Transcript Chapter Five - Aiou's Blog

Chapter Six: Decision-Making
Learning Objectives
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The decision-making process
Assumptions of rationality
Bounded rationality, satisficing, escalating
commitment
Intuition and its role in decision-making
Types of problems and decisions (structured,
programmed)
Decision-making conditions (certainty, risk,
uncertainty)
Four decision-making styles
Decision-making biases and errors
Decisions in the Management
Functions
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Planning
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Organizing
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How many employees should we hire?
How should jobs be designed?
Leading
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What niche should we fill?
What strategies should we employ?
What leadership style should I use?
What should I deal with unmotivated employees?
Controlling
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How should our performance be measured?
What type of management information system should we have?
The Decision-Making Process
Identify a problem
 Identify decision criteria
 Allocate weights to the criteria
 Develop alternatives
 Analyze alternatives
 Select an alternative
 Implement the alternative
 Evaluate decision effectiveness
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The Decision-Making Process
Identification
Of a
Problem
My salespeople
need new
computers.
Identification
Of Decision
Criteria
•Price
•Brand Name and Model
•Warranties and Support
•Reliability
•Repair Record
Allocation
Of Weights
To Criteria
•Reliability
•Brand Name and Model
•Warranties and Support
•Repair Record
•Price
10
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2
Development
of
Alternatives
Analysis
of
Alternatives
Compaq
Fujitsu
AST
NEC
Sharp
IBM
HP
TI
Compaq
NEC
AST
•Reliability
•Brand Name and Model
•Warranties and Support
•Repair Record
•Price
HP
Selection
of an
Alternative
Implementation
of the
Alternative
Fujitsu
IBM
Sharp
TI
The Fujitsu
is the best.
Evaluation of
Decision Effectiveness
Criteria
Score
Alternatives
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Assumptions of Rationality
Problem is clear
 Goal is clear
 All alternatives are known
 Alternatives can be ranked based on
criteria
 Criteria and weights are constant over
time
 No time or cost constraints
 Maximum payoff
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Bounded Rationality
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Is when you:
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Construct a simplified model that extracts features
of problems without capturing all their complexity
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Attempt to behave rationally
Result: a “satisficing” decision (basically what
you guys did)
Bounded Rationality
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Identify a problem
Identify decision criteria
Allocate weights to the
criteria
Develop alternatives
Analyze alternatives
Select an alternative
Implement the alternative
Evaluate decision
effectiveness
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Identify some criteria
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Identify some alternatives
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Select a “satisficing”
alternative, then stop the
search
The Role
of Intuition
Previous
Experience
“Gut-Level
Feeling”
Accumulated
Judgment
Problems and Decisions
Wellstructured
problems
Programmed
decisions
Illstructured
problems
Nonprogrammed
decisions
Procedures, Rules and Policies
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Procedure: Steps to solve a
structured problem
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Rule: Explicit statement that tells
what ought/ought not do
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Policy: Guide that establishes
parameters for making-decisions
Types of Problems, Types of Decisions,
and Level in the Organization
Ill-Structured
Top
Nonprogrammed
Decisions
Type
Level
Programmed
Decisions
Well-Structured
Lower
Decision-Making
Conditions
 Certainty
 Risk
 Uncertainty
This sort allows you to view funds by their risk
levels. The five risk levels are:
•Conservative
•Conservative to Moderate
•Moderate
•Moderate to Aggressive
•Aggressive
Ways Managers Approach
Problems
 Problem
avoider
 Problem
solver
 Problem
seeker
Dimensions of DecisionMaking
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Way of Thinking
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Rational
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Intuitive
Tolerance for Ambiguity
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High
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Low
Decision-Making Styles
Tolerance for Ambiguity
High
Analytic
Conceptual
Directive
Behavioral
Low
Rational
Way of Thinking
Intuitive
One Giant Leap: First Lunar
Landing
What type of D-M was used? (rational
or intuitive?)
 Well or ill-structured problem?
 Programmed or non-programmed
decision?
 Condition of certainty, risk, or
uncertainty?
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