2 The Nature of Managerial Decision Making The process by which managers respond to opportunities and threats by analyzing options, and making determinations about specific organizational goals and courses of actionDecisions 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.
3 Decision Making Programmed Decision Routine, virtually automatic decision making that follows established rules or guidelines.Managers have made the same decision many times beforeThere are rules or guidelines to follow based on experience with past decisionsLittle ambiguity involved
4 Decision Making Non-Programmed Decisions Nonroutine decision making that occurs in response to unusual, unpredictable opportunities and threats.
5 Decision Making Intuition Reasoned judgment feelings, beliefs, and hunches that come readily to mind, require little effort and information gathering and result in on-the-spot decisionsReasoned judgmentdecisions that take time and effort to make and result from careful information gathering, generation of alternatives, and evaluation of alternatives5-5
6 The Classical Model Classical Model of Decision Making A prescriptive model of decision making that assumes the decision maker can identify and evaluate all possible alternatives and their consequences and rationally choose the most appropriate course of actionOptimum decisionThe most appropriate decision in light of what managers believe to be the most desirable future consequences for their organization
7 The Classical Model of Decision Making Figure 5.15-7
8 The Administrative Model Administrative Model of Decision MakingAn approach to decision making that explains why decision making is inherently uncertain and risky and why managers usually make satisfactory rather than optimum decisionsBounded rationality, incomplete informationBounded rationalityCognitive limitations that constrain one’s ability to interpret, process, and act on information
10 Causes of Incomplete Information RiskThe degree of probability that the possible outcomes of a particular course of action will occurUncertaintythe probabilities of alternative outcomes cannot be determined and future outcomes are unknownManagers know enough about a given outcome to be able to assign probabilities for the likelihood of its failure or successMany decision outcomes are not known such as the success of a new product introduction.
11 Causes of Incomplete Information Ambiguous InformationInformation that can be interpreted in multiple and often conflicting ways.Young Woman or Old WomanFigure 5.35-11
12 Causes of Incomplete Information Time constraints and information costsmanagers have neither the time nor money to search for all possible alternatives and evaluate potential consequences
13 Causes of Incomplete Information SatisficingSearching for and choosing an acceptable, or satisfactory response to problems and opportunities, rather than trying to make the best decisionManagers explore a limited number of options and choose an acceptable decision rather than the optimum decisionManagers assume that the limited options they examine represent all options.This is the typical response of managers when dealing with incomplete information.
15 Decision Making Steps Step 1. Recognize Need for a Decision Sparked by an event such as environment changes.Managers must first realize that a decision must be made.
16 Decision Making Steps Step 2. Generate Alternatives Managers must develop feasible alternative courses of actionIf good alternatives are missed, the resulting decision is poorIt is hard to develop creative alternatives, so managers need to look for new ideas
17 Decision Making Steps Step 3. Evaluate Alternatives What are the advantages and disadvantages of each alternative?Managers should specify criteria, then evaluate.
18 General Criteria for Evaluating Possible Courses of Action Figure 5.55-18
19 Decision Making Steps Step 4. Choose Among Alternatives Rank the various alternatives and make a decisionTendency is for managers to ignore critical information, even when available
20 Decision Making Steps Step 5. Implement Chosen Alternative Managers must now carry out the alternativeOften a decision is made and not implemented
21 Decision Making Steps Step 6. Learn From Feedback Compare what happened to what was expected to happenExplore why any expectations for the decision were not metDerive guidelines that will help in future decision making
22 Group Decision Making Superior to individual making Choices less likely to fall victim to biasAble to draw on combined skills of group membersImprove ability to generate feasible alternativesAllows managers to process more informationManagers affected by decisions agree to cooperate5-22
23 Group Decision Making Groupthink A pattern of faulty and biased decision making that occurs in groups whose members strive for agreement among themselves at the expense of accurately assessing information relevant to a decision
24 Group Decision Making Devil’s Advocacy Critical analysis of a preferred alternative to ascertain its strengths and weaknesses before it is implemented
25 Organizational Learning and Creativity The process through which 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
26 Organizational Learning and Creativity A decision maker’s ability to discover original and novel ideas that lead to feasible alternative courses of actionInnovationThe implementation of creative ideas in an organization.5-26
27 Building Group Creativity BrainstormingManagers meet face-to-face to generate and debate many alternatives.Group members are not allowed to evaluate alternatives until all alternatives are listed.When all are listed, then the pros and cons of each are discussed and a short list created.
28 Building Group Creativity Production blockingLoss of productivity in brainstorming sessions due to the unstructured nature of brainstormingNominal Group TechniqueA decision-making technique in which group members write down ideas and solutions, read their suggestions to the whole group, and discuss and then rank the alternatives
29 Building Group Creativity Delphi TechniqueA decision-making technique in which group members do not meet face-to-face but respond in writing to questions posed by the group leader
30 Entrepreneurship and Creativity an individual who notices opportunities and decides how to mobilize the resources necessary to produce new and improved goods and servicesSocial entrepreneursindividuals who pursue initiatives and opportunities to address social problems and needs in order to improve society and well-being
31 Entrepreneurship and Creativity Intrapreneura manager, scientist, or researcher who works inside an organization and notices opportunities to develop new or improved products and better ways to make them
32 Entrepreneurship and Creativity Mobilization of resources to take advantage of an opportunity to provide customers with new and improved goods and services5-32
33 Intrapreneurship and Creativity Product championa manager who takes “ownership” of a project and provides the leadership and vision that take a product from the idea stage to the final customerSkunkworksa group who is deliberately separated from normal operations to encourage them to devote all their attention to developing new products5-33