1. Slide content created by Charlie Cook, The University of West Alabama Copyright © Houghton Mifflin Company. All rights reserved. Chapter Nine Managing Decision Making and Problem Solving

2. Copyright © Houghton Mifflin Company. All rights reserved.9–2 Learning Objectives After studying this chapter, you should be able to: 1.Define decision making and discuss types of decisions and decision-making conditions. 2.Discuss rational perspectives on decision making, including the steps in rational decision making. 3.Describe the behavioral aspects of decision making. 4.Discuss group and team decision making, including the advantages and disadvantages of group and team decision making and how it can be more effectively managed.

3. Copyright © Houghton Mifflin Company. All rights reserved.9–3 The Nature of Decision Making Decision Making –The act of choosing one alternative from among a set of alternatives. Decision-Making Process –Recognizing and defining the nature of a decision situation, identifying alternatives, choosing the “best” alternative, and putting it into practice. An effective decision optimizes some set of factors such as profits, sales, employee welfare, and market share. Managers make decisions about both problems and opportunities.

4. Copyright © Houghton Mifflin Company. All rights reserved.9–4 Types of Decisions Programmed Decisions –A decision that is a fairly structured decision or recurs with some frequency or both. Example: Starting your car in the morning. Nonprogrammed Decisions –A decision that is relatively unstructured and occurs much less often a programmed decision. Example: Choosing a vacation destination.

5. Copyright © Houghton Mifflin Company. All rights reserved.9–5 Decision-Making Conditions Decision Making Under Certainty –The decision maker knows with reasonable certainty what the alternatives are and what conditions are associated with each alternative. Decision Making Under Risk –The availability of each alternative and its potential payoffs and costs are all associated with risks. Decision Making Under Uncertainty –The decision maker does not know all the alternatives, the risks associated with each, or the consequences of each alternative.

6. Copyright © Houghton Mifflin Company. All rights reserved.9–6 Figure 9.1: Decision-Making Conditions

7. Copyright © Houghton Mifflin Company. All rights reserved.9–7 Figure 9.2: The Classical Model of Decision Making

8. Copyright © Houghton Mifflin Company. All rights reserved.9–8 Table 9.1: Steps in the Rational Decision- making Process

9. Copyright © Houghton Mifflin Company. All rights reserved.9–9 Figure 9.3: Evaluating Alternatives in the Decision- making Process

10. Copyright © Houghton Mifflin Company. All rights reserved.9–10 Figure 9.4: The Administrative Model of Decision Making

11. Copyright © Houghton Mifflin Company. All rights reserved.9–11 Behavioral Aspects of Decision Making (cont’d) Bounded Rationality –Decision makers are limited by their values and unconscious reflexes, skills, and habits. Satisficing –The tendency to search for alternatives only until one is found that meets some minimum standard of sufficiency to resolve the problem. Coalition –A positive or negative political force in decision making which consists of an informal alliance of individuals or groups formed to achieve a goal.

12. Copyright © Houghton Mifflin Company. All rights reserved.9–12 Group and Team Decision Making in Organizations Forms of Group Decision Making –Interacting group or team Consists of an existing group or newly formed team interacting and then making a decision. –Delphi groups Developing a consensus of expert opinion from a panel of experts who individually contribute through a moderator. –Nominal groups Generating ideas through the individual contributions of alternatives that are winnowed down to reach a decision.

13. Copyright © Houghton Mifflin Company. All rights reserved.9–13 Table 9.2: Advantages and Disadvantages of Group and Team Decision Making

14. Copyright © Houghton Mifflin Company. All rights reserved.9–14 Managing Group and Team Decision-Making Processes Managers can promote the effectiveness of group and team decision making by: –Being aware of the pros and cons of having a group or team make a decision. –Setting deadlines for when decisions must be made. –Avoiding dominance problems by managing group membership. –Having each group member individually critically evaluate all alternatives. –Not making your position known too early. –Appointing a group member to be a “devil’s advocate.” –Holding a follow-up meeting to recheck the decision.

15. Copyright © Houghton Mifflin Company. All rights reserved.9–15 Key Terms decision-making decision-making process programmed decision nonprogrammed decision state of certainty stage of risk state of uncertainty classical decision model steps in rational decision making administrative model bounded rationality satisficing coalition intuition escalation of commitment risk propensity interacting groups Delphi group nominal group groupthink