PMGT 402 Week 6 W10 Decision M

7/31/2019 PMGT 402 Week 6 W10 Decision M

1/37

School of Business

PMGT 4 0 2Project Leadership

Mario Vasilkovs


2/37

P

MGT402S

ummer2010

Agenda

Housekeeping Update

Assignment #1: June 16

Questions?

Mid-Term: June 30 Weeks 1-8 Material

Decision Making

Process of Decision Making

PM as Decision MakerDecision Making Models

Types of Decisions

Decision Making Conditions

2PMGT 402 Week 6 Decision Making


3/37

School of Business

Decision Making:The Essence of the Managers Job


4/37

P

MGT402S

ummer2010

Decisions

Decision

Making a choice from two or morealternatives

Involves a process, whether conscious or

not The Decision-Making Process

Identifying a problem and decision criteriaand allocating weights to the criteria

Developing, analyzing, and selecting analternative that can resolve the problem

Implementing the selected alternative

Evaluating the decisions effectiveness



5/37

P

MGT402S

ummer2010

8 Step Decision- Ma king Process


Identifya

Problem

I need to decide the bestfranchise to purchase.

IdentifyDecisionCriteria

Financial qualifications Franchisor history Start-up costs Open geographical locations Franchisor support

AllocateWeights

to Criteria

Start-up costsFranchisor supportFinancial qualificationsOpen geographical locationsFranchisor history

.......................................................10................................................7

.........................................8...............................6

..................................................7

DevelopAlternatives

Curves for WomenSecond CupJani-KingLiberty Tax Service

Merle NormanPetlandChem-Dry Carpet CleaningMcDonalds

Curves for WomenSecond CupJani-King

Liberty Tax Service

Merle NormanPetlandChem-Dry Carpet Cleaning

McDonalds

Curves for WomenSecond CupJani-KingLiberty Tax Service

Merle NormanPetlandChem-Dry Carpet CleaningMcDonalds

AnalyzeAlternatives

Selectan

Alternative

Implementthe

AlternativeChem-Dry Carpet Cleaning!

EvaluateDecision Effectiveness Exhibit 4-1

Problem: existing state desired state

Yes, its the W eighted Scoring Model

Matr ix of Altern atives and Scores


6/37

P

MGT402S

ummer2010

Decision- Making Process

Step 1: Identify the ProblemA discrepancy between an existing

and desired state of affairs

Characteristics of Problems

A problem becomes a problem when amanager becomes aware of it

There is pressure to solve the problem

The manager must have theauthority, information, or resourcesneeded to solve the problem



7/37

P

MGT402S

ummer2010


Cautions about Problem Identification:

Ensure problem identified, not just a symptom

Problem identification is subjective

Identifying problem in terms of possible solution

Manager must be aware of discrepancies beforeproblem can be identified

Variances = actual - standard

Pressure must be exerted on the manager to correctthe discrepancy.

Managers arent likely to characterize a discrepancyas a problem if they perceive that they dont have theauthority, information, or other resources needed toact on it.



8/37

P

MGT402S

ummer2010


Step 2: Identify Decision Criteria

Important dimensions on judging thealternatives, e.g.: Costs likely incurred (investments required)

Risks likely to be encountered (chance of failure)

Positive outcomes (growth of the firm)



9/37

P

MGT402S

ummer2010


Step 3: Assign Weights to DecisionCriteria

Some criteria are more importantthan others Have to be the same scale, e.g. 1-10, 1-3, 1-100,

for each criterion

Inherent subjectivity may be an issue



10/37

P

MGT402S

ummer2010


Step 4: Develop Alternatives

Different courses of action to satisfythe problem

No evaluation at this stageBrainstorming is a technique

While it is an open and creative process, there arespecific rules on how to conduct a successful

session!



11/37

P

MGT402S

ummer2010


Step 5: Analyze Alternatives

Assign each alternative a relativescore for each criterion (dimension)

Multiply the scores by the weightschosen in Step 3

Sum the results by alternative



12/37

PMGT402

Summer2010


Step 6: Select an Alternative

Simplistically: highest resultant score

Step 7: Implement Chosen Alternative

Communicating

Gaining Commitment Participation in decision-making improves

commitment



13/37

PMGT402

Summer2010


Step 8: Evaluate Effectiveness

Was the problem solved?

May have to consider how to answer this question

during Step 7 Implementation.

If not, why not?

What needs adjusting to solve the problem?



14/37

PMGT402

Summer2010

PM as Decision Maker

I 'm t he decider, and I decide w hat is best. And what 'sbest is for Don Rum sfeld to rem ain as the Secret ary ofDefense.

President George W . Bush, W ashington, D.C. April 18 , 2 0 06

http:/ / polit icalhumor.about.com/ l ibrary/ blbushism-decider.htm



15/37

PMGT402

Summer2010

PM as Decision Maker

Exhibit 4- 5



16/37

PMGT402

Summer2010

Making Decisions Exam ined

Weighted Score Model an exampleof Rational Decision Making

Homo Economicus

There are others:

Bounded Rationality

Intuition



17/37

PMGT402

Summer2010

Rationality

Consistent, value-maximizing choiceswith specified constraints

Assumptions that decision makers: Are perfectly rational, fully objective, and logical

Have carefully defined the problem andidentified all viable alternatives

Have a clear and specific goal Will select the alternative that maximizes

outcomes in the organizations interests ratherthan in their personal interests

Sounds like which Management Theory?



18/37

PMGT402

Summer2010

Rationality Fundam ental Assum ptions

Problem clear, unambiguousSingle, well-defined goalAll alternatives, consequences

knownPreferences clearPreferences stable over timeDecision process unconstrained by

cost or timeFinal choice maximizes payoff



19/37

PMGT402

Summer2010

Bounded Rat iona lity

Rationality limited (bounded) by imperfect,realistic conditions

Offers appearance of Rationality Characteristics:

Alternatives constrained by time and or cost todevelop, research Goal is satisfaction, not optimization

Satisfice decide on and pursue a course of action satisfying the minimum

requirements to achieve a goal satisfice. (n.d.). WordNet 3.0. Retrieved February 03, 2010, from Dict ionary.com website:

http://dictionary.reference.com/browse/satisfice

Additional influences: Organizational Culture Power & politics Escalation of Commitment

Throwing good money after bad



20/37

PMGT402

Summer2010

I ntuit ion

Gut Feel

Complementary to Rational processes

30% preferred Intuition to Rationality

Characteristics:

Based on experience, feelings, andaccumulated judgment

Ultimate in Bounded Rationality Also works when Unbounded



21/37

PMGT402

Summer2010

I ntuit ion


Intuition

Experience-baseddecisions

Subconsciousmental processing

Values-or ethics-based decisions

Cognitive-baseddecisions

Affect-initiateddecisions

Managers makedecisions based on

ethical values or culture

Managers use data fromsubconscious mind to

help them make decisions

Managers makedecisions based onfeelings or emotions

Managers makedecisions based on skills,knowledge, and training

Managers makedecisions based ontheir past experiences

Source:Based on L.A. Burke and M.K. Miller. Taking the Mystery Out of IntuitiveDecision Making. Academy of Management Executive. October 1999. pp. 9199.

Exhibit 4- 7


22/37

PMGT402

Summer2010

Types of Problem s & Decisions

Structured Problems

Clear goals

FamiliarEasily and completely defined

Programmed Decision

RepetitiveRoutine

Standardized



23/37

PMGT402

Summer2010


Types of Programmed Decisions:Procedure

A series of interrelated steps to respond

to a structured problemA Rule

An explicit statement that limits what amanager or employee can or cannot do

A Policy A general guideline for making a decision

about a structured problem



24/37

PMGT402

Summer2010


Unstructured Problems:

New or unusual

Information ambiguous, incompleteNon-programmed Decisions:

Unique

Customized solution



25/37

PMGT402

Summer2010


Most problems are a blend ofthe two

Which decision makingapproach most likely applicableto:

Structured Problem?Unstructured Problem?



26/37

PMGT402

Summer20

10

Decision- Making Condit ions

Certainty:

Outcome of every alternative known

Risk:

Outcomes are unknown butpredictable

Probability used to represent (act as

a proxy for) riskExpected value analysis one way to

model outcomes



27/37

PMGT402

Summer20

10

Decision- Making Condit ions

Uncertainty:

Outcome of alternatives unknown

Outcomes cannot be assigned probabilities

Intuition operates here, conditioned bypersonality:

Optimist: Maximax

Maximize maximum payoff

Pessimist: Maximin

Maximize the minimum payoff

Loss Avoidance: Minimax

Minimize the maximum regret or perceived loss



28/37

PMGT402

Summer20

10

Decision Making Styles

Types of Decision Makers: Directive

Use minimal information and consider fewalternatives

Analytic Make careful decisions in unique situations

Conceptual

Maintain a broad outlook and consider manyalternatives in making long-term decisions

Behavioural

Avoid conflict by working well with others andbeing receptive to suggestions

Individual Styles: Dominant andAlternative



29/37

PMGT402

Summer20

10

Decision Making Styles


High

Low

Way of Thinking

Rational Intuitive

Toler

ance

ForAm

biguity

Directive

Analytic Conceptual

Behavioural

Source:S.P. Robbins and D.A. DeCenzo,Supervision Today. 2nd ed. (Upper SaddleRiver, NJ: Prentice Hall, 1998), p. 166.Exhibit 4- 9


30/37

PMGT402

Summer20

10

Group Decision Making


Advantages

Generates morecomplete informationand knowledge

Generates morediverse alternatives

Increases acceptanceof a solution

Increases legitimacy

of decision

Disadvantages

Time consuming

Minority domination

Pressures to conform

Ambiguousresponsibility


31/37

PMGT402

Summer20

10

Group Decision Making


Groupthink

Most dangerous dynamic of groupdecision making

Group becomes the focus, not thedecision (s)

The withholding by group membersof different views in order to appear

to be in agreement


32/37

PMGT402

Summer20

10

Groupthink


Signs:

Doubts are withheld

Doubts are publicly dismissed,

ridiculed, ignored

Silence construed as agreement

Avoiding:

Climate of open discussionLeadership solicits all opinions


33/37

PMGT402

Summer20

10

Errors and Biases

Overconfidence

Availability

FramingRepresentation

ConfirmationRandomness

Selective PerceptionSunk Costs

Anchoring EffectSelf-serving

Immediate GratificationHindsight

Decision-MakingErrors and Biases

Exhibit 4 -1 1

Belief have more know ledge orskill than so

Short vs. long-te rm

Reliance ona single

fact

Expectationsaffectperceptions

Decisionsconfirm beliefs

Too narrow aperception

Heuristic relying on: m ostvivid, unusual, emotionallycharged

Probabilitybased onresemblances

Trying tocorrect th epast

Take credit,blame othersfor failure

Claim predictiononce outcomeknown

Probability fitsnormal

distribution



34/37

PMGT402

Summer20

10

Todays PM Decision- Making

PMBOK 2008, Appendix G, onStyles:

Command

Consultation

Consensus

Coin Flip (Random)

Chosen depending on: Time Constraints

Trust

Quality

Acceptance



35/37

PMGT402

Summer20

10


Group Creativity:Brainstorming:

All ideas welcome

Ideas belong to the group, not theindividual

No evaluation, yet

Delphi Process: Questionnaire to group

Anonymous submission of ideas

Feedback

Repeat Diminishing returns after the 2nd iteration



36/37

PMGT402

Summer20

10


Group Creativity:

Nominal Group Technique (NGT)

Group assembles, no interaction

Hence nominal group

Individually, write down ideas

Share one in turn

Recorded for all to see

Each idea gets some clarification Group secretly votes on ideas

Group consensus is calculated



37/37

PMGT402

Summer20

10

Sum m ary - Decision Making

Models

Styles

Factors

Biases & Errors

Individual vs. Group

Why:

Improve your decision-making

Recognize issues in others

PMGT 402 Week 6 W10 Decision M

Documents

Transcript of PMGT 402 Week 6 W10 Decision M