1. CHAPTER 3: INFORMATION AND DECISION-MAKING © John Wiley & Sons Canada, Ltd. John R. Schermerhorn, Jr., Barry Wright, and Lorie Guest Business Leadership: Management Fundamentals John R. Schermerhorn, Jr., Barry Wright, and Lorie Guest

2. Data – Raw facts and observations Information – Data made useful for decision-making Information drives management functions Characteristics of useful information: – Timely – High quality – Complete – Relevant – Understandable 2 WHAT IS USEFUL INFORMATION?

3. Problem avoiders: Inactive in information gathering and solving problems Problem solvers: Reactive in gathering information and solving problems Problem seekers: Proactive in anticipating problems and opportunities and taking appropriate action to gain an advantage PROBLEM-SOLVING APPROACHES OR STYLES 3

4. Systematic Thinkers Rational step-by-step analytical breaks problems into smaller components TYPES OF THINKING 4 Intuitive Thinkers Rely on hunches and feelings Flexible and spontaneous See “big picture ” Multidimensional Thinkers Multidimensional thinking applies both intuitive and systematic thinking Effective multidimensional thinking requires skill at strategic opportunism

5. 5 CEO JOHN CHAMBERS (HARVARD BUSINESS) Teamwork and Collaboration, Harvard Business Publishing Series (external link)

6. Sensation Thinkers emphasize the impersonal rather than the personal and take a realistic approach to problem solving. Intuitive Thinkers are comfortable with abstraction and tend to be idealistic. Have a spontaneous fashion. Intuitive Feelers prefer broad and global issues and are comfortable with intangibles. Sensation Feelers emphasize analysis and human relations and tend to be realistic and prefer facts. COGNITIVE STYLES 6

7. FIGURE 3.6 DIFFERENT COGNITIVE STYLES IN DECISION-MAKING

8. Apply solutions that are readily available from past experiences to solve structured problems Structured problems are ones that are familiar, straightforward, and clear with respect to information needs Best applied to routine problems that can be anticipated PROGRAMMED DECISIONS

9. Develop novel solutions to meet the demands of unique situation that present unstructured problems Unstructured problems are ones that are full of ambiguities and information deficiencies Commonly faced by higher-level management NONPROGRAMMED DECISIONS 9

10. A crisis involves an unexpected problem that can lead to disaster if not resolved quickly and appropriately Rules for crisis management: – Figure out what is going on – Remember that speed matters – Remember that slow counts, too – Respect the danger of the unfamiliar – Value the skeptic – Be ready to “fight fire with fire” CRISIS DECISION-MAKING

11. Certain environments: – Offer complete information about possible action alternatives and their outcomes Risk environments: – Lack complete information about action alternatives and their consequences, but offer some estimates of probabilities of outcomes for possible action alternatives Uncertain environments: – Information is so poor that probabilities cannot be assigned to likely outcomes of known action alternatives DECISION ENVIRONMENTS

12. FIGURE 3.7 THREE ENVIRONMENTS FOR MANAGERIAL DECISION-MAKING AND PROBLEM SOLVING

13. Identify and define the problem Generate and evaluate possible solutions Make decision and conduct ethics double check Implement the decision Evaluate results FIVE-STEP DECISION-MAKING PROCESS

14. FIGURE 3.8 STEPS IN MANAGERIAL DECISION- MAKING AND PROBLEM SOLVING

15. Step 1: Identify and define the problem Focuses on information gathering, information processing, and deliberation Decision objectives should be established Common mistakes in defining problems: – Defining the problem too broadly or too narrowly – Focusing on symptoms instead of causes – Choosing the wrong problem DECISION-MAKING PROCESS

16. Step 2: Generate and evaluate possible solutions Potential solutions are formulated and more information is gathered, data are analyzed, the advantages and disadvantages of alternative solutions are identified Approaches for evaluating alternatives: – Stakeholder analysis – Cost-benefit analysis DECISION-MAKING PROCESS

17. Step 2: Generate and evaluate possible solutions (cont.) Criteria for evaluating alternatives: – Benefits – Costs – Timeliness – Acceptability – Ethical soundness Common mistakes: – Selecting a particular solution too quickly – Choosing a convenient alternative that may have damaging side effects or may not be as good as other alternatives DECISION-MAKING PROCESS

18. Step 3: Decide on a preferred course of action Classical decision model – Managers act rationally in a certain world – Managers face clearly defined problems and have complete knowledge of all possible alternatives and their consequences – Results in an optimizing decision DECISION-MAKING PROCESS

19. Step 3: Decide on a preferred course of action (cont.) Behavioural decision model – Managers act in terms of what they perceive about a given situation – Recognizes limits to human information-processing capabilities Cognitive limitations Bounded rationality Results in a satisficing decision DECISION-MAKING PROCESS

20. FIGURE 3.9 DIFFERENCES IN THE CLASSICAL AND BEHAVIOURAL MODELS OF MANAGERIAL DECISION MAKING

21. Step 4: Implement the decision solution Involves taking action to make sure the solution decided upon becomes a reality Managers need to have willingness and ability to implement action plans Lack-of-participation error should be avoided DECISION-MAKING PROCESS

22. Step 5: Evaluate results Involves comparing actual and desired results Positive and negative consequences of chosen course of action should be examined If actual results fall short of desired results, the manager returns to earlier steps in the decision-making process DECISION-MAKING PROCESS

23. Creativity: – The generation of a novel idea or unique approach that solves a problem to take advantage of an opportunity – More likely: Task expertise – something one is good at or knows about Task motivated – people work exceptionally hard to resolve a problem or exploit and opportunity – Organizations should create an environment that supports and encourages creativity CREATIVITY IN DECISION-MAKING

24. VIDEO: CNBC VIDEO ON LONNIE JOHNSON AND THE SUPER SOAKER Super Soaker inventor, Lonnie Johnson (external link)

25. - DARRYL F. ZANUCK, HEAD OF 2OTH CENTURY FOX, 1946 “Television won’t be able to hold onto any market it captures after the first six months. People will soon get tired of the staring into a box every night.”

26. “That’s an amazing invention, but who would ever want to use one of them.” - US PRESIDENT RUTHERFORD B. HAYES, AFTER PARTICIPATING IN A TRIAL TELEPHONE CONVERSATION BETWEEN WASHINGTON AND PHILADELPHIA, 1876

27. THOMAS J. WATSON SR., CHAIRMAN OF IBM, 1943 “I think there is a world market for about five computers.”

28. RIGHT BRAIN VS. LEFT BRAIN Right Brain Imagination Intuition Spontaneity Emotion Left Brain Logic Order Method Analysis

29. CHARACTERISTICS OF CREATIVE PEOPLE Work with high energy Identify problems, plan, make decisions Hold ground in face of criticism Accept responsibility for what happens Be resourceful, even in difficult situations Use both systematic and intuitive in problem-solving Think “outside the box” Synthesize and find correct answers Look at divers ways to solve problems Transfer learning from one setting to others Be objective, willing to “step back” and question assumptions

30. Question: “What is the difference between you and the average person?” Response: “If you asked the average person to find a needle in the haystack, the person would stop when he or she found a needle. I, on the other hand, would tear through the entire haystack looking for all the possible needles." ALBERT EINSTEIN’S NEEDLE IN THE HAYSTACK

31. What is one-half of thirteen? ACTIVITY

32. 6.5 Six and one-half Thir & teen = 4 (4 letters on each side) 13 = 1,3 XI II = 11, 2 XIII = 8, 8 (Halving horizontally gives us 8 on the top and 8 on the bottom) ACTIVITY (CONT.)

33. CREATIVITY EXERCISE

34. The diagram represents twelve matchsticks positioned to represent a square made up of four equal squares. Can you, by moving only three of these sides, make three equal-sized squares? ACTIVITY 1

35. SOLUTION 23 1

36. Add one line to the following to make it into a 6. ACTIVITY 2 I X

37. SOLUTION S I X

38. GROUP DECISIONS Advantages: Greater amounts of information, knowledge and expertise are available Expand number of alternatives Avoids tunnel vision Increase understanding and acceptance of outcomes Increase commitments of members to work hard Disadvantages: Social pressures to conform Minority domination may occur Decision making takes longer thus more costly

39. Individual lacks expertise or information Problem is unclear and hard to define Acceptance by others needed for effective implementation Time is sufficient for group involvement WHEN GROUP DECISION-MAKING WORKS BEST

40. Any decision should meet “ethics double check” mentioned in step 3 of the decision-making process – How would I feel if my family found out about this decision? – How would I feel if this decision were published in the local newspaper or on the Internet? – Think of a person you know or know of (in real life or fiction) who has the strongest character and best ethical judgement. Then ask yourself – what would that person do in your situation? Any discomfort in answering these questions indicates the decision has ethical shortcomings. ETHICAL DECISION MAKING

41. Considering the ethics of a proposed decision may result in better decisions and prevention of costly litigation Ethical decisions satisfy the following criteria: – Utility – Rights – Justice – Caring ETHICAL DECISION MAKING (CONT.)