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Chapter Objectives
 Specify at least five sources of decision complexity for modern managers.
 Explain what a condition of risk is and what managers can do to cope with it.
 Define and discuss the three decision traps: framing, escalation of
commitment, and overconfidence.
 Discuss why programmed and nonprogrammed decisions require different
decision-making procedures and distinguish between the two types of
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knowledge in knowledge management.
Explain the need for a contingency approach to group-aided decision making.
Identify and describe five of the ten “mental locks” that can inhibit creativity.
List and explain the four basic steps in the creative problem-solving process.
Describe how causes of problems can be tracked down with fishbone diagrams.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Challenges for Decision Makers
 Decision Making
 The process of identifying and choosing alternative
courses of action to meet the demands of a situation.
 Alternative courses of action must be identified,
weighed, and weeded out.
 Trends in Decision Making
 The complexity of decision-making has accelerated.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Challenges for Decision Makers
(cont’d)
 Dealing with Complex Streams of Decisions
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Multiple criteria to be satisfied by a decision
Intangibles that often determine decision alternatives
Risk and uncertainty about decision alternatives
Long-term implications of the effects of the choice of a particular alternative
Interdisciplinary input, which increases the number of persons to be consulted
before a decision is made
Pooled decision making increases the number of persons playing a part in the
decision process.
Value judgments by differing participants in the process create disagreement over
whether a decision is right or wrong, good or bad, and ethical or unethical.
Unintended consequences occur because the results of purposeful actions cannot
always be predicted.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Coping with Uncertainty
 Types (Conditions) of Uncertainty
 Certainty: Exists when a solid factual basis allows
prediction of a decision’s outcome
 Risk: Exists when a decision is made on the basis of
incomplete but reliable information
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Objective probabilities are based on reliable data.
Subjective probabilities are based on judgment.
 Uncertainty: Exists when no reliable data exist on
which to base a decision
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Information Processing Styles
 Thinking Style
 Being deliberative, logical, precise, and objective when
making a decision
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Suited to routine tasks requiring attention to detail and
systematic implementation
 Intuitive Style
 Being creative, following hunches and visions in
decision making
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Best for rapidly changing situations requiring creativity and
intuition
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Avoiding Perceptual
and Behavioral Decision Traps
 Framing Error
 The way in which information is presented influences
one’s interpretation of it, which, in turn, may alter a
decision based on the information.
 Escalation of Commitment
 Continuing on a course of action can lock a person into
a losing position (“throwing good money after bad”).
 Overconfidence
 Believing too much in one’s own capabilities is a trap.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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A General Decision-Making Model
 Rational (Logical) Decision Model Steps
 Scan the situation; identify a signal that a decision
should be made.
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Receipt of authoritative communications from superiors
Cases referred for decision by subordinates
Cases originating from the manager
 Classify the decision. If it is routine, apply the
appropriate decision rule; if it is not, generate a
nonprogrammed decision through problem solving.
 Monitor and follow-up as necessary.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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A General Decision-Making Model
(cont’d)
 Knowledge Management
 Developing a system to improve the creation and
sharing of knowledge critical for decision making
 Tacit knowledge: Personal, intuitive, and
undocumented private information
 Explicit knowledge: Readily sharable public
information in verbal, textual, visual, or numerical
form
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Figure 8.5: Key Dimensions of
Knowledge Management (KM)
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A General Decision-Making Model
(cont’d)
 Improving the Flow of Knowledge
 The flow of constructive tacit knowledge between
coworkers is a priority.
 KM software is proving very useful and cost-effective in
large organizations for sharing both tacit and explicit
knowledge
 Knowing what you know, what you don’t know, and
how to find what you know yields better and more
timely decisions.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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A General Decision-Making Model
(cont’d)
Improving the Flow of Knowledge
 Organization cultures
 Participative management
 Training
 Virtual teams
 Communication
 Transformational
 Empowerment
leadership
 Mentoring
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Group-Aided Decision Making:
A Contingency Perspective
 Collaborative Computing
 Teaming up to make decisions via a computer network
programmed with groupware
 Group Involvement in Decisions
 Analyzing the problem
 Identifying components of the situation
 Estimating components of the situation
 Designing alternatives
 Choosing an alternative
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Group-Aided Decision Making:
A Contingency Perspective
(cont’d)
 The Problem of Dispersed Accountability
 Group-aided decision making: The group does
everything except make the decision.
 Group decision making: The group actually makes the
final decision collectively.
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Results in loss of personal/individual accountability
 Individual accountability is required when:
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The decision will have significant organizational impact.
The decision has legal ramifications.
A competitive reward is tied to the decision.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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A Contingency Approach Is Necessary
 Individuals Versus Groups
 Groups do better quantitatively and qualitatively than
the average individual.
 Exceptional individuals tend to outperform the group.
 Group decision-making performance does not always
exceed individual performance, making a contingency
approach to decision making advisable.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Figure 8.6: The
ProblemSolving Process
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Managerial Creativity
 What Is Creativity?
 The reorganization of experience into new
configurations
 Creativity is a function of knowledge, imagination, and
evaluation.
 Three domains of creativity:
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Art
Discovery
Humor
 Myth: Creative people are typically nonconformists
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Creative Problem Solving
 Problem solving is the conscious process of bringing
the actual situation closer to the desired situation.
 Steps in Creative Problem Solving
 Identifying the problem
 Generating alternative solutions
 Selecting a solution
 Implementing and evaluating the solution
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Summary
 Decision making is a fundamental part of management because it requires choosing
among alternative courses of action.
 Managers must learn to assess the degree of certainty in a situation—whether conditions
are certain, risky, or uncertain.
 Researchers have identified three perceptual and behavioral decision traps that can
undermine the quality of decisions: framing error, escalation of commitment, and
overconfidence.
 Decisions, generally, are either programmed or non-programmed.
 Managers may choose to bring other people into virtually every aspect of the decisionmaking process.
 Creativity requires the proper combination of knowledge, imagination, and evaluation to
reorganize experience into new configurations.
 The creative problem-solving process consists of four steps: (1) identifying the problem,
(2) generating alternative solutions, (3) selecting a solution, and (4) implementing and
evaluating the solution.
 A clear and concise statement of the problem forms the “head” of the fishbone skeleton.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Terms to Understand
 Decision making
 Law of unintended
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consequences
Condition of certainty
Condition of risk
Objective probabilities
Subjective probabilities
Condition of uncertainty
Framing error
Escalation of commitment
Programmed decisions
Decision rule
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Knowledge management
Tacit knowledge
Explicit knowledge
Collaborative computing
Creativity
Problem solving
Problem
Causes
Satisfice
Optimize
Idealize
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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