MG4031 Management Principles - Decision Making

MG4031 Management Principles - Decision Making

• Decision making is the selection of a course of action from various alternatives
• Decision making takes place at all organizational levels
• Decision making is an integral part of planning
• Decisions are categorized as programmed or non-programmed
• Programmed decisions are well-structured and routine, involve readily available information at lower organizational levels, and use established rules and procedures.
• Non-programmed decisions are poorly structured and new, require information at higher levels, and entail judgement and creativity.

Decision Making Conditions

• Decision making conditions include certainty, risk, and uncertainty.

The Decision-Making Process

• The decision-making process comprises stages:
  • Problem identification and diagnosis
  • Identifying alternative solutions
  • Evaluating alternatives
  • Selecting an alternative
  • Implementing the decision
  • Evaluating the decision

Barriers to Effective Decision Making

• Psychological barriers include biases that hinder objective rationality.
• Illusion of control is the belief in influencing events when one lacks control.
• Discounting the future involves prioritizing short-term costs and benefits over long-term ones.
• Time pressure is a significant barrier; prompt and high-quality decisions are needed in today's fast-paced environment.

Approaches to Decision Making

• Research identifies four models:
  • The Rational Model: decisions are consistent and value-maximizing, made with "perfect" information. Assumptions assume objective, logical thinking, clearly defined problems, specific goals, and optimal alternative selection to achieve the goal; maximizing economic interests.
  • Bounded Rationality: managers seldom make decisions under certainty, and they must use less than perfect rationality. Intuition and judgement are vital due to large amounts of complex information.
  • The Political Model: organizational politics and power play significantly impact decision making. This model considers resource allocation, interests, and conflicts and examines sources of power: legitimate, reward, expert, and coercive.
  • Escalation of Commitment: Commitment to a poor decision often increases after the initial decision, stemming from self-justification, preservation, and personal responsibility. This can be influenced by sunk costs, which involve continuing investments despite their futility, and confirmation bias, which causes prioritizing evidence supporting the initial decision.

Group versus Individual Decision Making

• Advantages of group decisions include a larger pool of information, diverse perspectives, and intellectual stimulation.
• Disadvantages of group decisions include potential for domination by one person, satisficing (settling for a satisfactory rather than optimal solution), goal displacement (replacing original goals with new ones), and time-consuming processes.

Groupthink

• Janis's Groupthink theory describes a distorted thinking style within a group. This groupthink can render members incapable of making sound rational decisions, particularly in ultra-cohesive groups, when striving for unanimity trumps realistic evaluation of alternative actions. This may arise from overestimation of the group, close-mindedness towards outgroups, and pressure for uniformity.

Improving Group Decision Making

• Techniques for enhanced group decision making include brainstorming, the Delphi technique, and nominal grouping.

This quiz covers the essential concepts of decision making as outlined in MG4031 Management Principles. It explores different types of decisions, decision-making conditions, and the detailed process involved in making effective decisions. Test your understanding of programmed and non-programmed decisions and the stages of the decision-making process.