Chapter 2 - Making Decision Organizational Management PDF

MGT212: Organizational Management Instructor: Dr. Jashim Uddin Ahmed Chapter TWO Making Decision 1  The Decision-Making Process Decision  Making a choice from two or more alternatives Sources...

MGT212: Organizational Management Instructor: Dr. Jashim Uddin Ahmed Chapter TWO Making Decision 1  The Decision-Making Process Decision  Making a choice from two or more alternatives Sources of Complexity for Today’s Managerial Decision Makers  Multiple criteria  Intangibles  Risk and uncertainty  Long-term implications  Interdisciplinary input  Pooled decision making  Value judgments  Unintended consequences hapter 11, Carlene M. Cassidy and Robert Kreitner, Principles of Management, Twelfth Edition. Copyright © 2013 Cengage Learning 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Pren 2  Exhibit 6-1 Decision-Making Process 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Pren 3  The Decision-Making Process (cont’d) Step 1: Identify a Problem Problem: An obstacle that makes it difficult to achieve a desired goal or purpose Every decision starts with a problem, a discrepancy between an existing and a desired condition. Example: Amanda is a sales manager whose reps need new laptops Step 2: Identify Decision Criteria Decision criteria are factors that are important or relevant to resolving the problem. Example: Amanda decides that memory and storage capabilities, display quality, battery life, warranty, and 6, Stephen P. Robbins carrying and Mary weight Coulter, Management, are Twelfth the Edition. relevant Copyright criteria © 2013 Pearson inInc.her Education, publishing as Pren 4  The Decision-Making Process (cont’d) Step 3: Allocate Weights to the Criteria If the relevant criteria aren’t equally important, the decision maker must weight the items in order to give them the correct priority in the decision. Example: See Exhibit 6-2 Step 4: Develop Alternatives List viable alternatives that could resolve the problem Example: Amanda, identifies eight laptops as possible choices (See Exhibit 6-3) 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Pren 5  Exhibit 6-2 Important Decision Criteria 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Pren 6  Exhibit 6-3 Possible Alternatives 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Pren 7  The Decision-Making Process (cont’d) Step 5: Analyze Alternatives Appraising each alternative’s strengths and weaknesses An alternative’s appraisal is based on its ability to resolve the issues related to the criteria and criteria weight. Example: See Exhibit 6-4 Step 6: Select an Alternative Choosing the best alternative  The alternative with the highest total weight is chosen. 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Pren 8  Exhibit 6-4 Evaluation of Alternatives 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Pren 9  The Decision-Making Process (cont’d) Step 7: Implement the Alternative Putting the chosen alternative into action Conveying the decision to and gaining commitment from those who will carry out the alternative Step 8: Evaluate Decision Effectiveness Evaluating the outcome of the decision to see whether the problem was resolved If the problem still exists, then the manager needs to assess what went wrong. 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Pren 10  Making Decisions: Rationality Rational Decision Making Describes choices that are logical and consistent and maximize value 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Pren 11  Making Decisions: Bounded Rationality Bounded Rationality Decision making that’s rational, but limited (bounded) by an individual’s ability to process information. Satisfice: Accepting solutions that are “good enough”  Because managers can’t possibly analyze all information on all alternatives, they satisfice, rather than maximize. Escalation of Commitment An increased commitment to a previous decision despite evidence it may have been wrong (“throwing good money after bad”). 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Pren 12  Making Decisions: The Role of Intuition and Evidence-Based Management Intuitive Decision Making Making decisions on the basis of experience, feelings, and accumulated judgment. Evidence-Based Management (EBMgt) The systematic use of the best available evidence to improve management practice. 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Pren 13  Structured Problems and Programmed Decisions Structured Problems Straightforward, familiar, and easily defined problems. Programmed Decision A repetitive decision that can be handled by a routine approach. Example: Decision related to handling common customer complaints 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Pren 14  Unstructured Problems and Nonprogrammed Decisions Unstructured Problems Problems that are new or unusual and for which information is ambiguous or incomplete. Nonprogrammed Decisions Unique and nonrecurring decisions that require custom made solutions. Example: Decision related to building a new manufacturing facility 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Pren 15  Decision-Making Conditions Certainty Exists when a solid factual basis allows prediction of a decision’s outcome Risk Exists when a decision is made on the basis of incomplete but reliable information Uncertainty Exists when no reliable data exist on which to base a decision hapter 11, Carlene M. Cassidy and Robert Kreitner, Principles of Management, Twelfth Edition. Copyright © 2013 Cengage Learning 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Pren 16  Decision-Making Biases and Errors 12 Common Decision Making Biases and Errors Overconfidence Bias: Holding unrealistically positive views of oneself and one’s performance. Immediate Gratification Bias: Choosing alternatives that offer immediate rewards and avoid immediate costs. Anchoring Effect: Fixating on initial information and ignoring subsequent information. Selective Perception Bias: Selecting, organizing and interpreting events based on the decision maker’s biased perceptions. 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Pren 17  Decision-Making Biases and Errors (cont’d) Framing Bias: Selecting and highlighting certain aspects of a situation while ignoring other aspects. Availability Bias: Losing decision-making objectivity by focusing on the most recent events. Representation Bias: Drawing analogies and seeing identical situations when none exist. Randomness Bias: Creating unfounded meaning out of random events. Sunk Costs Errors: Forgetting that current actions cannot influence past events and relate only to future consequences. 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Pren 18  Decision-Making Biases and Errors (cont’d) Self-Serving Bias: Taking quick credit for successes and blaming outside factors for failures. Hindsight Bias: Mistakenly believing that an event could have been predicted once the actual outcome is known. Some Other Definitions Framing Error: The way in which information is presented influences one’s interpretation of it, which, in turn, may alter a decision based on the information. Heuristics: Using “rules of thumb” to simplify decision making. 6, Stephen P. Robbins and Mary Coulter, Management, Twelfth Edition. Copyright © 2013 Pearson Education, Inc. publishing as Pren 19 Thank you  20