Decision-Making PDF

ninth edition STEPHEN P. ROBBINS MARY COULTER Decision-making: The Essence of The Manager’s Job PowerPoint Presentation by Charlie Cook The University of West Alabama  Decision Making Decision Making a choice from two...

ninth edition STEPHEN P. ROBBINS MARY COULTER Decision-making: The Essence of The Manager’s Job PowerPoint Presentation by Charlie Cook The University of West Alabama  Decision Making Decision Making a choice from two or more alternatives. Top-level managers make decisions about their organization's goals, where to locate manufacturing facilities, what new markets to move into, and what products or services to offer. Middle and lower-level managers make decisions about setting weekly or monthly production schedules, handling problems that arise, allocating pay raises, and selecting or disciplining employees.  Types of Decisions 1.1 Programmed vs. Non-Programmed Decisions Programmed Decisions: Routine decisions made using established guidelines or procedures (e.g., reordering inventory). Non-Programmed Decisions: Unique, non- recurring decisions that require a customized approach (e.g., entering a new market). Strategic Vs.Tactical Decisions Strategic Decisions: Long-term decisions that shape the direction of the organization (e.g., mergers and acquisitions). Tactical Decisions: Short-term decisions that support strategic goals (e.g., marketing campaigns). Operational Decisions Day-to-day decisions that keep the organization running smoothly (e.g., scheduling staff shifts). The Decision-making Process Identifying a problem and decision criteria and allocating weights to the criteria. Developing, analyzing, and selecting an alternative that can resolve the problem. Implementing the selected alternative. Evaluating the decision’s effectiveness. THE DECISION-MAKING PROCESS 6–7 Step 1: Identifying The Problem Problem A discrepancy between an existing and desired state of affairs. Characteristics of Problems A problem becomes a problem when a manager becomes aware of it.  There is pressure to solve the problem. If there is no pressure, the problem can be postponed. The manager must have the authority, information, or resources needed to solve the problem.  Step 2: Identifying Decision Criteria Decision criteria are factors that are important (relevant) to resolving the problem. Costs that will be incurred (investments required) Risks likely to be encountered (chance of failure) Outcomes that are desired (growth of the firm)  Step 3: Allocating Weights To The Criteria Decision criteria (identified in step 2) are not of equal importance: Assigning a weight to each item places the items in the correct priority order of their importance in the decision-making process.  Step 4: Developing Alternatives Identifying viable alternatives Alternatives are listed (without evaluation) that can resolve the problem. Step 5: Analyzing Alternatives Appraising each alternative’s strengths and weaknesses An alternative’s appraisal is based on its ability to resolve the issues identified in steps 2 and 3.  Step 6: Selecting An Alternative Choosing the best alternative The alternative with the highest total weight is chosen. Step 7: Implementing The Alternative Putting the chosen alternative into action. Conveying the decision to and gaining commitment from those who will carry out the decision. Step 8: Evaluating The Decision’s Effectiveness The soundness of the decision is judged by its outcomes. How effectively was the problem resolved by outcomes resulting from the chosen alternatives? If the problem was not resolved, what went wrong?  Decision-making Styles (Cont’d) Types of Decision Makers Directive Use minimal information and consider few alternatives. Analytic Make careful decisions in unique situations.  Conceptual Maintain a broad outlook and consider many alternatives in making decisions. Behavioral Avoid conflict by working well with others and being receptive to suggestions. Characteristics Of An Effective Decision-making Process It focuses on what is important. It is logical and consistent and rational. It requires only as much information and analysis as is necessary to resolve a particular dilemma.  It encourages and guides the gathering of relevant information and informed opinion. It is straightforward, reliable, easy to use, and flexible.  Challenges In Decision-making 4.1 Information Overload Difficulty in processing too much information can lead to analysis paralysis.  4.2 Biases and Heuristics Cognitive biases (e.g., confirmation bias) can cloud judgment and lead to poor decisions. 4.3 Uncertainty and Risk The inherent uncertainty in predicting outcomes can complicate decision-making. Improving Decision-making Skills 5.1 Encouraging a Culture of Open Communication Fostering an environment where team members feel comfortable sharing their ideas and concerns.  5.2 Utilizing Technology Leveraging decision-support systems and data analytics to improve the quality of information available for decision-making. 5.3 Continuous Learning and Adaptation Embracing a mindset of learning from past decisions to refine future decision-making processes. Key Factors Affecting Decision-making  Several factors can significantly influence decision-making processes in management. Understanding these factors can help managers make more informed and effective decisions. Here are some key factors:  1. Individual Factors Cognitive Biases: Personal biases, such as confirmation bias or overconfidence, can distort judgment. Experience and Expertise: A manager’s background and experience can shape their approach to decision- making. Emotions: Emotional state can impact how decisions are perceived and made, potentially leading to impulsive choices.  2. Organizational Factors Culture: The organizational culture influences decision-making styles, whether they are collaborative or hierarchical. Structure: The organizational structure can affect how decisions are made and who has the authority to make them. Policies and Procedures: Existing policies may guide or constrain decision-making processes.  3. Environmental Factors Market Conditions: Economic trends, competition, and customer preferences can influence the urgency and nature of decisions. Regulatory Environment: Legal and regulatory frameworks can impose constraints on decision options. Technological Changes: Advances in technology can create new opportunities and challenges that affect decision-making.  4. Information Factors Availability of Information: Access to accurate and relevant data is crucial for informed decision- making. Quality of Information: The reliability and credibility of information sources can impact the decision-making process. Information Overload: Too much information can lead to confusion and analysis paralysis.  5. Social Factors Team Dynamics: The relationships and interactions among team members can influence group decision-making. Influence of Stakeholders: Opinions and interests of stakeholders (employees, customers, investors) can shape decisions. Groupthink: Pressure to conform within a group can lead to suboptimal decision-making.  Conclusion The Importance of Effective Decision- Making: Decision-making is a critical managerial skill that impacts every aspect of an organization. By understanding the types and processes of decision-making, managers can enhance their effectiveness and drive organizational success.