1. Chapter 7
Decision Making
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2. The Essence of Decision Making
Decision making is the process of choosing among alternative courses of action to resolve a problem.
Most decisions can be classified as either:
Programmed—Made in response to situations that are routine, somewhat structured, and fairly repetitive
Non-programmed—Made in response to situations that are unique, relatively unstructured, undefined, and of major consequence to the organization
Certainty, risk, and uncertainty often exert a significant effect on decision making.
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4. The Steps in the Decision Making Process
The decision making process consists of six steps:
Identifying the problem
Generating alternative courses of action
Evaluating the alternatives
Selecting the best alternative
Implementing the decision
Evaluating the decision
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6. Decision Making Models
The classical model prescribes how managers should make decisions and asserts that managers are logical, rational individuals who make decisions that are in the best interests of the organization.
The administrative model describes how managers actually make decisions and includes the following concepts:
Bounded rationality—The idea that people have limits, or boundaries, to their rationality
Satisficing—The decision maker’s decision to choose the first alternative that appears to resolve the problem satisfactorily
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7. Decision Making Models (continued)
The political model of decision making is based on the idea that certain individuals or groups will be able to influence others to achieve their goals. In general, the political model attempts to develop coalitions to promote ideas, obtain resources, or negotiate an advantage.
The decision making models are valuable because they help managers better understand the decision making process.
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9. Four General Decision Making Styles
Managers with a directive style dislike ambiguity and desire power. These leaders base their decisions on facts and are focused on results.
Managers with an analytical style can tolerate a greater degree of ambiguity and like to tackle new challenges. They like to use logic and problem solving.
Managers with a conceptual style are skilled at developing new solutions and relying on intuition.
Behavioral decision makers focus more on the individual. They tend to be supportive of and empathetic to their followers.
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10. Factors That Affect Decision Making
Intuition—Immediately comprehending that something is the case, seemingly without the use of any reasoning process or conscious analysis
Emotion and stress—Feelings that can derail rational decision making and result in nonproductive or counterproductive behavior
Framing—Refers to how information is phrased, presented, or labeled and serves to bias judgment, or interpretation, of information
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11. Factors That Affect Decision Making (continued)
Escalation of commitment—The tendency of individuals and organizations to persist with failing courses of action
Confidence and risk propensity—The notion that the higher your confidence level in your decisions, the greater the likelihood that you will take risks in decision making
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13. Decision Making in Groups
In more and more organizations today, groups, rather than individuals, are making most of the decisions.
Today’s complex, dynamic business world requires more specialized knowledge than just one person can usually possess.
Thus, companies are almost forced to rely on groups of individuals to obtain sufficient information and expertise needed to make sound business decisions.
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14. Decision Making in Groups (continued)
Participative decision making generally results in greater job satisfaction, employee motivation, and involvement within the organization.
Two common group decision techniques are:
Brainstorming—A technique in which group members spontaneously suggest ideas to solve a problem
Nominal group technique—Involves the use of a highly structured meeting agenda and restricts discussion and interpersonal communication during the decision making process
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15. Decision Making in Groups (continued)
The major advantages that groups offer over individuals in decision making are that they:
Provide a greater pool of knowledge and information
Provide more experiences, perspectives, and interests
Are more likely to generate more alternative solutions
Clarify ambiguous problems, reduce uncertainty about alternatives, and increase intellectual stimulation
Foster greater comprehension of the decision
Foster increased acceptance of and commitment to the decision
Have increased legitimacy
Provide a training ground
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16. Decision Making in Groups (continued)
The major disadvantages of group decision making are that groups
Are time consuming
May be dominated by one or more group members
Are subject to social pressure
May compromise decisions, or satisfice
Have ambiguous decision responsibility
May experience goal displacement
Are subject to groupthink
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