Chapter 4 Decision Making Text Organizer Answers Business Management 12 Stewart

Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 4-2 Copyright © 2011 Pearson Canada Inc. 2

Making Decisions Rationality Are fully objective, and logical Managers make consistent, value-maximizing choices with specified constraints It assumes rational decision makers: Are fully objective, and logical Will define the problem and have a specific goal Will select the alternative that maximizes the organization’s interests not their own Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 4-3 Copyright © 2011 Pearson Canada Inc. 3

Making Decisions (cont’d) Bounded Rationality Managers make decisions rationally, but are limited by their ability to interpret, process, and act on information Assumes decision makers: Will not seek out or have knowledge of all alternatives Managers satisfice rather than maximize That is, they will accept a solution that is “good enough” Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 4-4 Copyright © 2011 Pearson Canada Inc. 4

Making Decisions (cont’d) Intuitive Decision Making Making decisions on the basis of experience, feelings, and accumulated judgment Complements rational analysis often allowing a manager to act quickly with limited information Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 4-5 Copyright © 2011 Pearson Canada Inc. 5

Types of Problems and Decisions Structured Problems Have clear goals Are familiar Are easily defined Programmed Decision A repetitive decision that can be handled by a routine approach Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 4-6 Copyright © 2011 Pearson Canada Inc. 6

Problems and Decisions (cont’d) Unstructured Problems Are new or unusual Information is ambiguous or incomplete Nonprogrammed Decisions Are unique and nonrecurring and require custom-made solutions Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 4-7 Copyright © 2011 Pearson Canada Inc. 7

Decision-Making Conditions Certainty Accurate decisions are possible because the outcome of every alternative is known Risk Decision maker estimates the likelihood of outcomes Ability to weight outcomes is based on personal experiences or secondary information Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 4-8 Copyright © 2011 Pearson Canada Inc. 8

Decision-Making Conditions (cont’d) Uncertainty Limited information prevents estimation of outcome probabilities Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 4-9 Copyright © 2011 Pearson Canada Inc. 9

Decision-Making Styles Directive Use minimal information and consider few alternatives Analytic Make careful decisions in unique situations Conceptual Maintain a broad outlook and consider many alternatives in making long-term decisions Behavioural Work well with and seek acceptance by others and try to avoid conflict Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 4-10 Copyright © 2011 Pearson Canada Inc. 10

Group Decision Making Advantages Disadvantages More complete information and knowledge More diverse alternatives Increases acceptance of a solution Increases legitimacy of decision Disadvantages Time consuming Opportunity for minority domination Ambiguous responsibility Pressures to conform Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 4-11 Copyright © 2011 Pearson Canada Inc. 11

Group Decision Making Groupthink The withholding by group members of different views to appear to be in agreement Quality decision making is jeopardized Groupthink occurs when: Group members rationalize resistance to the assumptions made Members pressure those who doubt group views Members with doubts avoid going against group consensus If someone does not speak, it is assumed they are in agreement Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 4-12 Copyright © 2011 Pearson Canada Inc. 12