Post on 31-Dec-2015
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Chapter3Foundationsof Decision Making
Learning Outcomes
• Describe the decision-making process.• Explain the three approaches managers can use
to make decisions.• Describe the types of decisions and decision-
making conditions managers face.
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Learning Outcomes (cont.)
• Discuss group decision-making.• Discuss contemporary issues in managerial
decision making.
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4.1Describe the decision-making process.
How Do Managers Make Decisions?
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Identifying a Decision Problem
Problem:a discrepancy between an existing and a desired state of affairs.
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Identifying Decision Criteria
Relevant Factors:• Price• Model• Size• Manufacturer• Options• Repair record
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Weighting Criteria
1. Most important criterion assigned a weight of 10.
2. Other weights assigned against this standard.
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Developing Alternatives
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Analyzing Alternatives
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Selecting the Best Alternative
Implementing the Decision
Decision implementation:putting a decision into action.
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Evaluating the Decision
Appraising the outcome of the decision:
Was the problem resolved?
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Common Errors
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4.2Explain the three approaches managers can use to make decisions.
Three Approaches Used to Make Decisions: Types of Decisions
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Rational Model
Rational decision making:choices that are consistent and value-maximizing within specified constraints.
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Bounded Rationality
Satisfice
Escalation of commitment
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Intuitive Decision Making
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4.3 Describe the types of decisions and decision-making conditions that managers face.
Types of Problems
1. Structured problem2. Unstructured problem
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Types of Decisions
Programmed:Repetitive decisions that can be handled
using a routine approach.
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Types of Decisions (cont.)
Nonprogrammed:Repetitive decisions that can be handled using a routine approach
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Problems, Decision Types, and Organizational Levels
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Decision-Making Conditions
• Certainty• Risk• Uncertainty
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4.4Discuss group decision-making.
How Do Groups Make Decisions?
Decisions are often made by groups representing the people who will be most affected by those decisions.
•Committees•Task forces•Review panels•Work teams
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Advantages of Group Decision Making
• More complete information• Diversity of experiences/perspectives• More alternatives generated• Increased acceptance of solution• Increased legitimacy
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Disadvantages of Group Decision Making
• Time-consuming• Minority domination• Ambiguous responsibility• Pressures to conform
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GroupthinkWhen a group exerts extensive pressure on an individual to withhold his or her different views in order to appear to be in agreement.
• What it does• How it occurs• How to minimize it
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When Are Groups Most Effective?
Individual•Faster decision making•More efficient use of work hours
Group•More accurate decisions•More creative•More heterogeneous representation•Greater acceptance of final solution
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Improving Group Decision MakingMake group decisions more creative by:
1. Brainstorming2. The nominal group technique3. Electronic meetings
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4.5 Discuss contemporary issues in managerial decision making.
Contemporary Issues
National culture influences the way decisions are made and the degree of risk involved.
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Contemporary Issues
Creativity lets the decision maker:
• Understand a problem more fully• See problems others can’t• Identify all viable alternatives
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Contemporary Issues
Design thinking:approaching management problems as designers approach design problems
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Contemporary Issues
Big dataThe vast amounts of quantifiable information that can be analyzed by highly sophisticated data processing.
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