How are decisions made in organizations? Ch#1 Steps in systematic decision making. Recognize and define the problem or opportunity. Identify and analyze alternative courses of action, and estimate their effects on the problem or opportunity. Choose a preferred course of action. Implement the preferred course of action. Evaluate the results and follow up as necessary. Organizational Behavior: Chapter 17

How are decisions made in organizations? Ch#1 Types of decisions. Programmed decisions. Involve routine problems that arise regularly and can be addressed through standard responses. Nonprogrammed decisions. Involve nonroutine problems that require solutions specifically tailored to the situation at hand Organizational Behavior: Chapter 17

What are the useful decision making models? Ch#1 Behavioral decision theory. Recognizes that human beings operate with: Cognitive limitations. Bounded rationality. The behavioral decision maker: Faces a problem that is not clearly defined. Has limited knowledge of possible action alternatives and their consequences. Chooses a satisfactory alternative. Organizational Behavior: Chapter 17

What are the useful decision making models? Ch#1 The garbage can model. A model of decision making that views problems, solutions, participants, and choice situations as mixed together in the “garbage can” of the organization. In stable settings, behavioral decision theory may be more appropriate. In dynamic settings, the garbage model may be more appropriate. Organizational Behavior: Chapter 17

How do intuition, judgment, and creativity affect decision making? Stages in the creative thinking process. Preparation. Concentration. Incubation. Illumination Verification. Ch#1 Organizational Behavior: Chapter 17

Decision Making and the Planning Process Ch#2 The Planning Process Strategic goals Strategic plans Tactical goals Operational goals Operational plans The organization’s mission The Environmental Context • Purpose Premises Values Directions Tactical plans

Ch#2 Kinds of Goals By Level Mission statement is a statement of an organization’s fundamental purpose. Strategic goals are goals set by and for top management of the organization that address broad, general issues. Tactical goals are generally set for middle managers; their focus is on how to operationalize actions to strategic goals.

Ch#2 Tactical Planning Developing and Executing Tactical Plans Developing tactical plans • Recognize and understand overarching strategic plans Specify relevant resources and time issues Recognize and identify human resource commitments Executing tactical plans Evaluate each course of action in light of its objective Obtain and distribute information and resources Monitor horizontal and vertical communication and integration of all activities/steps Evaluate ongoing activities

TYPES OF DECISIONS (CONT..) Ch#3 INDIVIDUAL AND GROUP DECISION ADVANTAGES INCREASED ACCEPTANCE EASIER COORDINATION EASIER COMMUNICATION MORE INFORMATION PROCESSED DISADVANTAGES TAKE LONGER GROUPS CAN BE INDECISIVE GROUPS CAN COMPROMISE GROUPS CAN BE DOMINATED

APPROACHES TO GROUP DECISION DELPHI TECHNIQUE QUESTIONNAIRES FEEDBACKS FINAL SUMMARY IS PREPARED

Rationality in Decision Making Ch#4 Rationality in Decision Making Rationality is Attempting to reach some goal that cannot be attained without action Having clear understanding of alternative courses by which a goal can be reached under existing circumstance and limitations Having the information and ability to analyze and evaluate alternatives in light of the goal sought. Having the desire to come to the best solution by selecting the alternative that most effectively satisfies goal achievement

Evaluation of Alternatives (Cont) Ch#4 Quantitative Factors Factors that can be measured in numerical terms\ e.g. $, time, no of people Qualitative/ Intangible Factors factors that are difficult to measure numerically e.g. risk of technology change, political climate, unforeseen war, transportation strike etc

Evaluation of Alternatives (Cont) Ch#4 Marginal Analysis to compare additional revenue and the additional cost arising from increasing output Cost-Effective Analysis Also known as the Cost-Benefit analysis, seeks the best ratio of benefits and cost

Intuition. The ability to know or recognize quickly and readily the possibilities of a given situation. Judgmental heuristics. Simplifying strategies or “rules of thumb” used to make decisions. Makes it easier to to deal with uncertainty and limited information. Can lead to systematic errors that affect the quality and/or ethics of decisions. Confirmation trap. The tendency to seek confirmation for what is already thought to be true and to not search for disconfirming information. Hindsight trap. The tendency to overestimate the degree to which an event that has already taken place could have been predicted. Ethical issues and decision making. Ethical dilemma. A situation in which a person must decide whether or not to do something that, although personally or organizationally beneficial, may be considered unethical and perhaps illegal. Ethical dilemmas are often associated with: Risk and uncertainty. Non routine problem situations.