Chapter 6

Decision Making and Problem Solving

Objectives

• Describe the decision making process

• Explain how to involve employees in decision making

• Describe the role of information in decision making

• Describe the role of creativity in decision making

Decision Making Defined

• Decision making is the process of choosing one alternative from among two or more alternatives.

• Ideally the alternative chosen is the best or at least the optimum alternative available.

• In most cases there is no one right choice.• Typically there are several alternatives

each with its own advantages and disadvantages.

Evaluating Decisions

• There are 2 ways to evaluate decisions.• First is to examine the results. The results of a

decision should advance an organization towards accomplishing its goals.

• Regardless of results it is also wise to evaluate the process used in making decisions. In the long run, a faulty process will lead to more negative results than positive.

Problems and Decision Making• A problem is the condition in which there is a discrepancy between

what is desired and what actually exists.• 3 characteristics of problems: structure, organization level, and

urgency (fig 6-2, page 76).• Structure can vary from highly structured to no structure. For

example, when a copy machine runs out of paper (a highly structured problem), the solution is obvious: add paper. With unstructured problems, the supervisor needs to consider all alternatives carefully and seek informed input before making a decision.

• Organizational Level: Executive level decision makers or top managers deal with strategic problems. Supervisors deal with operational level problems.

• Urgency: Crisis problems require immediate attention and force decision makers to react. Routine problems allow decision makers time to study the situation, consider alternatives, brainstorm ideas, and make well reasoned solutions.

Minimizing Crisis Problems

• Supervisors should apply the 3 step approach to minimizing crisis problems: plan, organize, and learn.

• Careful planning thorough organization will minimize the number of crisis problems supervisors must deal with.

• Supervisors should learn from every crisis.• Careful after the fact analysis of a crisis can

improve the planning and organization process, thereby minimizing the number of future crisis. It can also make you better prepared to handle a similar crisis should one occur.

The Decision Making Process

• The decision making process is a logically sequenced series of activities through which decisions are made.

• 3 steps:• 1. Identify/anticipate the problem: Do not wait for the

problem; look for them. Identify the root cause of the problem. Do not just treat the symptoms.

• 2. Consider the alternatives: Cost/benefit analysis, time considerations, permanent solution or temporary fix, ethical considerations, morale considerations, and thinking creatively.

• 3. Choose the best alternative, implement, monitor, and adjust: Implement the apparently best solution, evaluate results, and adjust as necessary.

Decision Making Models

• 1. Objective Approach to Decision Making: is logical and orderly. It assumes complete and accurate information is available and supervisors are free to choose the best alternative.

• 2. Subjective Approach to Decision Making: is based on intuition, experience, and incomplete information. The goal of the subjective decision making is to arrive at the best decision possible under the circumstances.

Advantages of Employee Involvement

• Involving employees in decision making can result in a more accurate picture of what the problem really is and a more comprehensive list of alternatives.

• It can help supervisors do a better job of evaluating alternatives and selecting the best one to implement.

• Employees who participate in the decision making process are more likely to accept the decision, and they have a personal stake in making sure the alternative selected succeeds.

Disadvantages of Employee Involvement

• It takes time and supervisors do not always have the time.

• Employee involvement can lead to democratic compromises that do not necessarily represent the best decision.

• Disharmony can result if the supervisor rejects the advice of the group.

Brainstorming

• With brainstorming the supervisor serves as a catalyst in drawing out group members to share any idea that comes to mind.

• All ideas are considered valid. • Once all ideas have been recorded, the

evaluation process begins.• Participants go through the list weighing the

relative merits of each.• This process is repeated until the group narrows

the choices to a specified number.

Nominal Group Technique

• The NGT (Nominal Group Technique) has 5 steps:

• 1. Problem is stated.

• 2. Group members silently record ideas.

• 3. Ideas of each member are reported publicly.

• 4. Ideas are clarified.

• 5. Ideas are silently voted on.

Quality Circles

• A quality circle is a group of employees convened to solve problems relating to their jobs.

• People who do the work know the most about the work.• These are volunteers who convene themselves without

being directed to do so by a supervisor.• They meet regularly to discuss their work, anticipate

problems, and identify ways to improve productivity.• The team leader may be a different person each time the

quality circle convenes.

Potential Problems With Group Decision Making

• Groupthink is the phenomenon that exists when people in a group focus more on reaching a decision than on making the right decision.

• Factors that can contribute to groupthink include peer pressure, group isolation, or leadership.

• Groupshift exists when group members exaggerate their initial position hoping that the eventual decision will be what they wanted.

• Assigning group members to serve as devil’s advocates will help minimize groupshift.

Information and Decision Making

• Information can be defined as data that have been converted into a useful format that is relevant to the decision making process.

• Data that are relevant to decision making have an impact on the decision.

Data versus Information

• Data for one person may be information for another.

• The difference is the needs of the individual.

• A supervisor’s needs will be dictated by the type of decisions he or she makes.

Value of Information

• The value of information is determined by the needs of people who will use it and the extent to which it will help them meet their needs.

• Information also has a cost because it must be collected, stored, processed, continually updated, and presented in a useful format when needed.

• It makes no sense to spend $100 on the information needed to make a $10 decision.

Amount of Information

• Information overload is the condition that exists when people receive more information than they can process in a time to be useful in decision making.

• To avoid information overload, supervisors can apply the following strategies:

• Change daily reports to weekly reports where ever possible.

• Make weekly reports monthly reports where ever possible.

• Eliminate unnecessary reports.• Format reports for efficiency.• Use on line and/or on demand information retreival.

Creativity in Decision Making

• Creativity is the process of developing new, different, imaginative, and innovative perspective on situations.

• The 4 stages are:• 1. Investigation: Involves learning, gaining experience,

and collecting/storing information in a given area.• 2. Incubation: Giving ideas time to develop, change,

grow, and solidify.• 3. Clarification: Point at which the potential solution

becomes clear. This point is a moment of inspiration. However it only comes after the perspiration of investigation and incubation.

• 4. Review: Analyzing the decision to determine if it will actually work. Feasibility studies and cost benefit analyses are used.

Terms Summary

• Brainstorming• Creativity• Crisis Problems• Decision making process• Incubation• Information Overload• Nominal Group Technique (NGT)• Quality Circles

Home Work• Answer questions 3,5,7,9,13,17, 18, and 19 on pages 87 and 88 .• 3. Briefly explain 2 ways to evaluate decisions.• 5. Explain the 3 characteristics of problems.• 7. Explain how supervisors can minimize the number of crisis

problems they have to deal with.• 9. Briefly explain the 3 steps in the decision making process.• 13. Briefly explain the following strategies for involving employees in

decision making: brainstorming, NGT, quality circles.• 17. Explain the concept of value versus cost relative to information.• 18. Explain the concept of information overload and how

supervisors can avoid it.• 19. List and explain the four stages of the creative process.