BMGT – Principles of Management Nine hapter Decision Managerial Making

BMGT – Principles of Management Types of Decisions Programmed decisions: situations that occur often enough to enable decision rules to be developed Nonprogrammed decisions: are made in response to situations that are unique, are poorly defined and largely unstructured many involve strategic planning Decision making is the process of identifying problems and opportunities and then resolving them.

Difference Between Programmed and Nonprogrammed Decisions  Certainty –all the information the decision maker needs is fully available  Risk –decision has clear-cut goals –good information is available –future outcomes associated with each alternative are subject to chance  Uncertainty –managers know which goals they with to achieve –information about alternatives and future events is incomplete –managers may have to come up with creative approaches to alternatives  Ambiguity –by far the most difficult decision situation –goals to be achieved or the problem to be solved is unclear –alternatives are difficult to define –information about outcomes is unavailable

Conditions that Affect the Possibility of Decision Failure Organizational Problem Solution Low High Possibility of Failure CertaintyRiskUncertaintyAmbiguity Programmed Decisions Nonprogrammed Decisions Pepsi-Cola

Three Decision Making Models  Classical Model  Administrative Model  Political Model

BMGT – Principles of Management Selecting a Decision Making Model Depends on the manager’s personal preference Whether the decision is programmed or non- programmed Extent to which the decision is characterized by risk, uncertainty, or ambiguity Depends on the manager’s personal preference Whether the decision is programmed or non- programmed Extent to which the decision is characterized by risk, uncertainty, or ambiguity

BMGT – Principles of Management Classical Model  Decision making is based on economic assumptions  Considered to normative, which means it defines how a decision maker should make decisions  Provides guidelines on how to reach an ideal outcome for the organization  Helps decision makers be more rational

Administrative Model  How managers actually make decisions in situations characterized by non-programmed decisions, uncertainty, and ambiguity  Managers are unable to make economically rational decisions even if they want to  Two concepts are instrumental in shaping the administrative model bounded rationality: means that people have limits or boundaries on how rational they can be satisficing: means that decision makers choose the first solution alternative that satisfies minimal decision criteria  Is considered to be descriptive  Another aspect is intuition  How managers actually make decisions in situations characterized by non-programmed decisions, uncertainty, and ambiguity  Managers are unable to make economically rational decisions even if they want to  Two concepts are instrumental in shaping the administrative model bounded rationality: means that people have limits or boundaries on how rational they can be satisficing: means that decision makers choose the first solution alternative that satisfies minimal decision criteria  Is considered to be descriptive  Another aspect is intuition

BMGT – Principles of Management Political Model  Closely resembles the real environment in which most managers and decision makers operate  Decisions are complex  Disagreement and conflict over problems and solutions are normal  Closely resembles the real environment in which most managers and decision makers operate  Decisions are complex  Disagreement and conflict over problems and solutions are normal

Characteristics of Classical, Political, and Administrative Decision Making Models Classical Model Administrative Model Political Model Clear-cut problem and goals Vague problem and goals Pluralistic; conflicting goals Condition of certainty Condition of uncertainty Condition of uncertainty/ambiguity Full information about Limited information about Inconsistent viewpoints; ambiguous alternatives and their outcomes alternatives and their outcomes information Rational choice by individual Satisficing choice for resolving Bargaining and discussion among for maximizing outcomes problem using intuition coalition members

Six Steps in the Managerial Decision Making Process Evaluation and Feedback Diagnosis and Analysis of Causes Recognition of Decision Requirement Development of Alternatives Selection of Alternative Implementation of Chosen Alternative Decision-Making Process

Personal Decision Framework  Directive Style: used by people who prefer simple, clear- cut solutions  Analytical Style: used by managers who like to consider complex solutions based on as much data as they can gather  Conceptual Style: used by people who like to consider a broad amount of information, more socially oriented  Behavioral Style: often the style adopted by managers having a deep concern for others Situation: ·Programmed/non- programmed ·Classical, administrative, political ·Decision steps Decision Choice: ·Best Solution to Problem Personal Decision Style: ·Directive ·Analytical ·Conceptual ·Behavioral

BMGT – Principles of Management Participation in Decision Making Vroom-Jago Model  helps gauge the appropriate amount of participation for subordinates Leader Participation Styles  employs five levels of subordinate  participation in decision making ranging from highly autocratic to highly democratic Diagnostic Questions  decision participation depends on the responses to eight diagnostic questions  questions deal with the problem, the required level of decision quality, and the importance of having subordinates commit to the decision

Advantages and Disadvantages of Participative Decision Making Advantages: ›Broader perspective for problem definition and analysis. ›More knowledge, facts, and alternatives can be evaluated. ›Discussion clarifies ambiguous problems and reduces uncertainty about alternatives. ›Participation fosters member satisfaction and support for decision. Disadvantages: ›Time-consuming; wasted resources if used for programmed decisions. ›Compromise decisions may satisfy no one. ›Group think; group norms may reduce dissent and opinion diversity. ›No clear focus for decision responsibility.

BMGT – Principles of Management Improving Decision Making  Brainstorming--group members present spontaneous suggestions  Devil’s Advocate-- an individual is assigned the role of challenging the assumptions and assertions made by the group to prevent premature consensus  Multiple Advocacy--involves several advocates and presentation of multiple points of view IDEO Product Development