Topic 6: Decision Making in Organizations

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Questions and Answers

What characterizes a programmed decision in managerial decision making?

Decisions are based primarily on intuition and feelings.

Decisions follow established rules or guidelines. (correct)

Decisions are made for unusual and unpredictable situations.

Decisions require extensive information gathering.

Which type of decision-making is characterized by responding to unpredictable opportunities?

Programmed decision

Nonprogrammed decision (correct)

Intuitive decision

Strategic decision

When a manager relies on their feelings and beliefs to make a decision, this is referred to as what?

Programmed decision-making

Intuition (correct)

Reasoned judgment

Structured analysis

What is the primary characteristic of reasoned judgment in decision making?

It involves careful evaluation of alternatives. Signup and view all the answers

Which of the following best describes decisions made in response to organizational threats?

They seek to improve performance when adversely affected. Signup and view all the answers

In what scenario would a manager likely use programmed decision making?

To make hiring decisions when overtime increases significantly. Signup and view all the answers

Why might a decision be categorized as nonprogrammed?

There are no clear guidelines to follow due to its unpredictability. Signup and view all the answers

What is an essential aspect that differentiates intuition from reasoned judgment?

Intuition is quick and requires little effort. Signup and view all the answers

What is the primary purpose of comparing actual outcomes to expected outcomes in the feedback procedure?

To explore why expectations were not met Signup and view all the answers

Which cognitive bias is characterized by making decisions based on strong pre-existing beliefs despite contradictory evidence?

Confirmation bias Signup and view all the answers

What is one of the disadvantages of group decision making compared to individual decision making?

Consensus can be harder to reach Signup and view all the answers

What describes the tendency to commit additional resources to failing projects?

Escalating commitment Signup and view all the answers

Which cognitive bias results from generalizing from a limited sample or a vivid event?

Representativeness Signup and view all the answers

What is the primary focus of the classical model of decision-making?

Evaluating all possible alternatives and their consequences Signup and view all the answers

How do heuristics function in the decision-making process?

They serve as rules of thumb that simplify decision-making. Signup and view all the answers

What does the concept of bounded rationality refer to in the administrative model?

The cognitive limitations that restrict information processing Signup and view all the answers

What is a potential pitfall of the illusion of control bias?

Overestimating one's influence over events Signup and view all the answers

Which aspect does not contribute to incomplete information in decision-making?

Cognitive biases Signup and view all the answers

What does satisficing involve according to the administrative model?

Finding a satisfactory response to address a problem Signup and view all the answers

Why might systematic errors in decision-making occur frequently?

They stem from consistent cognitive biases. Signup and view all the answers

Which of the following statements best represents uncertainty in decision-making?

Outcomes cannot be known and probabilities of alternatives are unclear Signup and view all the answers

In the context of the administrative model, which is a common consequence of time constraints?

Inability to gather complete information for decision-making Signup and view all the answers

How does the classical model approach the concept of an optimum decision?

By identifying the decision most aligned with desired consequences Signup and view all the answers

Which of the following characteristics is NOT typically associated with entrepreneurs?

An external locus of control Signup and view all the answers

Which term best describes information that can be interpreted in multiple conflicting ways?

Ambiguous information Signup and view all the answers

What term refers to individuals who work within organizations to develop new or improved products?

Intrapreneurs Signup and view all the answers

Which role specifically refers to the individual who leads a project from the idea stage to final customer delivery?

Product champion Signup and view all the answers

What is the purpose of 'skunkworks' within an organization?

To create a dedicated team for generating ideas without distraction Signup and view all the answers

What is the primary risk associated with groupthink in decision-making?

Failure to accurately assess relevant information Signup and view all the answers

Which of the following best describes social entrepreneurs?

Individuals addressing social problems through creative solutions Signup and view all the answers

In a learning organization, what is the main goal of management?

To maximize the creative potential of individuals and groups Signup and view all the answers

How are intrapreneurs increasingly rewarded for their performance?

By linking rewards directly to the success of the products they develop Signup and view all the answers

What is one disadvantage of the brainstorming technique?

It can cause production blocking due to the unstructured nature Signup and view all the answers

What characteristic reflects an entrepreneur's self-view of competence and capability?

High self-esteem Signup and view all the answers

Which of the following statements reflects a common misconception about entrepreneurs?

They must have a high degree of education to succeed. Signup and view all the answers

How does the nominal group technique differ from traditional brainstorming?

It involves writing down ideas independently before sharing Signup and view all the answers

What is the Delphi technique primarily used for in decision-making?

To gather opinions anonymously through written responses Signup and view all the answers

What aspect of decision-making does organizational learning emphasize?

Adaptability and creativity in thinking Signup and view all the answers

What does the term 'creativity' refer to in the context of decision making?

The skill to generate original and feasible alternatives Signup and view all the answers

What is a key benefit of the Delphi technique over other group decision-making methods?

It allows for varied opinions without face-to-face pressure Signup and view all the answers

Study Notes

Decision Making

Decision making is the process where managers respond to opportunities and threats by analyzing options and making choices about organizational goals and actions.
Decisions respond to opportunities when managers improve organizational performance for stakeholders like customers, employees, and other groups.
Decisions respond to threats when organizational performance is negatively affected by internal or external events, and managers seek to improve performance.

Programmed Decisions

Programmed decisions are routine, automatic, and based on established rules or guidelines.
These decisions have been made many times, using rules/guidelines developed to apply to specific situations.
Example: A manufacturing supervisor hiring new workers when overtime increases by more than 10%.

Nonprogrammed Decisions

Nonprogrammed decisions address unusual, unpredictable opportunities or threats.
No pre-existing rules or guidelines exist.
Situations are unexpected or uncertain, lacking the information needed to create decision rules.

Intuition

Intuition involves feelings, beliefs, and hunches, enabling quick, on-the-spot decisions with little information gathering.

Reasoned Judgment

Reasoned judgments require time for careful information gathering to generate alternatives and evaluate them.

The Classical Model

A prescriptive model assuming decision-makers can identify all possible alternatives and their consequences, making rational choices for the most favorable outcome.
The model assumes all information is readily available, decision-makers possess mental facilities to process the information, and know the best future course of action.

The Administrative Model

This model explains why decision-making is uncertain and risky, and managers often settle for satisfactory rather than optimal solutions.
Three key concepts are bounded rationality, incomplete information, and satisficing.

Bounded Rationality

Cognitive limitations restrict the ability to interpret, process, and act on information.

Incomplete Information

Information limitations due to risk, uncertainty, ambiguity, and time constraints.

Satisficing

Choosing a satisfactory solution rather than the optimal solution, addressing problems and opportunities.

Causes of Incomplete Information

Risk: The degree of probability that possible outcomes from a particular action will occur.
Uncertainty: The probabilities of future outcomes are undeterminable, with unknown outcomes.
Ambiguous Information: Information is unclear and can be interpreted in various, potentially conflicting ways.
Time Constraints and Information Costs: Limited time and resources for researching all possibilities and evaluating potential consequences.

Six Steps in Decision Making

Recognize the need for a decision.
Generate alternatives.
Assess alternatives.
Choose among alternatives.
Implement the chosen alternative.
Learn from feedback.

General Criteria for Evaluating Action

Step 3: Evaluate the possible course of action for:
- Legality
- Ethics
- Economic feasibility
- Practicality

Feedback Procedure

Comparing actual results to expected results. 
Investigating reasons for differing expectations.
Developing guidelines to inform future decision-making.

Cognitive Biases

Heuristics are rules of thumb simplifying decision-making.
Systematic errors, or biases, consistently lead to poor decision-making.
Example biases include confirmation bias, representativeness, illusion of control, and escalating commitment.

Confirmation Bias

Tendency to favor information consistent with existing beliefs, ignoring contradictory evidence.

Representativeness

Generalizing inappropriately from samples or single events.

Illusion of Control

Overestimating one's ability to control outcomes.

Escalating Commitment

Investing further in a failing project despite evidence of failure.

Group Decision Making

Advantages: Improved decision-making quality by combining skills, reduced bias susceptibility, and potential to generate more feasible alternatives.
Disadvantages: Increased time required, difficulties in manager agreement, and potential for groupthink.

Groupthink

Faulty decision-making pattern where group members prioritize consensus at the expense of accurate evaluation of relevant information.

Devil's Advocacy and Dialectical Inquiry

Techniques to encourage critical thinking in group decision-making.
Devil's advocacy encourages critique of the chosen alternative.
Dialectical inquiry presents alternative viewpoints followed by debate and reassessment.

Organizational Learning and Creativity

Organizational Learning: Managers focus on developing employees' ability to understand and manage the organization and its environment.
Learning Organization: An organization committed to maximizing individual and group creative thinking for organizational learning.
Creativity: A decision-maker's ability to generate original and novel ideas.

Senge's Principles for Creating a Learning Organization

Develop personal mastery
Build complex, challenging mental models
Promote team learning
Build shared vision
Encourage systems thinking

Promoting Group Creativity

Brainstorming: Generating and debating alternatives through face-to-face discussions. Production blocking is a possible drawback.
Nominal Group Technique: Members independently generate/rank suggestions followed by group discussion.
Delphi Technique: Members respond to questions through written communications, used for controversial issues or diverse opinions.

Entrepreneurship

Entrepreneurs: Initiate ventures by mobilizing resources to develop innovative products.
Social Entrepreneurs: Initiate projects to resolve social issues and uplift society.
Intrapreneurs: Propose new products/improvements within organizations.

Characteristics of Entrepreneurs

Open to experience; original thinkers and risk-takers
Internal locus of control; responsibility for actions
High self-esteem; feel competent and capable
High need for achievement; set high goals and strive to achieve them

Intrapreneurship and Organizational Learning

Product champion: Leads a project from conception to final sale
Skunkworks: Teams dedicated to product development, separated from normal operations.
Rewards for innovation: Linking compensation/incentives to performance is essential for encouragement.

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Description

This quiz explores the concept of decision making within organizations, focusing on the differences between programmed and nonprogrammed decisions. It underscores how managers respond to opportunities and threats in order to achieve organizational goals. Test your understanding of these critical managerial processes.