Session 3 MANAGERIAL DECISION MAKING – Manajemen Umum Mata kuliah : A0012

Mata kuliah : A0012 – Manajemen Umum
: 2010
Session 3
Learning Objectives
• After studying Chapter 3, you will know:
the kinds of decisions you will face as a manager
how to make “rational” decisions
the pitfalls you should avoid when making decisions
the pros and cons of using a group to make decisions
the procedures to use in leading a decision-making group
how to encourage creative decisions
the processes by which decisions are made in organizations
how to make decisions in a crisis
Characteristics of Managerial Decisions
The Stages of Decision Making
The Best Decision
Barriers to Effective Decision Making
Decision Making in Groups
Managing Group Decision Making
Organizational Decision Making
Characteristics Of Managerial Decisions
Lack of
Characteristics Of Managerial Decisions
• Lack of structure
– programmed decisions - decisions encountered and made in the past
• have objectively correct answers
• are solvable by using simple rules, policies, or numerical computations
– nonprogrammed decisions - new, novel, complex decisions having no proven answers
• a variety of solutions exist, all of which have merits and drawbacks
• demand creative responses, intuition, and tolerance for ambiguity
Characteristics Of Managerial Decisions (cont.)
• Uncertainty and risk
– certainty - have sufficient information to predict precisely the consequences
of one’s actions
– uncertainty - have insufficient information to know the consequences of
different actions
• cannot estimate the likelihood of various consequences of their actions
– risk - available information permits estimation of the likelihood of various
• probability of an action being successful is less than 100 percent
• good managers prefer to avoid or manage risk
Characteristics Of Managerial Decisions (cont.)
• Conflict
– opposing pressures from different sources
– occurs at two levels
• psychological conflict - individual decision makers:
– perceive several attractive options
– perceive no attractive options
• conflict between individuals or groups
The Stages Of Decision Making
Identifying and
the problem
Making the
the decision
the decision
Stages Of Decision Making
• Identifying and diagnosing the problem
– recognize that a problem exists and must be solved
• problem - discrepancy between current state and past performance, current
performance of other organizations, or future expected performance
• decision maker must want to resolve the problem and have the resources to do so
• Generating alternative solutions
– ready-made solutions - ideas that have been tried before
• may follow the advice of others who have faced similar problem
– custom-made solutions - combining new ideas into creative solutions
Stages Of Decision Making (cont.)
• Evaluating alternatives
– determining the value or adequacy of the alternatives
– there are potentially more alternatives available than managers may realize
– predict the consequences that will occur if the various options are put into
– success or failure of the decision will affect the track record of the decision
– contingency plans - alternative courses of action that can be implemented
based on how the future unfolds
• required to prepare for different scenarios
Stages Of Decision Making (cont.)
• Making the choice
– maximize - a decision realizing the best possible outcome
• greatest positive consequences and fewest negative consequences
• greatest benefit at the lowest cost and the largest expected total return
– satisfice - choose an option that is acceptable although not necessarily the best or perfect
• compare the choice with the goal, not against other options
• search for alternatives ends when an okay solution is found
– optimizing - achieving the best possible balance among several goals
Stages Of Decision Making (cont.)
• Implementing the decision
– those who implement the decision must:
• understand the choice and why it was made
• be committed to its successful implementation
– can’t assume that things will go smoothly during implementation
• identify potential problems
• identify potential opportunities
Barriers To Effective Decision Making
• Psychological biases
– biases that interfere with objective rationality
– illusion of control - a belief that one can influence events even when one has no control over
what will happen
– framing effects - how problems or decision alternatives are phrased or perceived
• subjective influences can override objective facts
– discount the future - weigh short-term costs and benefits more heavily than longer-term
costs and benefits
• the avoidance of short-term costs or the seeking of short-term rewards may result in
negative long-term consequences
Barriers To Effective Decision Making (cont.)
• Time pressures
– today’s economy places a premium on acting quickly and keeping pace
– in order to make timely and high-quality decisions one must:
• focus on real-time information
• involve people more effectively and efficiently
• rely on trusted experts
• take a realistic view of conflict
• Social realities
– many decisions result from intensive social interactions, bargaining, and
Decision Making In Groups
Potential Advantages
Potential Disadvantages
1. Larger pool of information 1. One person dominates
1. More perspectives and
1. Satisficing
3. Intellectual stimulation
1. Groupthink - team spirit
discourages disagreement
3. People understand the
1. Goal displacement - new
goals replace original goal
5. People are committed to
the decision
Managing Group Decision Making
1. Avoid domination
2. Encourage input
3. Avoid groupthink
and satisficing
4. Remember goals
Constructive Conflict
1. Air legitimate
2. Stay task-focused
3. Be impersonal
4. Play devil’s advocate
Effective Group
Decision Making
1. Brainstorm
2. Avoid criticizing
3. Exhaust ideas
4. Combine
Managing Group Decision Making
• Leadership style
– leader should attempt to minimize process-related problems
– leader should:
avoid dominating the discussion
encourage less vocal members to express themselves
mitigate pressures for conformity
stay alert to groupthink and satisficing
prevent group from losing sight of the primary objective
Managing Group Decision Making (cont.)
• Constructive conflict
– a certain amount of constructive conflict should exist
– cognitive conflict - issue-based differences in perspectives or judgments
• most constructive type of conflict
• can air legitimate differences of opinion and develop better ideas
– affective conflict - emotional disagreement directed toward other people
that is likely to be destructive
– devil’s advocate - has the job of criticizing others
– dialectic - structured debate comparing two conflicting courses of action
Managing Group Decision Making (cont.)
• Encouraging creativity
– creativity involves:
• creation - bringing a new thing into being
• synthesis - joining two previously unrelated things
• modification - improving something or giving it new application
– to become creative one must:
• recognize creative potential in little opportunities
• obtain sufficient resources
• escape from work once in awhile and read widely
– brainstorming - group generates ideas about a problem
• criticism is withheld until all ideas have been proposed
Organizational Decision Making
• Constraints on decision makers
– organizations cannot do whatever they wish
• face various constraints on their actions
• Models of organizational decision processes
– bounded rationality - decision makers cannot be truly rational because:
• they have imperfect, incomplete information about alternatives
• the problems they face are so complex
• human beings cannot process all the information to which they are exposed
• time is limited
• people in the organization have conflicting goals
Organizational Decision Making (cont.)
• Models of organizational decision processes (cont.)
– incremental model - major decisions arise through a series of smaller decisions
• piecemeal approach to larger solutions
– coalitional model - groups with differing preferences use power and negotiation to influence
• used when people disagree about goals or compete for resources
– garbage can model - a chaotic process leading to seemingly random decisions
• occurs when people are unsure of their goals and what should be done
Organizational Decision Making (cont.)
• Emergent strategies
– the strategy that evolves from all the activities engaged in by people
throughout the organization
– result from dynamic processes in which people engage in discovery,
implement decisions, and reconsider the initial decision after discovering new
things by chance
– emergent strategies may start at any organizational level
– emergent strategies are generally the result of constructive processes
Organizational Decision Making (cont.)
• Negotiations and politics
– negotiations necessary to galvanize the preferences of competing groups and
– organizational politics - people try to influence decisions to promote their
own interests
• use power to pursue hidden agendas
– create common goals - helps to make decision making a collaborative rather
than a competitive process
• Decision making in a crisis
– stress and time constraints make decisions less effective
– should be prepared for crises in advance