Ch. 3 Outline
Managerial Decision Making
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2.
3.
4.
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7.
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 Decisions
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Lack of Structure
• Programmed Decisions
– Decisions encountered
and made before, having
objectively correct
answers, and solvable by
using simple rules,
policies, or numerical
computations
• Non-programmed
Decisions
– New, novel, complex
decisions having no
proven answers
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Uncertainty and Risk
We operate in an environment— the Internet—
where there’s an enormous amount of
uncertainty. You can’t be sure what’s going to
happen tomorrow, never mind next year. The
danger is that the uncertainty can lead to
paralysis. You spend so much time trying to nail
down all the possibilities and risks, you never get
around to taking action. And if that happens—if
you become indecisive—you’re dead.
- George Conrades
Chairman and CEO Akamai Technologies
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Conflict
• Conflict exists when the manager must
consider opposing pressures from
different sources; occurs at two levels
– Psychological conflict occurs when several
options are attractive, or when non of the
options is attractive
– Interpersonal conflict
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Stages of Decision Making
• Ideal decision making process will have
six stages
1. Identify and diagnose the problem
2. Generate alternative solutions
3. Evaluate alternatives
4. Make the choice
5. Implement the decision
6. Evaluate the decision
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The Best Decision
• To make the best decision
managers must use vigilance
– Vigilance is a process in which
a decision maker carefully
executes all stages of the
decision making process
• Research shows that when
managers use a rational
decision making process they
tend to make better decisions
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Barriers to Effective Decision
Making
• Psychological
Biases
• Time Pressures
• Social Realities
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Psychological Biases
• The Illusion of Control—a belief that you can
influence events when an objective analysis would
reveal that you can’t.
• Framing—responding to the way the problem is
stated rather than the problem itself.
• Discounting the Future—using selection criteria
based on short-term gain and ignoring long-term
costs or benefits.
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Decision Making in Groups
• The basic philosophy for group decision
making is that ‘two heads are better than one’
• Group performance is a function of two
variables
– How effectively the group capitalizes on potential
advantages
– How effectively the group minimizes potential
problems
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Decision Making in Groups
• Potential Advantages
– Larger pool of information
– More perspectives and
approaches
– Intellectual stimulation
– People understand the
decision
– People are committed to the
decision
• Potential
Disadvantages
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–
–
–
One Person dominates
Satisficing
Groupthink
Goal displacement
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Managing Group Decision Making
• There are three factors
for effectively
managing group
decision making
– Appropriate leadership
style
– Constructive use of
disagreement and
conflict
– The enhancement of
creativity
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Brainstorming
• Brainstorming is a
commonly used
technique used to
encourage creativity
• It is a process in which
group members generate
as many ideas about a
problem as they can;
criticism is withheld
until all ideas have been
proposed
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