Fundamentals of Core Concepts & Applications Griffin Griffin Third Edition MANAGEMENT PowerPoint Presentation by Charlie Cook Copyright © 2003 Houghton Mifflin Company. All rights reserved. Chapter 4 Managing Decision Making

Copyright © by Houghton Mifflin Company. All rights reserved. 4–24–2 Chapter Outline The Nature of Decision Making –Decision Making Defined –Types of Decisions –Decision-Making Conditions Rational Perspectives on Decision Making –The Classical Model of Decision Making –Steps in Rational Decision Making Behavioral Aspects of Decision Making –The Administrative Model –Political Forces in Decision Making

Copyright © by Houghton Mifflin Company. All rights reserved. 4–34–3 Chapter Outline (cont’d) Behavioral Aspects of Decision Making (cont’d) –Intuition and Escalation of Commitment –Risk Propensity and Decision Making –Ethics and Decision Making Group and Team Decision Making in Organizations –Forms of Group and Team Decision Making –Advantages of Group and Team Decision Making –Disadvantages of Group and Team Decision Making –Managing Group and Team Decision-Making Processes

Copyright © by Houghton Mifflin Company. All rights reserved. 4–44–4 Learning Objectives After studying this chapter, you should be able to: –Define decision making and discuss types of decisions and decision-making conditions. –Discuss rational perspectives on decision making, including the steps in decision making. –Describe the behavioral nature of decision making. –Discuss group and team decision making, including its advantages and disadvantages, and how it can be managed more effectively.

Copyright © by Houghton Mifflin Company. All rights reserved. 4–54–5 The Nature of Decision Making Decision Making –The act of choosing one alternative from among a set of alternatives. Decision-Making Process –Recognizing and defining the nature of a decision situation, identifying alternatives, choosing the “best” alternative, and putting it into practice. –An effective decision is one that optimizes some set of factors such as profits, sales, employee welfare, and market share. –Managers make decisions about both problems and opportunities.

Copyright © by Houghton Mifflin Company. All rights reserved. 4–64–6 Types of Decisions Programmed Decisions –A decision that is a fairly structured decision or recurs with some frequency or both. Example: Starting your car in the morning. Nonprogrammed decisions –A decision that is relatively unstructured and occurs much less often than a programmed decision. Example: Choosing a vacation destination.

Copyright © by Houghton Mifflin Company. All rights reserved. 4–74–7 Decision-Making Conditions Level of ambiguity and chances of making a bad decision LowerHigherModerate CertaintyUncertaintyRisk The decision maker faces conditions of... Figure 4.1

Copyright © by Houghton Mifflin Company. All rights reserved. 4–84–8 Distinguishing Between Decision Making Conditions Source: Barney, Jay B. and Ricky W. Griffin. The Management of Organizations. Copyright © 1992 by Houghton Mifflin Company. Used with permissions.

Copyright © by Houghton Mifflin Company. All rights reserved. 4–94–9 Decision-Making Conditions (cont’d) Decision Making Under Certainty –A condition in which the decision maker knows with reasonable certainty what the alternatives are and what conditions are associated with each alternative. Decision Making Under Risk –A condition in which the availability of each alternative and its potential payoffs and costs are all associated with risks. Decision Making Under Uncertainty –A condition in which the decision maker does not know all the alternatives, the risks associated with each, or the consequences of each alternative.

Copyright © by Houghton Mifflin Company. All rights reserved. 4–10 Rational Perspectives on Decision Making The Classical Model of Decision Making When faced with a decision situation, managersshould......and end up with a decision that best serves the interests of the organization. obtain complete and perfect information eliminate uncertainty evaluate everything rationally and logically Figure 4.2

Copyright © by Houghton Mifflin Company. All rights reserved. 4–11 Steps in the Rational Decision-Making Process Table 4.1a

Copyright © by Houghton Mifflin Company. All rights reserved. 4–12 Steps in the Rational Decision-Making Process (cont’d) Table 4.1b

Copyright © by Houghton Mifflin Company. All rights reserved. 4–13 Evaluating Alternatives in the Decision-Making Process Is the alternative feasible? Eliminate from consideration Is the alternative satisfactory? Are the alternative’s consequences affordable? Retain for further consideration Yes Eliminate from consideration Eliminate from consideration No Figure 4.3

Copyright © by Houghton Mifflin Company. All rights reserved. 4–14 Behavioral Aspects of Decision Making The Administrative Model of Decision Making (Herbert Simon) Figure 4.4 When faced with a decision situation managers actually…...and end up with a decision that may or may not serve the interests of the organization. use incomplete and imperfect information are constrained by bounded rationality tend to satisfice

Copyright © by Houghton Mifflin Company. All rights reserved. 4–15 Behavioral Aspects of Decision Making (cont’d) Bounded Rationality –The concept that decision makers are limited by their values and unconscious reflexes, skills, and habits. Satisficing –The tendency to search for alternatives only until one is found that meets some minimum standard of sufficiency to resolve the problem. Coalition –A political force in decision making which consists of an informal alliance of individuals or groups formed to achieve a goal.

Copyright © by Houghton Mifflin Company. All rights reserved. 4–16 Behavioral Aspects of Decision Making (cont’d) Intuition –An innate belief about something without conscious consideration. Escalation of Commitment –A decision maker is staying with a decision even when it appears to be wrong. Risk Propensity –The extent to which a decision maker is willing to gamble when making a decision.

Copyright © by Houghton Mifflin Company. All rights reserved. 4–17 Behavioral Aspects of Decision Making (cont’d) Ethics and Decision Making –Individual ethics (personal beliefs about right and wrong behavior) combine with the organization’s ethics to create managerial ethics. –Components of managerial ethics: Relationships of the firm to employees Employees to the firm The firm to other economic agents

Copyright © by Houghton Mifflin Company. All rights reserved. 4–18 Group and Team Decision Making in Organizations Forms of Group Decision Making –Interacting groups or teams are the most common form of decision-making groups which consists of an existing group or newly formed team interacting and then making a decision. –Delphi groups are sometimes used for developing a consensus of expert opinion from a panel of experts who individually contribute through a moderator.

Copyright © by Houghton Mifflin Company. All rights reserved. 4–19 Group and Team Decision Making in Organizations (cont’d) Forms of Group Decision Making –Nominal groups are a structured technique designed to generate creative and innovative ideas. individuals contribute alternatives that are winnowed down through a series of rank-ordering of the alternatives to reach a decision.

Copyright © by Houghton Mifflin Company. All rights reserved. 4–20 Advantages and Disadvantages of Group and Team Decision Making Table 4.2

Copyright © by Houghton Mifflin Company. All rights reserved. 4–21 The Group- think Process Source: Gregory Moorhead, Group & Organizations Studies (Vol. 7, No. 4), pp Copyright © 1982 by Sage Publications, Inc. Reprinted by permission of Sage Publications, Inc.

Copyright © by Houghton Mifflin Company. All rights reserved. 4–22 Managing Group and Team Decision-Making Processes Be aware of the pros and cons of having a group or team make a decision. Set deadlines for when decisions must be made. Avoid problems with dominance by managing group membership. Have each group member individually and critically evaluate all alternatives. As a manager, do not make your position known too early. Appoint a group member to be a “devil’s advocate.” Hold a follow-up meeting to recheck the decision. Promoting the Effectiveness of Group and Team Decision Making: