The Manager
as Decision Maker
INLS 585, Fall ‘08
Ericka Patillo
Managerial
Decision Making
•
•
•
•
A process
In response to opportunities
In response to threats
Failure to make a decision is actually a
decision
• Autocratic vs. participative
Decision Making Steps
Recognize and define
problem
Generate alternatives
Evaluate alternatives
Choose preferred alternative
Implement solution
Evaluate solution feedback
Types of
Decisions
• Programmed
– high certainty and low risk
– standard operating procedure
– may be delegated to others
• NonProgrammed
– uncertainty and high risk
– no pre-existing rules
The Classical Model
List alternatives and
consequences
Assumes all
information is
available to manager
Rank each alternative
from low to high
Assumes manager
can process
information
Select best alternative
Assumes manager
knows the best
future course for the
organization
The Administrative Model
• Challenged the classical assumptions
• Bounded rationality: There are a large
number of alternatives and information
is vast so that managers cannot
consider it all.
• Decisions are limited by people’s
cognitive abilities
Time
Constraints
Risk &
Uncertainty
Incomplete
Information
Information
Costs
Ambiguous
Information
Herbert Simon
• Nobel Laureate in
Economics
• Managers operate with
Bounded Rationality
• Coined the term
“satisficing” - managers
make decisions that are
good enough
Incomplete Information
• Flying by the seat of
one’s pants
• Creativity
Creativity blooms
when the mental soil is deep, rich and
well prepared.
Deep relevant knowledge and
experience precede creative
expression.
Leonard & Swap
Cognitive Biases
• Managers use heuristics to deal with
bounded rationality
• Heuristics = rules of thumb
• Tendency to acquire and process
information in an error-prone way
• Leads to poor decision making
Cognitive Biases
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•
•
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Prior hypothesis
Representativeness
Illusion of control
Escalating commitment
Decision Making Styles
• Victor Vroom’s decision tree
• Subordinate participation based on:
– decision significance
– decision timeliness
Decision Making Styles
• Decide - manager make decision alone
• Consult (individually) - manager
presents program to each member,
seeks their feedback, then decides
• Consult (group) - manager presents
problem to the group, gets their
suggestions, then decides
Decision Making Styles
• Facilitate - manager facilitates group
discussion
• Delegate - manager allows the group to
do the decision making process
Evidence-Based
Management
Better Facts
+ Better Implementation
___________________
Better Performance
EBM Principles
• Face the hard facts
• Be committed to fact-based decision
making
• Treat your organization as an unfinished
prototype
• Carefully evaluate recommendations
• Avoid basing decisions on the past
Putting It Together
• Managers make decisions constantly
• Decision making is a process
• Factors affecting decisions:
– incomplete/ambiguous information
– cognitive bias
– time constraints
• Include subordinates, when appropriate
• Consider Evidence-Based Management
Decision Making Steps
Recognize and define
problem
Generate alternatives
Evaluate alternatives
Choose preferred alternative
Implement solution
Evaluate solution feedback