard Business Publishing Series (external link) Teamwork and Collaboration from the Harvard Business Publishing series http://www.youtube.com/watch?feature=player_embedded&v=9WX7BNnYTf8 Please note that in order to use the embedded videos in this presentation, you must select “Enable Content” in your security settings for the file.

Information needs of organizations Information exchanges with the external environment: Gather intelligence information Provide public information Information exchanges within the organization: Facilitate decision-making Facilitate problem solving

Basic information system concepts Use of the latest IT to collect, organize, and distribute data for use in decision-making Management Information System (MIS) Specifically designed to meet the information needs of managers in daily decision-making

Figure 3.3 Information technology is breaking barriers and changing organizations. Management 2e - Chapter 13

Managerial advantages of IT utilization Planning advantages: Better and more timely access to useful information Involving more people in planning Organizing advantages: More ongoing and informed communication among all parts of the organization Improved co-ordination and integration

Managerial advantages of IT utilization (cont.) Leading advantages: Improved communication with staff and stakeholders Keeping objectives clear Controlling advantages: More immediate measures of performance results Allows real-time solutions to performance problems

Figure 3.4 The manager as an information-processing nerve centre Management 2e - Chapter 13

Managers as problem-solvers Problem solving: The process of identifying a discrepancy between actual and desired performance and taking action to resolve it A decision: A choice among possible alternative course of action A performance deficiency: Actual performance being less than desired performance A performance opportunity: Actual performance being better than desired performance

Problem-solving approaches or styles Problem avoiders: Inactive in information gathering and solving problems Problem solvers: Reactive in gathering information and solving problems Problem seekers: Proactive in anticipating problems and opportunities and taking appropriate action to gain an advantage

Types of thinking Systematic Thinkers Rational step-by-step analytical breaks problems into smaller components Intuitive Thinkers Rely on hunches and feelings Flexible and spontaneous See “big picture” Multidimensional Thinkers Multidimensional thinking applies both intuitive and systematic thinking Effective multidimensional thinking requires skill at strategic opportunism

Cognitive styles Sensation Thinkers emphasize the impersonal rather than the personal and take a realistic approach to problem solving. Intuitive Thinkers are comfortable with abstraction and tend to be idealistic. Have a spontaneous fashion. Intuitive Feelers prefer broad and global issues and are comfortable with intangibles. Sensation Feelers emphasize analysis and human relations and tend to be realistic and prefer facts.

Figure 3.6 different cognitive styles in decision-making

Programmed decisions Apply solutions that are readily available from past experiences to solve structured problems Structured problems are ones that are familiar, straightforward, and clear with respect to information needs Best applied to routine problems that can be anticipated

Nonprogrammed decisions Develop novel solutions to meet the demands of unique situation that present unstructured problems Unstructured problems are ones that are full of ambiguities and information deficiencies Commonly faced by higher-level management

Crisis decision-making A crisis involves an unexpected problem that can lead to disaster if not resolved quickly and appropriately Rules for crisis management: Figure out what is going on Remember that speed matters Remember that slow counts, too Respect the danger of the unfamiliar Value the skeptic Be ready to “fight fire with fire”

Decision environments Certain environments: Offer complete information about possible action alternatives and their outcomes Risk environments: Lack complete information about action alternatives and their consequences, but offer some estimates of probabilities of outcomes for possible action alternatives Uncertain environments: Information is so poor that probabilities cannot be assigned to likely outcomes of known action alternatives

Figure 3.7 Three environments for managerial decision-making and problem solving

Five-step decision-making process Identify and define the problem Generate and evaluate possible solutions Make decision and conduct ethics double check Implement the decision Evaluate results

Figure 3.8 Steps in managerial decision- making and problem solving

Decision-making process Step 1: Identify and define the problem Focuses on information gathering, information processing, and deliberation Decision objectives should be established Common mistakes in defining problems: Defining the problem too broadly or too narrowly Focusing on symptoms instead of causes Choosing the wrong problem

Decision-making process Step 2: Generate and evaluate possible solutions Potential solutions are formulated and more information is gathered, data are analyzed , the advantages and disadvantages of alternative solutions are identified Approaches for evaluating alternatives: Stakeholder analysis Cost-benefit analysis

decision-making process Step 2: Generate and evaluate possible solutions (cont.) Criteria for evaluating alternatives: Benefits Costs Timeliness Acceptability Ethical soundness Common mistakes: Selecting a particular solution too quickly Choosing a convenient alternative that may have damaging side effects or may not be as good as other alternatives

Decision-making process Step 3: Decide on a preferred course of action Classical decision model Managers act rationally in a certain world Managers face clearly defined problems and have complete knowledge of all possible alternatives and their consequences Results in an optimizing decision

Decision-making process Step 3: Decide on a preferred course of action (cont.) Behavioural decision model Managers act in terms of what they perceive about a given situation Recognizes limits to human information-processing capabilities Cognitive limitations Bounded rationality Results in a satisficing decision

Figure 3.9 Differences in the classical and behavioural models of managerial decision making

Decision-making process Step 4: Implement the decision solution Involves taking action to make sure the solution decided upon becomes a reality Managers need to have willingness and ability to implement action plans Lack-of-participation error should be avoided

Decision-making process Step 5: Evaluate results Involves comparing actual and desired results Positive and negative consequences of chosen course of action should be examined If actual results fall short of desired results, the manager returns to earlier steps in the decision-making process

Creativity in decision-making The generation of a novel idea or unique approach that solves a problem to take advantage of an opportunity More likely: Task expertise – something one is good at or knows about Task motivated – people work exceptionally hard to resolve a problem or exploit and opportunity Organizations should create an environment that supports and encourages creativity

Video: CNBC video on Lonnie Johnson and the Super Soaker Super Soaker inventor, Lonnie Johnson (external link) Link http://www.youtube.com/watch?v=HpvEF_GIhmw

- Darryl F. Zanuck, Head of 2oth Century Fox, 1946 “Television won’t be able to hold onto any market it captures after the first six months. People will soon get tired of the staring into a box every night.” - Darryl F. Zanuck, Head of 2oth Century Fox, 1946

“That’s an amazing invention, but who would ever want to use one of them.” - US President Rutherford B. Hayes, after participating In a trial telephone conversation between Washington And Philadelphia, 1876

Thomas J. Watson Sr., Chairman of IBM, 1943 “I think there is a world market for about five computers.” Thomas J. Watson Sr., Chairman of IBM, 1943 1899 – Charles Duell, director of the US Patent Office, suggested that the government close the office because everything that could be invented had been invented. 1923 – Robert Millikan, noted physicist and winner of the Nobel Prize, said that there was absolutely no likelihood that man could harness the power of the atom. Phillip Reiss, a German, invented a machine that could transmit music in 1861. He was days away from inventing the telephone. Every communication expert in Germany persuaded him there was no market for such a device, as the telegraph was good enough. Fifteen years later, Alexander Graham Bell invented the telephone and become a multimillionaire. Chester Carlson invented xerography in 1938. Virtually every major corporation, including IBM and Kodak, scoffed at his idea and turned him down. They claimed that since carbon paper was cheap and plentiful, no one in their right mind would buy an expensive copier. Fred Smith, while at Yale, came up with the concept of Federal Express. The US postal service, UPS and his own business professor and every delivery expert in the US predicted his enterprise would fail.

Right Brain vs. Left Brain Imagination Intuition Spontaneity Emotion Logic Order Method Analysis

Characteristics of creative people Work with high energy Identify problems, plan, make decisions Hold ground in face of criticism Accept responsibility for what happens Be resourceful, even in difficult situations Use both systematic and intuitive in problem-solving Think “outside the box” Synthesize and find correct answers Look at divers ways to solve problems Transfer learning from one setting to others Be objective, willing to “step back” and question assumptions

Albert Einstein’s Needle in the Haystack Question: “What is the difference between you and the average person?” Response: “If you asked the average person to find a needle in the haystack, the person would stop when he or she found a needle. I, on the other hand, would tear through the entire haystack looking for all the possible needles."

What is one-half of thirteen? Activity What is one-half of thirteen?

Activity (cont.) 6.5 Six and one-half Thir & teen = 4 (4 letters on each side) 13 = 1,3 XI II = 11, 2 XIII = 8, 8 (Halving horizontally gives us 8 on the top and 8 on the bottom)

Creativity Exercise Most people see a pattern as a square composed of smaller squares or circles, or as alternate rows of squares and circles. It isn’t easily seen as columns of alternate squares and circles. Once pointed out, it is visible.

Activity 1 The diagram represents twelve matchsticks positioned to represent a square made up of four equal squares. Can you, by moving only three of these sides, make three equal-sized squares?

Solution 1 2 3

Activity 2 Add one line to the following to make it into a 6. I X

Solution S I X

Group Decisions Advantages: Greater amounts of information, knowledge and expertise are available Expand number of alternatives Avoids tunnel vision Increase understanding and acceptance of outcomes Increase commitments of members to work hard Disadvantages: Social pressures to conform Minority domination may occur Decision making takes longer thus more costly

When group decision-making works best Individual lacks expertise or information Problem is unclear and hard to define Acceptance by others needed for effective implementation Time is sufficient for group involvement

Ethical decision making Any decision should meet “ethics double check” mentioned in step 3 of the decision-making process How would I feel if my family found out about this decision? How would I feel if this decision were published in the local newspaper or on the Internet? Think of a person you know or know of (in real life or fiction) who has the strongest character and best ethical judgement. Then ask yourself – what would that person do in your situation? Any discomfort in answering these questions indicates the decision has ethical shortcomings.

Ethical decision making (cont.) Considering the ethics of a proposed decision may result in better decisions and prevention of costly litigation Ethical decisions satisfy the following criteria: Utility Rights Justice Caring

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