CHAPTER 3: INFORMATION AND
DECISION-MAKING
Business Leadership: Management Fundamentals
John R. Schermerhorn, Jr., Barry Wright, and Lorie Guest
© John Wiley & Sons Canada, Ltd.
MANAGERS AS PROBLEM-SOLVERS
• Problem solving:
– The process of identifying a ? between actual and desired
performance and taking action to resolve it
• A decision:
– A ? among possible alternative course of action
• A performance ? :
– Actual performance being less than desired performance
• A performance ? :
– Actual performance being better than desired performance
2
PROBLEM-SOLVING APPROACHES
OR STYLES
• Problem ? : Inactive in information gathering and solving
problems
• Problem ? : Reactive in gathering information and solving
problems
• Problem ? : Proactive in anticipating problems and opportunities
and taking appropriate action to gain an advantage
3
TYPES OF THINKING
Systematic Thinkers
• ?
• ?
• ?
Intuitive Thinkers
• ?
• ?
• ?
• ?
Multidimensional Thinkers
• Multidimensional thinking applies both ? thinking
4
PROGRAMMED DECISIONS
• Apply solutions that are readily available from ? to solve
structured problems
• Structured problems are ones that are ? with respect to
information needs
• Best applied to ? problems that can be anticipated
NONPROGRAMMED DECISIONS
• Develop novel solutions to meet the demands of unique
situation that present unstructured problems
• Unstructured problems are ones that are full of ? and
information ?
• Commonly faced by higher-level management
6
CRISIS DECISION-MAKING
• A crisis involves an ? that can lead to ? if not resolved quickly and
appropriately
• Rules for crisis management:
– Figure out what is going on
– Remember that speed matters
– Remember that slow counts, too
– Respect the danger of the unfamiliar
– Value the skeptic
– Be ready to “fight fire with fire”
DECISION ENVIRONMENTS
• ? environments:
– Offer complete information about possible action
alternatives and their outcomes
• ? environments:
– Lack complete information about action alternatives and
their consequences, but offer some estimates of
probabilities of outcomes for possible action alternatives
• ? environments:
– Information is so poor that probabilities cannot be assigned
to likely outcomes of known action alternatives
FIGURE 3.7 THREE ENVIRONMENTS FOR
MANAGERIAL DECISION-MAKING AND
PROBLEM SOLVING
FIVE-STEP DECISION-MAKING PROCESS
1.
2.
3.
4.
5.
?
?
?
?
?
FIGURE 3.8 STEPS IN MANAGERIAL
DECISION- MAKING AND PROBLEM
SOLVING
DECISION-MAKING PROCESS
Step 1: Identify and define the problem
• Focuses on information ?, information ?, and deliberation
• Decision objectives should be established
• Common mistakes in defining problems:
– Defining the problem too broadly or too narrowly
– Focusing on symptoms instead of causes
– Choosing the wrong problem
DECISION-MAKING PROCESS
Step 2: Generate and evaluate possible solutions
• Potential solutions are ? and more information is ?, data are ?,
the ?and ?of alternative solutions are identified
• Approaches for evaluating alternatives:
– Stakeholder analysis
– Cost-benefit analysis
DECISION-MAKING PROCESS
Step 2: Generate and evaluate possible solutions (cont.)
• Criteria for evaluating alternatives:
–?
–?
–?
–?
–?
• Common mistakes:
– Selecting a particular solution too ?
– Choosing a ? alternative that may have damaging side effects
or may not be as good as other alternatives
DECISION-MAKING PROCESS
Step 3: Decide on a preferred course of action
• Classical decision model
– Managers act rationally in a certain world
– Managers face clearly defined problems and have complete
knowledge of all possible alternatives and their
consequences
– Results in an optimizing decision
DECISION-MAKING PROCESS
Step 3: Decide on a preferred course of action (cont.)
• Behavioural decision model
– Managers act in terms of what they perceive about a given
situation
– Recognizes limits to human information-processing
capabilities
FIGURE 3.9 DIFFERENCES IN THE CLASSICAL
AND BEHAVIOURAL MODELS OF MANAGERIAL
DECISION MAKING
DECISION-MAKING PROCESS
Step 4: Implement the decision solution
• Involves ? to make sure the solution decided upon becomes a
reality
• Managers need to have ? and ? to ? action plans
• Lack-of-participation error should be avoided
DECISION-MAKING PROCESS
Step 5: Evaluate results
• Involves comparing ? and ? results
• ? and ? consequences of chosen course of action should
be examined
• If actual results fall short of desired results, the
manager returns to earlier steps in the decision-making
process