1. Chapter Outline The Nature of Managerial Decision Making
Programmed and Nonprogrammed Decision Making
The Classical Model
The Administrative Model
Steps in the Decision-Making Process
Recognize the Need for a Decision
Generate Alternatives
Evaluate Alternatives
Choose Among Alternatives
Implement the Chosen Alternative
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2. Chapter Outline (cont’d)
Steps in the Decision-Making Process (cont’d)
Learning from Feedback
Cognitive Biases and Decision Making
Prior Hypothesis Bias
Representative Bias
Illusion of Control
Escalating Commitment
Group Decision Making
Perils of Groupthink
Devil’s Advocacy and Dialectical Inquiry
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3. Chapter Outline (cont’d)
Group Decision Making (cont’d)
Diversity Among Decision Makers
Organizational Learning and Creativity
Creating a Learning Organization
Promoting Individual Creativity
Promoting Group Creativity
Promoting Creativity at the Global Level
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4. The Nature of Managerial Decision Making
The process by which managers respond to opportunities and threats by analyzing options, and making decisions about goals and courses of action.
Decisions in response to opportunities—occurs when managers respond to ways to improve organizational performance.
Decisions in response to threats—occurs when managers are impacted by adverse events to the organization.
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5. Programmed and Nonprogrammed Decisions
Routine, virtually automatic decision making that follows established rules or guidelines.
Managers have made the same decision many times before.
There are rules or guidelines to follow based on experience with past decisions.
Example: Disciplinary action to be taken concerning a tardy employee.
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6. Programmed and Nonprogrammed Decisions
Nonroutine decision making that occurs in response to unusual, unpredictable opportunities and threats.
The are no rules to follow since the decision is new.
Decisions are made based on information, and a manager’s intuition, and judgment.
Example: Deciding to invest in additional production equipment to meet forecasted demand.
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7. The Classical Model of Decision Making
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Figure 7.1

8. The Administrative Model
Administrative Model of Decision Making
An approach to decision making that explains why decision making is inherently uncertain and risky and why managers usually make satisfactory rather than optimum decisions.
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9. The Administrative Model (cont’d)
Administrative Model of Decision Making (cont’d)
Bounded rationality
There is a large number of alternatives and available information can be so extensive that managers cannot consider it all.
Decisions are limited by people’s cognitive abilities.
Incomplete information
most managers do not see all alternatives and decide based on incomplete information.
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10. Why Information Is Incomplete
Figure 7.2
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11. Six Steps in Decision Making
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Figure 7.4

12. General Criteria for Evaluating Possible Courses of Action
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Figure 7.5

13. Evaluating Alternatives
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14. Cognitive Biases and Decision Making
Heuristics
Rules of thumb to deal with complex situations.
Decision makers use heuristics to deal with bounded rationality.
If the heuristic is wrong, however, then poor decisions result from its use.
Systematic errors can result from use of an incorrect heuristic and will appear over and over since the rule used to make decision is flawed.
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15. Sources of Cognitive Bias at the Individual and Group Levels
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Source:
Figure 7.6

16. Types of Cognitive Biases
Illusion of Control
The tendency to overestimates one’s own ability to control activities and events.
Escalating Commitment
Committing considerable resources to project and then committing more even if evidence shows the project is failing.
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17. Group Decision Making Most decisions are made in group settings.
Groups tend to reduce cognitive biases and can call on their greater combined skills and abilities.
Groupthink
Biased decision making resulting from group members striving for agreement.
Usually occurs when group members rally around a central manager’s idea , and become blindly commit to the idea without considering alternatives.
The group’s influence tends to convince each member that the idea must go forward.
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18. Devil’s Advocacy and Dialectical Inquiry
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Source:
Figure 7.7

19. Organizational Learning and Creativity
Managers seek to improve a employee’s desire and ability to understand and manage the organization and its task environment so as to raise effectiveness.
The Learning Organization
Managers try to maximize the people’s ability to behave creatively to maximize organizational learning.
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20. Senge’s Principles for Creating a Learning Organization
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Source:
Figure 7.8

21. Organizational Learning and Creativity
The ability of the decision maker to discover novel ideas leading to a feasible course of action.
A creative management staff and employees are the key to the learning organization.
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