Chapter 3: Outline
I.
Characteristics of Managerial Decisions
A. Lack of Structure
-is the usual state of affairs in managerial decision making.
a) Programmed Decisions: Decision encountered and made before,
having objectively correct answers, and solvable by using simple
rules, policies, or numerical computations.
b) Non-programmed decision: These are decisions that have no certain
outcomes. They have a variety of possible solutions, all of which have
certain merits and drawbacks.
B. Uncertainty and Risk
a) Certainty: state that exists when decision makers have accurate and
comprehensive information.
b) Uncertainty: state that exists when decision makers have insufficient
information.
c) Risk: state that exists when the possibility of success is less than 100
percent and losses may occur.
C. Conflict
- Opposing pressures from different sources, occurring on the level of
psychological conflict or of conflict between individuals or groups.
- Exists when a manager must consider opposing pressures from different
sources, occurs at two levels.
II.
The Stages of Decision Making
Identifying &
Diagnosing
the Problem
A. Identifying and Diagnosing the Problem:
-This is the first stage in decision-making process: to recognize that a
problem exists and must be solved.
Generating
Alternative
Solutions
B. Generating Alternative Solutions:
-This is the second stage of decision-making skills.
-This links problem diagnosis to the development of alternative
courses of action aimed at solving the problem.
Evaluating
Alternatives
a) Solutions range from ready made to custom made:
1. Ready- made: Ideas that have been seen or tried
before.
2. Custom-made: New, creative solutions designed
specifically for the problem.
Making the
Choice
Implementing
the Decision
Evaluating
the Decision
C. Evaluating Alteratives:
- This is the third stage of decision-making.
- This involves determining the value or adequacy of the alternatives
that were generated.
Main question to ask: Which solution will be best?
a) Contingency Plans: Alternative courses of action that can be
implemented based on how the future unfolds.
D. Making the Choice:
- This is the part where you make the decision after
considering all the possible consequences of your opinions.
a) Maximizing: A decision realizing the best possible outcome.
b) Satisficing: Choosing an option that is acceptable, although not
necessarily the best or perfect.
: choosing the 1st option that is minimally acceptable or
adequate.
c) Optimizing: Achieving the best possible balance among several goals.
E. Implementing the Decision
- This is the part wherein you act out the decision that you have made.
Adequate Planning Requires Several Steps:
1. Determine how things will look when the decision is fully operational.
2. Chronologically order the steps necessary to achieve a fully operational
decision.
3. List the resources and activities required to implement each step.
4. Estimate the time needed for each step.
5. Assign responsibility for each step to specific individuals.
F. Evaluating the Decision:
- This is the final stage in the decision-making process and involves the
evaluation of the decision as to how well is it working.
G. The Best Decision:
Vigilance: A process in which a decision maker carefully executes all the
stages of decision making.
III.
Barriers to Effective Decision Making
A. Psychological Biases
- People have biases that interfere with objective rationality.
i. Illusion of Control: People’s belief that they can influence events,
even when they have no control over what will happen.
ii. Framing Effects: A decision bias influenced by the way in which a
problem or decision alternative is phrased or presented.
iii. Discounting the Future: A bias weighting short-term costs and
benefits more heavily than longer-term costs and benefits.
B. Time Pressures
i. This deals with time affecting the quality of the decision being done.
C. Social Realities
i. This deals with the quality of decision a person can make when
working in groups or with other individuals.
IV.
Decision Making in Groups
A. Potential Advantages of Using a Group
1. More information is available.
2. A greater number of perspectives or different approaches to solving
the problem are available.
3. Group discussion provides an opportunity for intellectual stimulation.
4. People in a group are more likely to understand why the decision was
made.
5. Group discussion typically leads to a higher level of commitment to
the decision.
B. Potential Problems of Using a Group
1. One group member can dominate the discussion.
2. Satisficing is more likely with groups.
3. Pressure to avoid disagreement can lead to a phenomenon called
groupthink: occurs in decision making when group members
avoid disagreement as they strive for consensus.
4. New goals emerge to replace the original one because of different
perspectives.
a. Goal Displacement- occurs when a decision-making group
loses sight of its original goal and a new, less, important
goal emerges.
V.
Managing Group Decision Making
A. Leadership
Style: Looking
and having the
appropriate
leading style to
be effective.
B.
Constructive
Conflict: total
and consistent
agreement can
be destructive.
It is important
to shell out
opinions.
C. Creativity:
Groups must
be creative in
generating
ideas. It is
more than just
an option; it is
essential for
survival.
D.
Brainstormin
g: 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.
Constructive Conflict:
1. Air legitimate
differences.
2. Stay task-related.
3. Be impersonal.
4. Play devil’s
advocate.
Leadership:
1. Avoid domination.
2. Encourage input.
3. Avoid groupthink
and satisficing.
4. Remember goals.
EFFECTIVE
GROUP
DECISION
MAKING
Bottom Line
of Creativity:
“Most
creative ideas
come, not
from the lone
genius in the
basement
laboratory,
but from
working and
people talking
together.”
Creativity:
1. Brainstorm
2. Avoid Criticizing.
3. Exhaust ideas.
4. Combine Ideas.
Types of conflict:
1. Cognitive conflict:
issue-based
differences in
perspectives or
judgments.
2. Affective conflict:
emotional
disagreement
directed toward
other people.
Devils Advocate: A
person who has the
job of criticizing
ideas to ensure that
their downsides are
fully explored.
Dialectic: A
structured debate
comparing two
conflicting courses of
action.
VI.
Organizational Decision Making
A. Constraints on Decision Makers
- People who make critical decision cannot always do whatever they wish.
They face constraint along the path such as financial, legal, market,
human and organizational constraint.
B. Models of Organizational Decision Processes
 Bounded Rationality: A less-than-perfect form of rationality in which
decision makers cannot be perfectly rational because decisions are
complex and complete information is unavailable or cannot be fully
processed.
 Incremental Model: Model of organizational decision-making in
which major solutions arise through a series of smaller decisions.
 Coalitional Model: Model of organizational decision-making in which
groups with differing preferences use power and negotiation to
influence decisions.
 Garbage Can Model: Model of organizational decision-making
depicting a chaotic process and seemingly random decisions.
C. Decision Making in a Crisis:
- Crisis makes effective decision-making more difficult. A strategy for crisis
management can be developed so that if crises do arise, decision makers
are prepared.
Elements of Strategy Plan for Crisis Management(CM):
1. Strategic actions such as integrating CM into strategic planning and
official policies.
2. Technical and Structural actions such as conducting audits of threats
and establishing tracking systems for early warning signals.
3. Communication actions such as providing training for dealing with the
media, local communities, and police and government officials.
4. Psychological and cultural actions such as showing a strong top
management commitment to CM and providing psychological support
services regarding the human and emotional impacts of crises.