Transcript Chapter 9 - cchristopherlee

Chapter 9
Managerial Decision Making
Types of Decisions
and Problems
Decision making is
the process of
identifying
opportunities
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A decision is a
choice made
from available
alternatives
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Programmed and
Nonprogrammed Decisions
Programmed Decisions
– Recurring problems
– Apply rule
Nonprogrammed Decisions
– Unique situations
– Poorly defined
– Unstructured
– Important consequences
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Facing Certainty
and Uncertainty
• Difference between programmed and
unprogrammed decisions
• Uncertainty depends on the amount and
value of information available
• Certainty – situation in which all information
is fully available
• Risk – the future outcomes associated with
an alternative are subject to chance
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9.1 Conditions That Affect the
Possibility of Decision Failure
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Ambiguity and Conflict
• Ambiguity makes decisions difficult
– The goals and the problem are unclear
• Wicked Decisions involve conflict over goals and
have changing circumstances, fuzzy information,
and unclear links
– There is often no “right” answer
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The Ideal, Rational Model
Rational economic assumptions drive decisions
 Operates to accomplish established goals, problem
is defined
 Decision maker strives for information and
certainty, alternatives evaluated
 Criteria for evaluating alternatives is known, select
alternative with maximum benefit
 Decision maker is rationale and uses logic
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How Managers Actually
Make Decisions
• Administrative/descriptive approach – Simon Model
– How managers really make decisions
– Recognize human and environmental limitations
• Bounded rationality – people have limits or
boundaries
• Satisficing – decision makers choose the first
solution that satisfies minimal decision criteria
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Steps in the Administrative
Model
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•
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Goals are often vague
Rational procedures are not always used
Managers’ searches for alternatives are limited
Most managers settle for satisficing
Intuition – quick apprehension of situation based
on practice and experience
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Decision-Making Model: Political
• Decisions involve managers with diverse interests
• Managers must engage in coalition building
– Informal alliance to support specific goal
• Without a coalition, powerful groups can derail
the decision-making process
• Political model resembles the real environment
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9.2 Comparing the Models
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Decision-Making Steps
1. Recognition of Decision Requirement – identify
problem or opportunity
2. Diagnosis and Analysis – analyze underlying
causal factors
3. Develop Alternatives – define feasible alternatives
4. Selection of Desired Alternative – alternative with
most desirable outcome
5. Implementation of Chosen Alternative – use of
management persuasive abilities to execute
6. Evaluation and Feedback – gather information
about effectiveness
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9.3 Six Steps in Managerial Decision-Making Process
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9.4 Decision Alternatives with Different Levels of Risk
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9.5 Personal Decision Framework
Many managers depend on their own
decision-making style to make decisions
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Personal Decision Framework
• Directive style – people who prefer simple, clearcut solutions to problems
• Analytic style – managers prefer complex
solutions based on a lot of data
• Conceptual style – managers like a broad amount
of information
• Behavioral style – managers with a deep concern
for others
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Why Do Managers Make
Bad Decisions?
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Being influenced by initial impressions
Justifying past decisions
Seeing what you want to see
Perpetuating the status quo
Being influenced by emotions
Overconfidence
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Innovative Group Decision Making
• Start with brainstorming – spontaneous suggestions in a group
• Engage in rigorous debate – use divergent points of view to focus
problems
• Avoid groupthink – acknowledge disagreement as value instead of
blind agreement: Kennedy Administration’s invasion of Cuba (1961)
• Act with speed – some decisions have to be made incredibly
quickly: Barnes & Noble (1995) on the E-Commerce decision-making
• Don’t ignore crisis – managers should expect and plan for crises
(with speed)
• Know when to bail – good managers must know when to pull the
plug!: Lehman Brothers vs. Merrill Lynch (2008)
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Effective Brainstorming
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•
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Less than 10 people
Less than 30 min.
Focus on one topic (subject)
Encourage everyone to participate
Prohibit criticism.
Leader writes the ideas on the board
Alternative  Electronic Brainstorming
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Review Questions
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Explain why decision making is an important component of good management.
Discuss the difference between programmed and nonprogrammed decisions and the
decision characteristics of certainty and uncertainty.
Describe the ideal, rational model of decision making, and the political model of
decision making.
Explain Bounded Rationality, Satisficing in Simon Model.
Explain the process by which managers actually make decisions in the real world.
Identify the six steps used in managerial decision making.
Describe four personal decision styles used by managers, and explain the biases that
frequently cause managers to make bad decisions.
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Review Questions (continued)
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Explain briefly why managers make bad decisions.
Identify and explain techniques for innovative group decision making.
Barnes & Nobles (1995) demonstrates a case of bad decision-making. Explain briefly
how Barnes & Nobles could have avoided such bad decision-making, in terms of
innovative decision-making.
Lehman Brothers (2008) presents a case of bad decision-making. Explain briefly how
Lehman Brothers could have avoided such bad decision-making, in terms of innovative
decision-making.
Kennedy Administration (1961) shows a case of bad decision-making. Explain briefly
how President Kennedy could have avoided such bad decision-making, in terms of
innovative decision-making.
Explain briefly how you can run an effective brainstorming session.
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