Managerial Decision Making Chapter Three Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
3-2 Learning Objectives LO1 Describe the kinds of decisions you will face as a manager. LO2 Summarize the steps in making “rational” decisions. LO3 Recognize the pitfalls you should avoid when making decisions. LO4 Evaluate the pros and cons of using a group to make decisions.
3-3 Learning Objectives (cont.) LO5 Identify procedures to use in leading a decision-making group LO6 Explain how to encourage creative decisions LO7 Discuss the process by which decisions are made in organizations LO8 Describe how to make decisions in a crisis
3-4 Characteristics of Managerial Decisions Figure 3.1
3-5 Lack of Structure Programmed decisions Decisions encountered and made before, having objectively correct answers, and solvable by using simple rules, policies, or numerical computations. Nonprogrammed decisions New, novel, complex decisions having no proven answers.
3-6 Uncertainty and Risk Risk The state that exists when the probability of success is less than 100 percent and losses may occur.
3-7 Conflict Conflict Opposing pressures from different sources, occurring on the level of psychological conflict or of conflict between individuals or groups.
3-8 Evaluating Alternatives Evaluating alternatives Involves determining the value or adequacy of the alternatives that were generated Which solution will be the best?
3-9 Evaluating Alternatives Contingency plans Alternative courses of action that can be implemented based on how the future unfolds.
3-10 Making the Choice Satisficing Choosing an option that is acceptable, although not necessarily the best or perfect Optimizing Achieving the best possible balance among several goals
3-11 The Best Decision Vigilance A process in which a decision maker carefully executes all stages of decision making
3-12 Psychological Biases Discounting the future A bias weighting short-term costs and benefits more heavily than longer- term costs and benefits.
3-13 Managing Group Decision Making
3-14 Brainstorming Brainstorming A process in which group members generate as many ideas about a problem as they can; criticism is withheld until all ideas have been proposed.
3-15 Models of Organizational Decision Processes Bounded rationality A less-than-perfect form of rationality in which decision makers cannot be perfectly rational because decisions are complex and complete information is unavailable or cannot be fully processed Incremental model Model of organizational decision making in which major solutions arise through a series of smaller decisions