Management Decision Making PDF

Management Fourteenth Edition, Global Edition Chapter 2 Decision Making Copyright © Copyright 2018 Pearson...

Management Fourteenth Edition, Global Edition Chapter 2 Decision Making Copyright © Copyright 2018 Pearson © 2018 Education, PearsonLtd. Education, All Rights Ltd. Reserved All Rights Reserved Learning Objectives 2.1 Describe the eight steps in the decision-making process. 2.2 Explain the five approaches managers can use when making decisions. 2.3 Classify decisions and decision-making styles. 2.4 Describe how biases affect decision making. 2.5 Identify cutting-edge approaches for improving decision making. Copyright © 2018 Pearson Education, Ltd. All Rights Reserved What is a Decision? Decision—a choice among two or more alternatives Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Exhibit 2-1 Decision-Making Process Exhibit 2-1 shows the eight steps in the decision-making process. This process is as relevant to personal decisions as it is to corporate decisions. Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Decision-Making Process Step 1: Identify the______________ Problem: an obstacle that makes it difficult to achieve a desired goal or purpose. Example: Amanda is a sales manager whose reps need new laptops. Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Decision-Making Process Step 2: Identify the ____________________ Decision criteria are factors that are important to resolving the problem. Example: memory and storage capabilities, display quality, battery life, warranty, and carrying weight are the relevant criteria in her decision Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Decision-Making Process Step 3: ___________________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. Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Exhibit 2-2 Important Decision Criteria Criterion Weight Memory and storage 10 Battery life 8 Carrying weight 6 Warranty 4 Display quality 3 Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Decision-Making Process Step 4: ___________________ Alternatives List viable alternatives that could solve the problem. Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Exhibit 2.3 Possible Alternatives Laptop Memory Battery Carrying Warranty Display and Life Weight Quality Storage Acer Aspire E 10 3 10 8 5 Apple MacBook 8 5 7 10 10 Pro Dell XPS 13 8 7 7 8 7 Lenovo 7 8 7 8 7 ThinkPad Lenovo Yoga 8 3 6 10 8 Microsoft 10 7 8 6 7 Surface Book Razer Blade 4 10 4 8 10 Stealth Copyright © 2021 Pearson Education Ltd. Decision-Making Process Step 5: ___________________ Alternatives Step 6: __________________ an Alternative STEP 5: Once you identify the alternatives you need to analyze them using the criteria established in Step 2. STEP 6: Choose the alternative that generates the highest total in Step 5. Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Exhibit 2.4 Evaluation of Alternatives Laptop Memory Battery Carrying Warranty Display Total and Life Weight Quality Storage Acer Aspire E 100 24 60 32 15 231 Apple MacBook 80 40 42 40 30 232 Pro Dell XPS 13 80 56 42 32 21 231 Lenovo 70 64 42 32 21 229 ThinkPad Lenovo Yoga 80 24 36 40 24 204 Microsoft 100 56 48 24 21 249 Surface Book Razer Blade 40 80 24 32 30 206 Stealth Copyright © 2021 Pearson Education Ltd. Decision-Making Process Step 7: __________________ the Alternative Put the chosen alternative into action. Convey the decision to those affected and get their commitment to it. Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Decision-Making Process Step 8: ____________ Decision Effectiveness Evaluate the result or outcome of the decision to see if the problem was resolved. Copyright © 2018 Pearson Education, Ltd. All Rights Reserved  Five approaches to decision making Rationality Rational Decision-Making: choices that are logical and consistent and maximize value Copyright © 2018 Pearson Education, Ltd. All Rights Reserved  Bounded Rationality Bounded rationality: decision making that’s rational, but limited by an individual’s ability to process information Satisfice: accepting solutions that are “good enough” Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Intuition Intuitive decision-making: making decisions on the basis of experience, feelings, and accumulated judgment Copyright © 2018 Pearson Education, Ltd. All Rights Reserved  Evidence-based management (EBMgt) Evidence-based management (EBMgt): the systematic use of the best available evidence to improve management practice. Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Crowdsourcing Crowdsourcing: a decision-making approach where you solicit ideas and input from a network of people outside of the traditional set of decision makers. Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Types of Decisions: Structured Problems and Programmed Decisions Structured problems: straightforward, familiar, and easily defined problems Programmed decisions: repetitive decisions that can be handled by a routine approach Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Types of Programmed Decisions _____________: 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 ______________: a guideline for making decisions Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Types of Decisions: 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 © 2018 Pearson Education, Ltd. All Rights Reserved  Exhibit 2-7 Programmed vs Nonprogrammed Decisions Characteristic Programmed Decisions Nonprogrammed Decisions Type of problem Structured Unstructured Managerial level Lower levels Upper levels Frequency Repetitive, routine New, unusual Information Readily available Ambiguous or incomplete Goals Clear, specific Vague Time frame for solution Short Relatively long Solution relies on… Procedures, rules, policies Judgment and creativity Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Decision-Making Styles Research has identified four different individual decision- making styles based on two dimensions: 1. An individual’s way of thinking 2. An individual’s tolerance for ambiguity The four styles are directive, analytic, conceptual and behavioral. Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Exhibit 2.8 Decision-Style Model Exhibit 2.8 shows the decision-style model from A. J. Rowe and J. D. Boulgarides, Managerial Decision Making (Upper Saddler River, N J: Prentice Hall, 1992), p. 29. Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Four Decision-Making Styles Directive style: low tolerance for ambiguity and seek rationality Analytic style: seek rationality but have a higher tolerance for ambiguity Conceptual style: intuitive decision makers with a high tolerance for ambiguity Behavioral style: intuitive decision makers with a low tolerance for ambiguity Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Heuristics Heuristics or “rules of thumb” can help make sense of complex, uncertain, or ambiguous information. However, they can also lead to errors and biases in processing and evaluating information. Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Decision-Making Biases and Errors ________________holding unrealistically positive views of oneself and one’s performance. Immediate Gratification Bias: choosing alternatives that offer immediate rewards and avoid immediate costs ________________: taking quick credit for successes and blaming outside factors for failures Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Decision-Making Biases and Errors Selective Perception Bias: selecting, organizing and interpreting events based on the decision maker’s biased perceptions ______________________: selecting and highlighting certain aspects of a situation while ignoring other aspects Copyright © 2018 Pearson Education, Ltd. All Rights Reserved Cutting-Edge Decision Making Technology has changed the ability of managers to access information. Two technology driven cutting-edge aides to decision making are: – Design thinking: approaching management problems as designers approach design problems – Big data and Artificial Intelligence: big data refers to huge and complex data sets now available. Big data has opened the door to widespread use of artificial intelligence (AI) – Artificial Intelligence (AI) – uses computing power to solve complex problems Copyright © 2018 Pearson Education, Ltd. All Rights Reserved  END Copyright © 2018 Pearson Education, Ltd. All Rights Reserved