Managerial Decision Making Concepts

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What was the main reason for the bookstore manager's lackluster Book Day sales?

Students and parents were already busy attending a lacrosse game. (correct)

The bookstore had limited selection of books available for sale.

The manager did not adequately advertise the Book Day.

The school lacked a strong interest in participating in the fund-raiser.

Which decision-making bias is exemplified by the bookstore manager's continued refusal to partner with other schools for Book Days despite the initial negative experience?

Confirmation Bias (correct)

Availability Heuristic

Escalating Commitment

Illusion of Control

How does the illusion of control affect decision-making?

It leads managers to be more cautious and less likely to take risks.

It encourages managers to delegate tasks and responsibilities to others.

It results in managers overestimating their ability to control outcomes and make inappropriate decisions. (correct)

It promotes a more collaborative decision-making process.

Which of the following is NOT a characteristic of escalating commitment as described in the text?

Seeking advice from other managers to ensure a balanced perspective on the project. (B) Signup and view all the answers

The text suggests that top managers are particularly susceptible to the illusion of control. Why is this?

Having reached a position of authority, they may develop an exaggerated sense of their own abilities and control. (D) Signup and view all the answers

What is a potential consequence of escalating commitment?

Ignoring evidence that a course of action is failing and potentially making further unwise investments. (D) Signup and view all the answers

What percentage of mergers and acquisitions are considered failures?

70-90% (B) Signup and view all the answers

What does the text suggest that managers should do when faced with a failing project?

B and D (C) Signup and view all the answers

What is a primary characteristic of groupthink in decision making?

Blind commitment to a chosen course of action (B) Signup and view all the answers

Which of the following decisions is an example of groupthink leading to flawed outcomes?

The Bay of Pigs invasion (C) Signup and view all the answers

What role does a devil's advocate play in the decision-making process?

Critiques and challenges the preferred alternative (B) Signup and view all the answers

How do pressures for agreement within a group affect individual contributions?

They discourage individuals from raising concerns. (A) Signup and view all the answers

What is the main purpose of dialectical inquiry in decision making?

To evaluate both sides of an argument rigorously (A) Signup and view all the answers

What outcome can result from failing to recognize cognitive biases in a group decision process?

Flawed decision-making and negative outcomes (D) Signup and view all the answers

What emotional basis can often underlie commitment in decision making during groupthink?

Collective enthusiasm (D) Signup and view all the answers

Which of the following best describes a consequence of the groupthink phenomenon?

Surprise at the flawed nature of decision outcomes (D) Signup and view all the answers

What should top managers emphasize to foster creative solutions in their teams?

The significance of looking for alternative solutions (D) Signup and view all the answers

How can organizations encourage frontline employees to share creative ideas?

Through various types of rewards for creativity (C) Signup and view all the answers

What is a key feature of brainstorming sessions?

Encouragement of radical and innovative ideas (A) Signup and view all the answers

What is 'piggybacking' in the context of brainstorming?

Building on another person’s idea (B) Signup and view all the answers

What is one of the benefits of using group problem-solving techniques in organizations?

They help uncover biases and improve creativity (C) Signup and view all the answers

Which of the following is NOT a characteristic of successful idea generation in groups?

Limiting participation to senior managers only (B) Signup and view all the answers

What role do ceremonies and rewards play in an innovative organization?

They help recognize and motivate creative employees (B) Signup and view all the answers

What is a potential emotional response associated with being creative in the workplace?

A sense of fulfillment from solving problems (C) Signup and view all the answers

What is one significant advantage of group decision making?

It reduces the chances of biases impacting decisions. (C) Signup and view all the answers

Which of the following is a disadvantage of group decision making?

Potential for groupthink. (A) Signup and view all the answers

What can improve group decision making?

Encouraging open discussion and debate. (B) Signup and view all the answers

What is the primary role of a product champion in an organization?

To develop a business plan for a new product (C) Signup and view all the answers

How does group decision making affect the probability of successful implementation of a decision?

It increases the probability due to cooperative agreement. (A) Signup and view all the answers

How does intrapreneurship impact organizational learning?

It increases the level of learning and innovation (A) Signup and view all the answers

What common challenge do groups face in coming to decisions?

Longer time taken to reach a conclusion. (B) Signup and view all the answers

According to Audrey Sherman, what is a key factor for successful intrapreneurship?

Teamwork and collaboration (D) Signup and view all the answers

Which scenario best exemplifies groupthink in decision making?

A group chooses one solution without disagreement. (B) Signup and view all the answers

Why might managers work together to expose their decision-making weaknesses?

To reduce the likelihood of biases affecting their decisions. (D) Signup and view all the answers

What is the purpose of skunkworks in an organization?

To promote a feeling of ownership among employees (B) Signup and view all the answers

What advantage does 3M offer its managers to promote intrapreneurship?

Encouragement to become product champions (C) Signup and view all the answers

What is a beneficial outcome of group decision making regarding information?

Enhanced ability to process and evaluate more information. (C) Signup and view all the answers

Which of the following describes a characteristic of a product champion?

Takes ownership of the project's development (C) Signup and view all the answers

What mindset does Audrey Sherman suggest for recognizing innovation opportunities?

Preparing the mind to recognize opportunities in daily activities (A) Signup and view all the answers

How can organizations enhance their ability to provide improved goods and services?

Through constant experimentation and problem-solving (B) Signup and view all the answers

In the context of decision making, what does the term "nonprogrammed decision making" refer to?

Decisions that are made in situations where there are no established rules or precedents. (B) Signup and view all the answers

What is the primary reason why managers have to be cautious about overconfidence in their decisions, according to the passage?

Both intuition and reasoned judgment can lead to flawed decisions. (A) Signup and view all the answers

Which of the following situations best exemplifies nonprogrammed decision making?

A CEO deciding whether to acquire a competitor company. (A) Signup and view all the answers

According to the passage, what are the primary difficulties posed by nonprogrammed decision making, as opposed to programmed decision making?

Nonprogrammed decisions are generally more complex and uncertain. (D) Signup and view all the answers

The passage mentions that the classical model of decision making is "prescriptive." What does "prescriptive" mean in this context?

It offers guidelines on how decisions should be made. (A) Signup and view all the answers

According to the passage, what is the purpose of the classical and administrative decision-making models?

To illustrate the complexities and challenges involved in decision making. (D) Signup and view all the answers

Which of the following is NOT mentioned as a characteristic of nonprogrammed decision making?

Relies heavily on historical data. (B) Signup and view all the answers

What conclusion can be drawn from the passage about the role of intuition in decision making?

Intuition can be helpful but should be used with caution. (A) Signup and view all the answers

Study Notes

Decision Making, Planning, and Strategy

Learning Objectives: Students should be able to understand managerial decision-making, differentiate between programmed and nonprogrammed decisions, explain why nonprogrammed decisions are complex, describe the six steps for best decisions, and explain cognitive biases in poor decisions. Identify advantages and disadvantages of group decision making, and describe techniques to improve it. Explain the role of organizational learning and creativity in improving decisions. Describe how managers can encourage and promote entrepreneurship.
A Manager's Challenge (CVS Health): Karen Lynch, CEO of CVS Health, demonstrates decision-making skills in corporate strategy. CVS acquired Aetna in 2018 to expand health care services. She focused on affordability and wider access to primary care and mental health services alongside other existing services.

Programmed and Nonprogrammed Decision Making

Programmed Decisions: These decisions are routine and automatic, following well-established rules and guidelines for recurring situations. Examples include ordering supplies when inventory is low or hiring new teachers when enrollment increases.
Nonprogrammed Decisions: These decisions occur in response to unusual or novel situations, lacking pre-existing rules or guidelines. Examples include decisions about new technologies, developing new product lines, entering new markets.

Decision-Making Steps

Six Steps: Recognizing the need for a decision, generating alternative solutions, assessing alternatives, choosing among the alternatives, implementing the chosen solution, and learning from the feedback.

Cognitive Biases

Confirmation Bias: Decision-makers tend to favor information that confirms existing beliefs, ignoring contradictory evidence.
Representativeness Bias: Judging probabilities based on limited samples or vivid examples.
Illusion of Control: Overestimating one's ability to control events or outcomes.
Escalating Commitment: Continuing a failing course of action despite negative feedback due to the sunk cost.

Group Decision Making

Advantages: Drawing on diverse skills and knowledge, reducing bias, and enhancing information processing.
Disadvantages: Groups may take longer to reach decisions, require agreement among multiple parties, and can be susceptible to biases. Groupthink is a particular concern where group members value harmony over critical discussion.

Techniques to Improve Group Decision Making

Brainstorming: Generating ideas without criticism, allowing for free-flowing contributions.
Nominal Group Technique: Generating ideas individually and then sharing them in a structured format to encourage diverse input.
Delphi Technique: Using structured questionnaires to gather input from multiple individuals, allowing for anonymous feedback, reducing production blocking and groupthink.

Organizational Learning and Creativity

Organizational Learning: The company and its employees continually learn. It involves enhancing employees' ability to understand the environment and improving organizational effectiveness.
Creativity: The ability of decision-makers to generate novel ideas and solutions is central to decision-making improvement.

Intrapreneurship

Intrapreneurs: Individuals who foster entrepreneurship within established organizations. They identify opportunities, develop new products/services, and contribute to the organization's growth.
Promoting Intrapreneurship: Rewarding creative ideas and encouraging experimentation, providing support, and allowing flexible work arrangements can cultivate intrapreneurship.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Description

This quiz covers key concepts in managerial decision-making, including the distinctions between programmed and nonprogrammed decisions. It explores the techniques for effective group decision-making and the impact of cognitive biases. In addition, it discusses the organizational learning aspect and the promotion of entrepreneurship in management.