Organizational Decision-Making

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Questions and Answers

What contributes to the difficulty of making decisions in an organization?

Inability to predict the future outcomes of decisions

Ever-changing factors, unclear information, and conflicting points of view (correct)

Insufficient resources to implement decisions

A lack of time to make informed choices

What can be considered a consequence of poor decision-making in an organization?

Increased employee morale

Improved operational efficiency

Enhanced company reputation

Financial losses and decreased performance (correct)

What is the primary significance of good decision-making in management?

Solving problems, allocating resources, and achieving organizational goals (correct)

Developing effective communication strategies

Building strong relationships with stakeholders

Attracting and retaining top talent

What example is given in the text to illustrate a situation involving potentially flawed decision making?

Caterpillar's acquisition of China ERA Mining Machinery Ltd. (D) Signup and view all the answers

What does the text suggest is a crucial element of managerial competence?

The ability to make effective decisions (B) Signup and view all the answers

What is NOT a factor contributing to the complexity of decision-making in a business environment?

Uniform and predictable circumstances (B) Signup and view all the answers

What is the primary challenge highlighted in the text concerning decision-making?

Choosing the best course of action amidst uncertainty (B) Signup and view all the answers

What does the example of Caterpillar's acquisition of China ERA Mining Machinery Ltd. suggest about the role of decision-making in business?

Even well-intentioned decisions can have unexpected consequences (A) Signup and view all the answers

In which decision-making situation is the information incomplete, and the goals are clear?

Uncertainty (D) Signup and view all the answers

What is the defining characteristic of a decision situation classified as 'Ambiguity'?

Unclear goals, difficult to define alternatives, and unavailable information about outcomes (A) Signup and view all the answers

Which decision situation is considered the easiest to make?

Certainty (A) Signup and view all the answers

What is the difference between 'Risk' and 'Uncertainty' in decision-making?

In Risk, enough information is available to calculate the probability of success, while in Uncertainty, information is incomplete to do so. (A) Signup and view all the answers

Which of these conditions describe a 'wicked decision problem'?

Conflicting goals, rapidly changing circumstances, fuzzy information, and difficulty in evaluating the effectiveness of solutions. (A) Signup and view all the answers

What is a potential consequence of ambiguity in a decision-making situation?

Conflicts over decision alternatives and goals. (C) Signup and view all the answers

What is the main challenge posed by 'Wicked Decision Problems'?

Lack of data to evaluate the effectiveness of solutions. (B) Signup and view all the answers

When making decisions in situations characterized by 'Ambiguity,' what is an important factor for managers to consider?

Seeking diverse perspectives and information from various sources. (D) Signup and view all the answers

Which of the following is NOT a characteristic of the classical model of decision-making?

The decision maker uses intuition and experience. (C) Signup and view all the answers

What term describes the idea that decision makers are limited in how rational they can be?

Bounded rationality (B) Signup and view all the answers

Which decision-making model is considered descriptive, meaning it describes how managers actually make decisions?

Administrative model (B) Signup and view all the answers

Which of the following is an example of a programmed decision?

Approving a purchase order for office supplies. (B) Signup and view all the answers

What is the primary difference between the classical model and the administrative model?

All of the above (D) Signup and view all the answers

Which of the following is NOT a characteristic of the administrative model?

Decision makers strive for information and certainty. (C) Signup and view all the answers

What is the main difference between a programmed decision and a non-programmed decision?

Programmed decisions are routine and repetitive, while non-programmed decisions are unique and complex. (A) Signup and view all the answers

In the political model, what is a coalition?

An informal alliance of managers who share a specific goal. (B) Signup and view all the answers

Which of the following is NOT an assumption of the political model of decision making?

Information is clear and readily available to all managers. (C) Signup and view all the answers

What does the term 'derail' mean in the context of decision-making?

To disrupt or hinder. (B) Signup and view all the answers

Which of these factors can be considered a 'problem' in the decision-making process?

Organizational performance falling short of established goals. (D) Signup and view all the answers

What is the first step in the managerial decision-making process?

Identifying the problem or opportunity. (A) Signup and view all the answers

In the context of decision-making, what does 'ambiguity' refer to?

Lack of clarity and uncertainty about information. (B) Signup and view all the answers

Which of the following is NOT a characteristic of the classical decision-making model?

Information is incomplete and uncertain. (C) Signup and view all the answers

What is an 'opportunity' in the context of decision-making?

A potential for improvement beyond currently established goals. (B) Signup and view all the answers

What is the primary cause for managers to be influenced by initial impressions?

Anchoring bias (D) Signup and view all the answers

Which of these biases arises when managers discount evidence that contradicts their favored belief or viewpoint?

Confirmation bias (C) Signup and view all the answers

Which of the following scenarios demonstrates the sunk cost effect?

A manager continuing to invest in a failing project despite clear evidence of its unviability. (A) Signup and view all the answers

According to the provided content, which of these factors does NOT contribute to managers making bad decisions?

Unwillingness to take risks (C) Signup and view all the answers

What is the primary reason managers make bad decisions when perpetuating the status quo?

They are unwilling to explore new options (B) Signup and view all the answers

Which of these situations DOES NOT demonstrate a situation where an emotional manager is likely to make a bad decision?

A manager, having carefully analyzed all the data, decides to proceed with a project, despite doubts among the team members. (C) Signup and view all the answers

Which of the following best describes the concept of "loss aversion"?

The tendency to prioritize avoiding losses over gaining rewards. (C) Signup and view all the answers

What is the primary difference between confirmation bias and anchoring bias?

Anchoring bias focuses on the first bit of information, while confirmation bias prioritizes evidence that confirms a belief. (A) Signup and view all the answers

Which of the following is NOT an assumption of the Administrative Model?

Rational procedures are always used, leading to a simplistic view of the problem. (B) Signup and view all the answers

What is the term used to describe a decision-making approach that combines both intuition and analytical thought?

Quasirational (B) Signup and view all the answers

What is a potential disadvantage of using information technology in decision making?

Over-reliance on data and susceptibility to confirmation bias. (A) Signup and view all the answers

Which of the following is NOT considered a common assumption of the Administrative Model of decision-making?

Managers always have access to complete information about the problem. (B) Signup and view all the answers

According to the content provided, how does the Political Model differ from the Administrative Model?

The Political Model focuses on complex decision-making in situations with conflicting interests, while the Administrative Model assumes harmony and consensus. (A) Signup and view all the answers

What is a key assumption of the Administrative Model regarding managerial goals?

Goals are usually vague, conflicting, and lack consensus. (C) Signup and view all the answers

Which of the following is NOT a potential advantage of using info-tech for managerial decision-making?

Decreased need for human judgment and expertise. (C) Signup and view all the answers

Why is the Political Model considered useful for making non-programmed decisions in situations with uncertain conditions and conflicting interests?

Because it acknowledges that decisions often involve managers with diverse interests and goals. (D) Signup and view all the answers

Study Notes

Chapter 9: Managerial Decision Making

Managerial decisions drive organizational success or failure
Complex problems, changing factors, unclear information, and conflicting viewpoints make decision-making challenging
Managers sometimes make poor decisions, as seen in the Caterpillar example purchasing China ERA and its later decline in value
Good decision making is crucial for solving problems, allocating resources, and achieving organizational goals

Learning Objectives

Differentiate between programmed and non-programmed decisions, considering certainty, uncertainty, and ambiguity
Compare the ideal (rational) model of decision making with the political model
Summarize the six steps in the managerial decision-making process
Identify four personal decision styles used by managers
Recognize common decision-making biases
Detail innovative techniques like brainstorming, evidence-based management, and after-action reviews

Overview

Organizational success relies heavily on managerial decisions
Managers often face difficulty due to constantly changing conditions, ambiguous information, and diverse view points
Examples of poor decisions, such as the Caterpillar ERA purchase, underscore the importance of effective decision-making

9.1 Types of Decisions and Problems

Decision-making involves identifying problems and opportunities, then resolving these issues.
Decision is a choice among available alternatives

9.1.1 Programmed and Non-programmed Decisions

Programmed decisions address recurring problems with established rules
Non-programmed decisions tackle unique or unexpected issues, often requiring significant managerial input

9.1.2 Facing Certainty and Uncertainty

Decision difficulty reflects the level of uncertainty/risk/ambiguity
Attempts to reduce uncertainty through information gathering
Programmed decisions involve certainty, while non-programmed decisions involve varying degrees of uncertainty, risk, and ambiguity

Certainty, Risk, Uncertainty, and Ambiguity

Certainty: Full information available, predicting outcomes with confidence
Risk: Clear goals, uncertainty about outcome probabilities
Uncertainty: Know the goals but lack information to predict outcome probabilities
Ambiguity: Goals and alternatives unclear, outcome prediction impossible

9.3 Decision-Making Models

Classical, administrative, and political models represent managerial perspectives
Model choice depends on decision characteristics, especially the degree of uncertainty

9.3.1 Classical Model

Normative model outlining ideal decision-making
Assumes rational behavior with clear goals and perfect information
Used for programmed decisions with certainty/little uncertainty

9.2.2 Administrative Model

Descriptive model of how managers actually make decisions
Recognizes human and environmental limitations
Bounded rationality: Managers can't evaluate every possible solution. They often look for workable rather than optimal solutions
Satisficing: Choosing the first acceptable solution instead of pursuing an optimal one

9.2.2 Administrative Model (cont.)

Goals may be vague and conflicting, and information incomplete
Managers may make simplistic decisions due to resource and time limitations
Managers often use intuition and discussion to solve problems

9.3.3 Political Model

Recognizes conflicts and power struggles among diverse stakeholders
Decision-making involves coalition building and negotiation among managers with varied goals.
Best used for non-programmed decisions in ambiguous situations

9.3.3 Political Model (cont.)

Four assumptions include organizational structure with diverse interests, incomplete information, resource and time constraints, and uncertainty/conflicts as part of the process
Decisions result from bargaining and negotiation among stakeholders

9.4 Decision-Making Steps

Six-step process for effective managerial decision-making
Recognition of decision requirement: identifying problems or opportunities
Diagnosis and analysis of causes: exploring underlying causes
Developing alternatives: generating feasible solutions
Selection of desired alternative: choosing the best solution
Implementation: putting chosen alternative into effect
Evaluation and feedback: assessing the solution's effectiveness

9.5 Personal Decision Framework

Managers' varying decision styles—directive, analytical, conceptual, and behavioral—impact their decision-making.
The style chosen depends on the factors of the situation

9.6 Why Do Managers Make Bad Decisions?

Initial Impressions/Anchoring Bias: Overreliance on past data for current judgments
Justification of Past Decisions/Sunk Cost Effect: Continuing effort in a failing project despite evidence against it
Confirmation Bias: Favoring information that supports existing beliefs/opinions
Perpetuating the Status Quo: Maintaining past practices without sufficient evaluation/innovation
Emotional Influence: Decisions driven by emotions, rather than logic
Overconfidence: Overestimating one's abilities to predict uncertain outcomes

9.7 Innovative Decision Making

Brainstorming, electronic brainstorming, hard evidence, and evidence-based decision-making for effective decisions
Practices like devil's advocate, and rigorous debate can be included in the decision making process to improve quality of decisions.
Groupthink, escalating commitment, and premortems are used to prevent biases

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Description

This quiz explores the complexities and challenges of decision-making within organizations. It examines factors influencing good and poor decision-making, emphasizing the significance of managerial competence. Additionally, relevant examples highlight the impact of decision situations on business outcomes.