Management Decision Making Overview

Data and Information

• Data is raw, unanalyzed facts.
• Information is processed and analyzed data.
• Useful information has quality (accuracy and reliability), timeliness, completeness (providing needed information for control/decisions), and relevance (meeting manager needs).

Incomplete Information

• Managers lack all needed information due to risk, uncertainty, ambiguity, and time/cost constraints.
• Risk involves known outcomes with assigned probabilities.
• Uncertainty involves unknown future outcomes with indeterminate probabilities.
• Ambiguity allows for multiple, often conflicting interpretations of information.
• Time constraints and information costs limit managerial search and evaluation.

Decision Making

• Decision making involves identifying a problem, defining criteria, weighting criteria, developing alternatives, analyzing alternatives, selecting an alternative, implementing the alternative, and evaluating effectiveness.
• Managers use programmed or nonprogrammed decisions based on structured or unstructured problems.
• Structured problems are straightforward, familiar, and easily defined.
• Unstructured problems are new or unusual.
• Programmed decisions have guidelines for repeated situations (procedure, rule, policy).
• Nonprogrammed decisions are unique and require custom solutions.

Decision Making Conditions

• Certainty involves full information availability.
• Risk involves known probabilities of successful/failed outcomes.
• Uncertainty has known goals but incomplete information on alternatives/future events.
• Ambiguity involves unclear goals/problems, undefined alternatives, and unavailable outcome information.

Decision-Making Biases and Errors

• Overconfidence bias: Overestimating knowledge/performance.
• Immediate gratification bias: Prioritizing immediate rewards.
• Anchoring effect: Focusing on initial information.
• Confirmation bias: Seeking confirming information.
• Hindsight bias: Believing past outcomes were predictable.
• Sunk cost error: Focusing on past investments rather than future outcomes.
• Self-serving bias: Attributing success to oneself and failure to others.

Decision Making Approaches

• Rational decision making assumes logical choices maximizing value.
• Assumptions of rationality: logical decision-making, clear goals, knowledge of all alternatives/consequences.
• Bounded rationality acknowledges limitations in processing information (satisficing).
• Satisficing is accepting "good enough" solutions.
• Intuitive decision making relies on experience, feelings, and judgments.

Information Systems and Management

• Information Technology (IT) provides methods for acquiring, organizing, manipulating, and transmitting information.
• IT impacts business through remote offices, improved service, efficient organizations, collaboration, global exchange, enhanced management processes, and customized flexibility.
• Information systems use IT to process data becoming information for decision making.
• Customer Relationship Management (CRM) systems manage customer information.
• Enterprise Resource Planning (ERP) systems integrate organizational processes.

Business Administrators and Managers

• Management is universal in all organizations, at all levels.
• Company owners are responsible for appointing administration and management.
• Boards of directors ensure proper management and strategic direction.
• Boards for listed companies are elected by shareholders.
• Minimum board size: Three members.
• Board members can be internal or external.
• A CEO (or equivalent title) is responsible for making decisions.

The Nature of the Manager's Job

• Managers coordinate and oversee work toward organizational goals.
• Management ensures efficient and effective work activity fulfillment.
• Efficiency is maximizing output from minimal inputs.
• Effectiveness is achieving organizational goals.
• Types of managers (by hierarchical level): first-line, middle, top.
• Types of managers (by scope of activities): functional, general.
• Katz's skills for managers: technical, interpersonal, conceptual.
• Mintzberg's managerial roles: interpersonal, informational, decisional.

Management Functions: Planning

• Planning provides direction, reduces uncertainty, minimizes waste, and establishes control standards.
• Goal characteristics: specific, linked to rewards, challenging but realistic, defined time period, covering key areas.

Management Functions: Organizing

• Organizational structure is the formal arrangement of jobs.
• Key elements of organizational structure: work specialization, departmentalization, chain of command, span of control, centralization/decentralization, formalization.
• Work specialization divides work into tasks.
• Departmentalization groups related jobs.
• Chain of command clarifies reporting relationships.
• Span of control refers the number of workers managed efficiently by a manager.
• Centralization and decentralization refer to the decision-making level in an organization.
• Formalization describes the level of standardization and procedure guidance in the structure.
• Organizational forms include mechanistic (rigid) and organic (flexible).

Management Functions: Leading

• Human resource management ensures effective use of human capital.
• HRM activities involve attracting, rewarding, developing, and maintaining employees.
• HRM impact includes higher employee productivity, and stronger financial results. HRM activities include recruitment, selection, orientation, training, performance appraisal, and compensation.

Management Functions: Controlling

• Managers control activities in feedforward, concurrent, and feedback phases.
• Feedforward control (prevention) is taking place before the work activity.
• Concurrent Control (monitoring) is taking place while a work activity is in progress.
• Feedback control (correction) is taking place after the work activity.
• The control process involves measuring actual performance against a standard, and taking corrective action.

Leadership

• Leadership influences, motivates, and guides people to achieve goals.
• Leadership styles include autocratic, democratic, and laissez-faire.
• Management focuses on stability, while leadership fosters change.
• Management and leadership require different types of skills and characteristics.
• Transformational leaders inspire change and vision, while transactional leaders maintain efficiency.

Economic Goal and Value Creation

• Firms aim to maximize accounting profit.
• Accounting profit is revenue minus costs over a period (usually a year).
• Profitability measurement helps compare different firms.
• Economic profit measures value creation and future profit potential.

Social Responsibility, Sustainability, and Ethics

• Classical view emphasizes profit maximization; socioeconomic view considers social welfare.
• Social responsibility is a firm's commitment beyond legal/economic obligations in long-term societal benefit.
• Areas of social responsibility include customer, employee, investor, natural environment, and social welfare.
• Sustainability meets present needs without compromising future generations.
• Ethics are personal beliefs about right conduct.
• Managerial ethics guide behavior in organizations.
• Code of ethics ensures employees follow expected behavior standards.

The Growth of a Firm

• Strategy is a plan to compete and satisfy customers.
• SWOT analysis identifies internal (strengths, weaknesses) and external factors (opportunities, threats).
• Organizational strategies include corporate, competition, and functional levels.
• Corporate strategy determines industries to enter and growth forms.
• Competitive strategy focuses on competition within a business.
• Functional strategy focuses on efficient operations within functions.
• Scope of the firm includes vertical, horizontal, and geographical factors.
• Vertical integration encompasses the production process.
• Specialization/concentration and diversification involve horizontal scope.
• Internationalization affects geographical scope.
• Competitive strategies include cost leadership, differentiation strategies.
• Growth forms include internal growth, mergers/acquisitions, and strategic alliances.

Innovation

• Creativity creates unique ideas, while innovation turns them into useful products or processes.
• Innovative organizations can implement new ideas into useful outputs.
• Factors stimulating innovation involve organizational structure, culture, and human resource practices.
• Innovation types: product, process, radical, and incremental.

This quiz explores the concepts of data vs. information and the challenges managers face due to incomplete information. It also delves into the decision-making process, including identifying problems and analyzing alternatives.