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DECISION MAKING AND STRESS MGMT

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1 DECISION MAKING AND STRESS MGMT
Anubha © 2005 Prentice Hall Inc. All rights reserved.

2 Phases of DM Identification Phase – identify problem
Recognize and Diagnose Development phase – Solution Search and design Selection phase – Choice of solution Judgment, Analysis & authorisation © 2005 Prentice Hall Inc. All rights reserved.

3 Types of decision Basic & Routine (Basic decision that are taken, generally only once and have a long lasting impact on the working of an org whereas routine are day to day basis and don’t have a major impact ) Personal & Organizational (Personal decision cannot be delegated and org often, if not always be delegated) Program and non programmed ( Decision are routine and repetitive decision that are normally handled by bureaucratic procedure whereas non programmed decision made by individual using the info available and their own ability to judge the situation) © 2005 Prentice Hall Inc. All rights reserved.

4 Mechanistic Decision – the decision maker is sure of alternative and outcome of each alternative
Analytical Decision – decision taken where a large alternatives can be generated since a lot of information is available and outcome of each alternative can be calculated. Judgment decision – A limited no. of alternatives are available to solve the problem and outcome of decision are also unknown Adaptive Decision - a large no of alternatives are available and their outcome is not known © 2005 Prentice Hall Inc. All rights reserved.

5 Techniques used in steps of DM
Brainstorming Synectics Delphi Technique © 2005 Prentice Hall Inc. All rights reserved.

6 The Decision-Making Process
Identify Problem The Decision-Making Process Select Alternative Implement Evaluate Results 1 Develop Alternatives Analyze Decision Criteria Allocate Weights to 2 3 4 5 6 7 8 The decision-making process is a set of 8 steps that allows a manager (or any other person) to “choose among alternatives.” The example in the text deals with a sales manager at Weyerhaeuser Canada who has spent nearly $5000 on auto repairs in the past few years and now has a blown engine in his car. Repair estimates indicate that it is not economical to repair the car and public transportation is not realistic. © 2005 Prentice Hall Inc. All rights reserved. 4

7 Step 2: Decision Criteria
Price Interior comfort Durability Repair record Performance Handling Factors that are relevant in making the decision The next step is to determine the factors that might be relevant in making the decision. In our example, John decides that price, interior comfort, durability, repair record, performance, and handling are the criteria he’ll use to make his decision. Interesting to note that the repair record is the 4th criterion even though he has had problems with excessive repairs on his current car. © 2005 Prentice Hall Inc. All rights reserved. 6

8 Determining the relative priority of each of the criteria
Step 3: Allocating Weights Determining the relative priority of each of the criteria It is important to determine the relative ranking or priority of each of the criterion. Going back to our example, price has been determined to be the most important factor, then interior comfort with handling being the least important. © 2005 Prentice Hall Inc. All rights reserved. 7

9 Problem: To purchase a new car
Criterion Weight Price 10 Interior comfort 8 Durability 5 Repair record Performance 3 Handling 1 This slide illustrates the type of decision-making matrix being generated using the relevant factors for the decision and the weights you have assigned. Again, note that price is the most important on a scale of 1-10 with handling being the least important at a 1. © 2005 Prentice Hall Inc. All rights reserved. 8

10 Step 5: Analyzing Alternatives
Assessing the value of each alternative by making a value judgment of the feature Step 5 now requires us to to assess the value of each alternative. We will use the criteria and weights established in steps 2 and 3. Each alternative is evaluated by appraising it against the criteria. Exhibits 4-4 and 4-5 take you through the decision-makers assessment of the value of each criterion and the weighting of each factor--which is the assessment times the criteria weight. © 2005 Prentice Hall Inc. All rights reserved. 10

11 Concluding Steps in Making a Decision
Step 6: Select the “best” Step 7: Implement decision The final steps in the decision making process is selecting the best choice, implementing the decision and evaluating the decision. Did the alternative chosen in Step 6 accomplish the desired result. You will note on Exhibit 4-5 (page91) in the text that the car with the highest total value is the Toyota Camry. On the basis of the criteria identified, the weights given given to the criteria, the decision maker’s assessment of each vehicle’s achievement on the criteria, the Toyota scored 224 which makes it the best alternative. Step 8: Evaluate decision © 2005 Prentice Hall Inc. All rights reserved. 12

12 Assumptions Of Rationality
Single, well- defined goal is to be achieved All alternatives and consequences are known Problem is clear and unambiguous Rational Decision Making Preferences are clear Final choice will maximize payoff When a manager makes a decision, it is assumed that the manager is able to do so with knowing all the information. But this is a perfect world that rarely exists for managers today. Remember that the assumptions of rationality often do not hold true because the level of certainty that the rational model demands rarely exists. Most managers then try to determine the amount of risk and make their decisions under a condition of uncertainty. Preferences are constant and stable No time or cost constraints exist © Prentice Hall, 2002 Robbins et al., Fundamentals of Management, 4th Canadian Edition ©2005 Pearson Education Canada, Inc. FOM 4.12 © 2005 Prentice Hall Inc. All rights reserved.

13 Creativity and Decision Making
Creativity is the ability to produce novel and useful ideas Important to decision making as it allows the decision-maker to “see” problems that others can’t It helps identify more viable alternatives Most people have creative potential that they can use when confronted with a decision-making problem. But to unleash that potential they need to get out of the thinking ruts and learn how to think about a problem in different ways. © 2005 Prentice Hall Inc. All rights reserved.

14 Unleashing Creative Potential
“Thinking out of the box” Using the right side of your brain Three-component model of creativity Expertise Creative-thinking skills Intrinsic task motivation There are ways that we can unleash our creativity. What we need to be able to look at problems and situations differently. For example, take a few minutes and sit on the floor and look around you. Describe what you see. Now stand up and do the same thing. Is there something different that you see standing up that you didn’t see sitting down? There is a three-component model of creativity which enable people to make use of their potential. Expertise is the foundation of all creative work. Therefore, the more abilities, knowledge, etc. that a person has, the more creative potential there is to unleash. Creative-thinking skills encompass personality characteristics associated with creativity, the ability to use analogies as well as the talent to see the familiar in a different light. For instance, intelligence and risk-taking plus an internal locus of control have been found to be associated with the development of creative ideas. This is a learned skill that people can practice with. The exercises at the end of this chapter help people become more creative in their thinking. Intrinsic task motivation is the desire to work on something because it’s interesting and involving. This motivational component turns creative potential into actual creative ideas. © 2005 Prentice Hall Inc. All rights reserved.

15 Bounded Rationality Uncertainty Risk Satisfying
Focusing on highly visible choices Because most managers deal with incomplete or uncertain information and because there is an element of risk in making any decision, most managers operate under the bounded rationality decision-making model. Here, managers make decisions recognizing the various constraints that are “good enough” or satisficing. In addition, they tend to focus on alternatives that are highly-visible. © 2005 Prentice Hall Inc. All rights reserved. 14

16 Errors in Decision-Making Process
Heuristics Availability Representative Escalation of commitment Heuristics are judgmental shortcuts that we take to avoid information overload. One type of heuristic is availability--which is our tendency to base our judgment on information that is readily available to us. For example, you may do a quick search on the Internet for some information about traffic statistics and make a judgment based on the number of newspaper articles you find that deal with the subject. Representative heuristics is the tendency of individuals to match the likelihood of an occurrence with something that they are familiar with. For example, you might watch a bike race and because you enjoy riding a bike and are fairly good at it, that you could complete in the race. The last area of errors in decision-making is escalation of commitment where a decision-maker stays on the same path even though there is negative data that suggests otherwise. For example, a manager might continue with decision to keep the operation open longer to service customers even though few if any customers come in after the original closing time. © 2005 Prentice Hall Inc. All rights reserved.

17 Well-Structured vs. Ill-Structured Problems
Straightforward Familiar Easily-defined New or unusual Ambiguous information Incomplete information In today’s business environment, the nature of the problem in many situations determines how the problem will be approached. Those problems that are simple and straightforward such as a customer wanting a refund for a defective product are described as “well-structured.” They are familiar and easily-defined. However, in many cases a manager may be facing a new or unusual problem where information may be incomplete. An example would be the desire to have a capability on the company’s web site to purchase products and have them delivered more quickly and cheaply. © 2005 Prentice Hall Inc. All rights reserved. 16

18 Categories of Decisions
Programmed Non-programmed Just as there are two types of problems, there are also two types of decisions: programmed and non-programmed. A programmed decision is one where it is repetitive and easily handled through a routine. On the other hand, a non-programmed decision is one where a unique solution is required. © 2005 Prentice Hall Inc. All rights reserved. 17

19 Procedure Rule Policy Programmed Decision
Every manager will need to deal with and understand a procedure, rule and policy. Basically, a procedure is a series of related and sequential steps. For example, if a student wishes to appeal a grade on a course. A rule is an explicit statement that tells managers what they can and cannot do. An example would be a store rule that requires a manager to approve any refund of more than $25. A policy is a general guideline that establishes the parameters in which to make a decision. An organization may have a policy to “take appropriate steps to satisfy any customer complaint.” This gives the manager a great deal of freedom in which to make a decision. Policy © 2005 Prentice Hall Inc. All rights reserved. 18

20 Relationship of Problems, Decisions, and Level
Non-programmed Decisions Ill-Structured Programmed Decisions Top Type of Problem Level As you can see from this slide, the more senior managers tend to handle ill-structured problems with non-programmed decisions. This means that the problem may be new and therefore requires a unique solution. Likewise, lower level managers tend to handle more routine problems with solutions that were used in the past. Few managerial decisions in the real world are either fully programmed or fully non-programmed--no matter what level in the organization. Few programmed decisions are designed to eliminate individual judgment completely. At the other extreme, even the most unusual situation requiring a non-programmed decision can be helped by programmed routines. Lower Well-Structured © 2005 Prentice Hall Inc. All rights reserved. 19

21 Decision-making and Technology
Information technology can help support decision-making Types of software include Expert systems Neural networks Groupware Information technology is providing managers with a wealth of decision-making support. Among these are expert systems, neural networks, and groupware. Expert systems use software programs to encode the relevant experience of an expert and allow a system to act like that expert in analyzing and solving ill-structured problems. Neural networks are the next step beyond expert systems and use computer software to imitate the structure of brain cells and connections among them. For example, sophisticated robotics use neural networks for their intelligence. Another example is the use of neural networks tracking credit card transactions. © 2005 Prentice Hall Inc. All rights reserved.

22 Decision-Making Styles
Analytical Conceptual High Tolerance for Ambiguity Directive Behavioural Because managers are unique, each manager will bring personal characteristics into the decision-making process. The styles that we will examine look at the way in which managers think and their tolerance for ambiguity. The directive style tends to be logical and focus on the short-term. The analytical style is characterized by high tolerance for ambiguity and a rational way of thinking. These people want to have complete information before making a decision. The behavioural style reflects someone who thinks intuitively but have a low tolerance for ambiguity. These managers work well with others and are open to suggestions. The conceptual style represents someone who can live with lots of ambiguity. These individuals will look at the big picture and look for creative solutions. As you can see on this slide, the more a person can handle ambiguity and thinks more intuitively, the more likely the decisions will be broad in outlook. Managers today need to be able to use each of these styles depending on the situation. However, each manager will tend to have a dominant style. Low Rational Intuitive Way of Thinking Source: S. P. Robbins, Supervision Today (Upper Saddle River, NJ: Prentice Hall, 1995), page 111. © 2005 Prentice Hall Inc. All rights reserved. 21

23 Advantages of Group Decision-Making
More complete information Diversity of experience Generation of more alternatives Solutions more likely to be accepted by those concerned Part of today’s work environment is the increase in teams and groups. As a consequence, many organizations will have different groups working on different issues and therefore will encourage group decision making. The reasons an organization will use group decision-making is that more complete information can be generated;the people involved have a variety of experiences to bring to the problem; more people can generate more alternatives--”two heads are better than one”; and people who are involved in a decision that will affect them tend to accept the decision more readily. © 2005 Prentice Hall Inc. All rights reserved. 22

24 Disadvantages of Group Decision-Making
Time-consuming Domination by a few Pressure to conform Even with so many organizations using groups to make decisions, there are some problems that can surface. One of the more visible problems is that group decision-making is very time-consuming. It takes time for groups to learn to work with each other as well as to generate the outcomes. And a group can have one or several people attempt to dominate the discussion and to push their own view. Lastly, there is a tendency for pressures of group conformity. This phenomenon is called groupthink--the withholding by group members of different views in order to appear to be in agreement. © 2005 Prentice Hall Inc. All rights reserved. 23

25 When are Groups More Effective
When accuracy is important When creativity is important When buy-in is important When size of group is 5-7 people It is important to recognize that group decision-making is not always the best. However, if accuracy, creativity and buy-in to the solution is important, than groups are more effective than individuals. For a group to function well, the optimum size is 5-7 people involved. © 2005 Prentice Hall Inc. All rights reserved. 24

26 Ways to Improve Group Decision-Making
Brainstorming Nominal group technique Electronic meetings There are several ways in which a group can become more effective in their decision-making. One of the ways is brainstorming--a technique where everyone states their ideas--a “freewheeling” session. The power of brainstorming is to ensure that people do not begin to evaluate. What you want to do is generate a big list of ideas--no matter how strange or unusual. You’ll evaluate the ideas later in the process. Nominal group technique helps groups arrive at a preferred solution. This is done by group members being present at a meeting and secretly writing a lists of preferred solutions to a problem. In this way there is no restriction of an individual’s thinking. Lastly, electronic meetings blend nominal group techniques with technology. People do not have to be in the same room and yet they can put their views and comments forward in a discussion without having to disclose who is saying what. © 2005 Prentice Hall Inc. All rights reserved. 25

27 Decision-Making and National Culture
Differs from one country to another Need to recognize what is acceptable Managers can expect high payoff if they can accommodate the diversity Just as we saw in Chapter 2, managers who are able to recognize the cultural differences when making decisions will enable the manager to be more effective. For example, Japanese use consensus-forming group decisions Called ringisei after collecting large amount of information and data. In Germany, the culture is one of structure and order--therefore the decision-making needs to be more directive. © 2005 Prentice Hall Inc. All rights reserved. 26

28 How Are Decisions Actually Made in Organizations
Bounded Rationality Individuals make decisions by constructing simplified models that extract the essential features from problems without capturing all their complexity. © 2005 Prentice Hall Inc. All rights reserved.

29 How Are Decisions Actually Made in Organizations (cont’d)
How/Why problems are identified Visibility over importance of problem Attention-catching, high profile problems Desire to “solve problems” Self-interest (if problem concerns decision maker) Alternative Development Satisficing: seeking the first alternative that solves problem. Engaging in incremental rather than unique problem solving through successive limited comparison of alternatives to the current alternative in effect. © 2005 Prentice Hall Inc. All rights reserved.

30 Common Biases and Errors
Overconfidence Bias Believing too much in our own decision competencies. Anchoring Bias Fixating on early, first received information. Confirmation Bias Using only the facts that support our decision. Availability Bias Using information that is most readily at hand. Representative Bias Assessing the likelihood of an occurrence by trying to match it with a preexisting category. © 2005 Prentice Hall Inc. All rights reserved.

31 Common Biases and Errors
Escalation of Commitment Increasing commitment to a previous decision in spite of negative information. Randomness Error Trying to create meaning out of random events by falling prey to a false sense of control or superstitions. Hindsight Bias Falsely believing to have accurately predicted the outcome of an event, after that outcome is actually known. © 2005 Prentice Hall Inc. All rights reserved.

32 Intuition Intuitive Decision Making
An unconscious process created out of distilled experience. Conditions Favoring Intuitive Decision Making A high level of uncertainty exists There is little precedent to draw on Variables are less scientifically predictable “Facts” are limited Facts don’t clearly point the way Analytical data are of little use Several plausible alternative solutions exist Time is limited and pressing for the right decision © 2005 Prentice Hall Inc. All rights reserved.

33 Organizational Constraints on Decision Makers
Performance Evaluation Evaluation criteria influence the choice of actions. Reward Systems Decision makers make action choices that are favored by the organization. Formal Regulations Organizational rules and policies limit the alternative choices of decision makers. System-imposed Time Constraints Organizations require decisions by specific deadlines. Historical Precedents Past decisions influence current decisions. © 2005 Prentice Hall Inc. All rights reserved.

34 Cultural Differences in Decision Making
Problems selected Time orientation Importance of logic and rationality Belief in the ability of people to solve problems Preference for collect decision making © 2005 Prentice Hall Inc. All rights reserved.

35 Ethics in Decision Making
Ethical Decision Criteria Utilitarianism Seeking the greatest good for the greatest number. Rights Respecting and protecting basic rights of individuals such as whistleblowers. Justice Imposing and enforcing rules fairly and impartially. © 2005 Prentice Hall Inc. All rights reserved.

36 Ethics in Decision Making
Ethics and National Culture There are no global ethical standards. The ethical principles of global organizations that reflect and respect local cultural norms are necessary for high standards and consistent practices. © 2005 Prentice Hall Inc. All rights reserved.

37 Ways to Improve Decision Making
Analyze the situation and adjust your decision making style to fit the situation. Be aware of biases and try to limit their impact. Combine rational analysis with intuition to increase decision-making effectiveness. Don’t assume that your specific decision style is appropriate to every situation. Enhance personal creativity by looking for novel solutions or seeing problems in new ways, and using analogies. © 2005 Prentice Hall Inc. All rights reserved.

38 STRESS MANAGEMENT © 2005 Prentice Hall Inc. All rights reserved.

39 Work Stress and Its Management
A dynamic condition in which an individual is confronted with an opportunity, constraint, or demand related to what he or she desires and for which the outcome is perceived to be both uncertain and important. © 2005 Prentice Hall Inc. All rights reserved.

40 Work Stress and Its Management
Constraints Forces that prevent individuals from doing what they desire. Demands The loss of something desired. © 2005 Prentice Hall Inc. All rights reserved.

41 Potential Sources of Stress
Environmental Factors Economic uncertainties of the business cycle Political uncertainties of political systems Technological uncertainties of technical innovations Terrorism in threats to physical safety and security © 2005 Prentice Hall Inc. All rights reserved.

42 Potential Sources of Stress
Organizational Factors Task demands related to the job Role demands of functioning in an organization Interpersonal demands created by other employees Organizational structure (rules and regulations) Organizational leadership (managerial style) Organization’s life stage (growth, stability, or decline) © 2005 Prentice Hall Inc. All rights reserved.

43 Potential Sources of Stress (cont’d)
Individual Factors Family and personal relationships Economic problems from exceeding earning capacity Personality problems arising for basic disposition Individual Differences Perceptual variations of how reality will affect the individual’s future. Greater job experience moderates stress effects. Social support buffers job stress. Internal locus of control lowers perceived job stress. Strong feelings of self-efficacy reduce reactions to job stress. © 2005 Prentice Hall Inc. All rights reserved.

44 Consequences of Stress
High Levels of Stress Physiological Symptoms Behavioral Symptoms Psychological Symptoms © 2005 Prentice Hall Inc. All rights reserved.

45 Managing Stress Individual Approaches Implementing time management
Increasing physical exercise Relaxation training Expanding social support network © 2005 Prentice Hall Inc. All rights reserved.

46 Managing Stress Organizational Approaches
Improved personnel selection and job placement Training Use of realistic goal setting Redesigning of jobs Increased employee involvement Improved organizational communication Offering employee sabbaticals Establishment of corporate wellness programs © 2005 Prentice Hall Inc. All rights reserved.

47 A Model of Stress © 2005 Prentice Hall Inc. All rights reserved.

48 Managing Stress Individual Approaches Implementing time management
Increasing physical exercise Relaxation training Expanding social support network © 2005 Prentice Hall Inc. All rights reserved.

49 Managing Stress Organizational Approaches
Improved personnel selection and job placement Training Use of realistic goal setting Redesigning of jobs Increased employee involvement Improved organizational communication Offering employee sabbaticals Establishment of corporate wellness programs © 2005 Prentice Hall Inc. All rights reserved.

50 Inverted-U Relationship between Stress and Job Performance
OPTIMAL ALERT ANXIETY SLEEP DISORGANISED © 2005 Prentice Hall Inc. All rights reserved.


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