AAST Principles of Management PDF

PRINICIPALES OF MANAGEMENT Copyright © 2014 Pearson Education, Ltd  MAKING DECISIONS 2 Copyright © Copyright © 2016 2014 by...

PRINICIPALES OF MANAGEMENT Copyright © 2014 Pearson Education, Ltd  MAKING DECISIONS 2 Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-2  LEARNING OBJECTIVES 1. Describe the eight steps in the decision-making process. § Develop your skill at being creative. 2. Explain the four ways managers make decisions. 3. Classify decisions and decision-making conditions. 4. Describe different decision-making styles and discuss how biases affect decision-making. § Know how to recognize when you’re using decision- making errors and biases and what to do about it. 5. Identify effective decision-making techniques. Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-3 A key to success in management and in your career is knowing how to be an effective decision-maker. Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-4  THE DECISION-MAKING PROCESS Decision – making a choice from two or more alternatives. Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-5  EXHIBIT 2-1 DECISION-MAKING PROCESS Copyright © 2014 Pearson Education, Ltd 2-6  If he had one hour to save the world, he would spend fifty-five minutes defining the problem and only five minutes finding the solution. Copyright © 2014 Pearson Education, Ltd THE DECISION-MAKING PROCESS (CONT.) 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. Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-8 Determine the Root Cause(s) of the Problem Once you defined the problem, you can begin to collect information about the nature of the problem. Copyright © 2014 Pearson Education, Ltd Determine the Root Cause(s) of the Problem Identify causes of your problem look at the current situation, rather than its history do not consider the "trouble" it creates whether now or in the future. 1. 5-Whys Technique. 2. Fishbone Diagram. 3. Mind Mapping. Copyright © 2014 Pearson Education, Ltd  5-Whys Technique Quickly Getting to the Root of a Problem. Look at any problem and asking: "Why?" and "What caused this problem?" The answer to the first "why" will prompt another "why" and the answer to the second "why" will prompt another and so on. Copyright © 2014 Pearson Education, Ltd 5-Whys Technique Taiichi Ohno Copyright © 2014 Pearson Education, Ltd 5 Whys Example The problem is that your customer, is “unhappy”. Why is customer unhappy? Because we didn't deliver our services when we said we would. Why were we unable to meet customer expectations? The job took much longer than we thought it would. Why did it take so much longer? Because we underestimated the complexity of the job. Why did we underestimate the complexity of the job? Because we made a quick estimate of the time needed to complete it and didn't list the individual stages needed to complete the project. Why didn't we do this? Because we were running behind on other projects. We clearly need to review our time estimation and specification procedures. Copyright © 2014 Pearson Education, Ltd 2. Fishbone Diagram Kaoru Ishikawa Copyright © 2014 Pearson Education, Ltd 2. Fishbone Diagram Objective: – Root cause analysis. Possible causes. Filtrate those causes to get the Root Cause. Then reach to the Best Solution. Copyright © 2014 Pearson Education, Ltd 2. Fishbone Diagram 4M: 4M 5M 6M 1. Man 2. Material 3. Machine 4. Method 5M: 5. Measure 6M: 5. Mother Nature (Environment) Copyright © 2014 Pearson Education, Ltd 2. Fishbone Diagram 4M 5M 6M 1. Man (People): Anyone involved with the process Ex.: Poor supervision Lack of concentration Need Training Copyright © 2014 Pearson Education, Ltd 2. Fishbone Diagram 4M 5M 6M 2. Material: Raw materials used to produce the final product Measurements: Data generated from the process that is used to evaluate its quality Ex.: System issue Defective from vendor Copyright © 2014 Pearson Education, Ltd 2. Fishbone Diagram 4M 5M 6M 3. Machine: Any equipment, computer etc. required to accomplish the job. Ex.: Tooling Problem Old Machine Copyright © 2014 Pearson Education, Ltd 2. Fishbone Diagram 4. Method: 4M 5M 6M How the process is performed and the specific requirements for doing it, such as policies, procedures, rules, regulations and laws Ex.: No clear Process The process is wrong or outdated The process is too complicated Copyright © 2014 Pearson Education, Ltd 2. Fishbone Diagram 4M 5M 6M 5. Measure: How is the process measured and monitored to evaluate quality? Ex.: Quality Score Target KPI Copyright © 2014 Pearson Education, Ltd 2. Fishbone Diagram 4M 5M 6M 5. Mother Nature (Environment): This includes anything outside the company’s control that may impact on results. Ex.: THE conditions, such as location, time, temperature, and culture in which the process operates. Copyright © 2014 Pearson Education, Ltd 2. Fishbone Diagram 3. Put 4, 5 or 6M on the bones 2. Create a backbone for the fish. Fishbone Steps: 4. Put your possible causes under each M. 1.Man Create the head. Machine Measure …… …… …… …… …… …… Problem …… …… …… …… …… …… Environ Material Method ment Causes Effect Copyright © 2014 Pearson Education, Ltd 3.Mind Mapping Process Copyright © 2014 Pearson Education, Ltd 3.Mind Mapping Process 1. Start in the center with an image of the topic. 2. Connect your main branches to the central image and connect your second- and third-level branches to the first and second levels, etc. 3. Use one key word per line. 4. The lines should be connected, starting from the central image. 5. The central lines are thicker, organic and thinner as they radiate out from the center. 6. Make your branches Curved rather than straight-lined 7. Use multiple colors throughout the mind map, for visual stimulation Copyright © 2014 Pearson Education, Ltd Mind Mapping Process Copyright © 2014 Pearson Education, Ltd  THE DECISION-MAKING PROCESS (CONT.) Step 2: Identify Decision Criteria – Decision criteria are factors that are important (relevant) to resolving the problem. – Example – Amanda decides that memory and storage capabilities, display quality, battery life, warranty, and carrying weight are the relevant criteria in her decision. Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-28 THE DECISION-MAKING PROCESS (CONT.) 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. – The weighted criteria for our example is shown in Exhibit 2-2. Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-29  EXHIBIT 2-2 IMPORTANT DECISION CRITERIA Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-30 THE DECISION-MAKING PROCESS (CONT.) Step 4: Develop Alternatives – List viable alternatives that could resolve the problem – Example – Amanda, identifies eight laptops as possible choices. (See Exhibit 2-3.) Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-31  EXHIBIT 2-3 POSSIBLE ALTERNATIVES Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-32 THE DECISION-MAKING PROCESS (CONT.) 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. Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-33  THE DECISION-MAKING PROCESS (CONT.) Step 6: Select an Alternative Choosing the best alternative – The alternative with the highest total weight is chosen. Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-34  EXHIBIT 2-4 EVALUATION OF ALTERNATIVES Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-35 THE DECISION-MAKING PROCESS (CONT.) 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 Is the criteria still valid Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-36 THE DECISION-MAKING PROCESS (CONT.) Step 8: Evaluate Decision 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? Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-37  EXHIBIT 2-5 DECISIONS MANAGERS MAY MAKE Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-38  EXHIBIT 2-5 DECISIONS MANAGERS MAY MAKE (CONT.) Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-39  MAKING DECISIONS: RATIONALITY Rational Decision-Making – describes choices that are logical and consistent while maximizing value. Objective & Logical Assumptions of Rationality – The decision maker would be fully objective and logical – The problem faced would be clear and unambiguous – The decision maker would have a clear and specific goal and know all possible alternatives and consequences and consistently select the alternative that maximizes achieving that goal Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-40  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.” Escalation of commitment – an increased commitment to a previous decision despite evidence it may have been wrong. Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-41  MAKING DECISIONS: THE ROLE OF INTUITION Intuitive decision- making – Making decisions on the basis of experience, feelings, and accumulated judgment. Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-42  EXHIBIT 2-6 WHAT IS INTUITION? Copyright © 2014 Pearson Education, Ltd  MAKING DECISIONS: THE ROLE OF EVIDENCE-BASED MANAGEMENT Evidence-based management (EBMgt) – the systematic use of the best available evidence to improve management practice. Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-44  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. Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-45  STRUCTURED PROBLEMS AND PROGRAMMED DECISIONS (CONT.) Procedure – a series of sequential steps used to respond to a well-structured problem. Rule – an explicit statement that tells managers what can or cannot be done. Policy – a guideline for making decisions. Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-46  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 and involve custom made solutions. Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-47  EXHIBIT 2-7 PROGRAMMED VERSUS NONPROGRAMMED DECISIONS Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-48  DECISION-MAKING CONDITIONS Certainty – a situation in which a manager can make accurate decisions because all outcomes are known. Risk – a situation in which the decision maker is able to estimate the likelihood of certain outcomes. Uncertainty – a situation in which a decision maker has neither certainty nor reasonable probability estimates available. Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-49  MANAGING RISK „ Managers can use historical data from past experiences or secondary information that lets them assign probabilities to different alternatives. „ Managers use this information to help make decisions by calculating the expected value – the expected return from each possible outcome – by multiplying expected revenues by (the probability). „ This exercise will give the manager an idea of the average revenue that they can expect over time if everything relative to the probability remains constant. Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-50  DECISION-MAKING STYLES Linear Thinking Style – a person’s tendency to use external data/facts; the habit of processing information through rational, logical thinking. Nonlinear Thinking Style – a person’s preference for internal sources of information; a method of processing this information with internal insights, feelings, and hunches. Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-54  DECISION-MAKING BIASES AND ERRORS Heuristics – using “rules of thumb” to simplify decision-making. 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. Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-55  DECISION-MAKING BIASES AND ERRORS (CONT.) 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. Confirmation Bias – seeking out information that reaffirms past choices while discounting contradictory information. Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-56  DECISION-MAKING BIASES AND ERRORS (CONT.) 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. Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-57  DECISION-MAKING BIASES AND ERRORS (CONT.) Sunk Costs Errors – forgetting that current actions cannot influence past events and relate only to future consequences. 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 (after-the-fact). Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-58  EXHIBIT 2-11 COMMON DECISION-MAKING BIASES Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-59  EXHIBIT 2-12 OVERVIEW OF MANAGERIAL DECISION-MAKING Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-60 GUIDELINES FOR MAKING EFFECTIVE DECISIONS Understand cultural differences Create standards for good decision-making Know when it’s time to call it quits Use an effective decision-making process Build an organization that can spot the unexpected and quickly adapt to the changed environment Copyright © Copyright © 2016 2014 by Pearson Education, Pearson LtdLtd. Education, 2-61 Prof. Dr. Nevine Nabil Nakhla THANK YOU! Copyright © 2014 Pearson Education, Ltd PROF. DR. NEVINE N. NAKHLA Copyright © 2014 Pearson Education, Ltd Prof. Dr. Nevine Nabil Nakhla THANK YOU! Copyright © 2014 Pearson Education, Ltd