Mata kuliah : A0012 – Manajemen Umum
Tahun
: 2010
Session 3
MANAGERIAL DECISION MAKING
Learning Objectives
• After studying Chapter 3, you will know:
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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
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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
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Characteristics Of Managerial Decisions
Risk
Uncertainty
Lack of
Structure
Conflict
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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
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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
consequences
• probability of an action being successful is less than 100 percent
• good managers prefer to avoid or manage risk
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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
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The Stages Of Decision Making
Identifying and
diagnosing
the problem
Generating
alternative
solutions
Evaluating
alternatives
Making the
choice
Implementing
the decision
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Evaluating
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
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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
effect
– success or failure of the decision will affect the track record of the decision
maker
– contingency plans - alternative courses of action that can be implemented
based on how the future unfolds
• required to prepare for different scenarios
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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
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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
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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
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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
politicking
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Decision Making In Groups
Potential Advantages
Potential Disadvantages
1. Larger pool of information 1. One person dominates
1. More perspectives and
approaches
1. Satisficing
3. Intellectual stimulation
1. Groupthink - team spirit
discourages disagreement
3. People understand the
decision
1. Goal displacement - new
goals replace original goal
5. People are committed to
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the decision
Managing Group Decision Making
Leadership
1. Avoid domination
2. Encourage input
3. Avoid groupthink
and satisficing
4. Remember goals
Constructive Conflict
1. Air legitimate
differences
2. Stay task-focused
3. Be impersonal
4. Play devil’s advocate
Effective Group
Decision Making
Creativity
1. Brainstorm
2. Avoid criticizing
3. Exhaust ideas
4. Combine
ideas
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Managing Group Decision Making
• Leadership style
– leader should attempt to minimize process-related problems
– leader should:
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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
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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
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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
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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
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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
decisions
• 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
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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
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Organizational Decision Making (cont.)
• Negotiations and politics
– negotiations necessary to galvanize the preferences of competing groups and
individuals
– 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
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