Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 3-0 Bateman Snell Management 5th Edition Competing in the New Era

Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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Bateman Snell

Management

5thEdition

Competingin theNew Era


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Part OneChapter 3 - Managerial Decision Making

Chapter OutlineCharacteristics of Managerial DecisionsThe Stages of Decision MakingThe Best DecisionBarriers to Effective Decision MakingDecision Making in GroupsManaging Group Decision MakingOrganizational Decision Making


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Learning ObjectivesLearning Objectives

After studying Chapter 3, you will know: the kinds of decisions you will face as a manager how to make “rational” decisions the pitfalls you should avoid when making decisions the pros and cons of using a group to make decisions the procedures to use in leading a decision-making group how to encourage creative decisions the processes by which decisions are made in organizations how to make decisions in a crisis


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Lack ofStructure

Risk

Conflict

Uncertainty

Characteristics Of Managerial Decisions



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Lack of structure programmed decisions - decisions encountered and made in

the pasthave objectively correct answersare solvable by using simple rules, policies, or numerical computations

nonprogrammed decisions - new, novel, complex decisions having no proven answers

a variety of solutions exist, all of which have merits and drawbacks

demand creative responses, intuition, and tolerance for ambiguity


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Characteristics Of Managerial Decisions (cont.)


Uncertainty and risk certainty - have sufficient information to predict precisely

the consequences of one’s actions uncertainty - have insufficient information to know the

consequences of different actionscannot estimate the likelihood of various consequences of their actions

risk - available information permits estimation of the likelihood of various consequences

probability of an action being successful is less than 100 percentgood managers prefer to avoid or manage risk


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Conflict opposing pressures from different sources occurs at two levels

psychological conflict - individual decision makers: perceive several attractive options perceive no attractive options

conflict between individuals or groups




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Identifying anddiagnosing

the problemGeneratingalternativesolutions

Evaluatingalternatives

Evaluatingthe decision

Implementingthe decision

Making thechoice

The Stages Of Decision MakingThe Stages Of Decision Making


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Stages Of Decision MakingStages Of Decision Making

Identifying and diagnosing the problem recognize that a problem exists and must be solved

problem - discrepancy between current state and past performance, current performance of other organizations, or future expected performance

decision maker must want to resolve the problem and have the resources to do so

Generating alternative solutions ready-made solutions - ideas that have been tried before

may follow the advice of others who have faced similar problem custom-made solutions - combining new ideas into creative

solutions


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Stages Of Decision Making (cont.)Stages Of Decision Making (cont.)

Evaluating alternatives determining the value or adequacy of the alternatives there are potentially more alternatives available than

managers may realize predict the consequences that will occur if the various

options are put into effect success or failure of the decision will affect the track record

of the decision maker contingency plans - alternative courses of action that can be

implemented based on how the future unfoldsrequired to prepare for different scenarios


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Making the choice maximize - a decision realizing the best possible outcome

greatest positive consequences and fewest negative consequences

greatest benefit at the lowest cost and the largest expected total return

satisfice - choose an option that is acceptable although not necessarily the best or perfect

compare the choice with the goal, not against other optionssearch for alternatives ends when an okay solution is found

optimizing - achieving the best possible balance among several goals


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Implementing the decision those who implement the decision must:

understand the choice and why it was madebe committed to its successful implementation

can’t assume that things will go smoothly during implementation

identify potential problemsidentify potential opportunities


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List the resources andactivities required toimplement each step

Estimate the time neededfor each step

Determine how things willlook when the decision

is fully operational

ImplementationPlan

Order the steps necessaryto achieve a fully

operational decision

Assign responsibility foreach step to specific

individuals

Steps In The Implementation PlanSteps In The Implementation Plan


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Evaluating the decision collecting information on how well the decision is working if decision appears inappropriate, the process cycles back to

the first stageThe best decision

nothing can guarantee a “best” decision must be confident that the procedures used are likely to

produce the best decision given the circumstancesvigilance - decision maker carefully and conscientiously executes all stages of decision making


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Barriers To Effective Decision Making

Barriers To Effective Decision Making

Psychological biases biases that interfere with objective rationality illusion of control - a belief that one can influence events

even when one has no control over what will happen framing effects - how problems or decision alternatives are

phrased or perceivedsubjective influences can override objective facts

discount the future - weigh short-term costs and benefits more heavily than longer-term costs and benefits

the avoidance of short-term costs or the seeking of short-term rewards may result in negative long-term consequences


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Barriers To Effective Decision Making (cont.)

Barriers To Effective Decision Making (cont.)

Time pressures today’s economy places a premium on acting quickly and

keeping pace in order to make timely and high-quality decisions one must:

focus on real-time informationinvolve people more effectively and efficientlyrely on trusted expertstake a realistic view of conflict

Social realities many decisions result from intensive social interactions,

bargaining, and politicking


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Potential Advantages

1. Larger pool of information

1. More perspectives and approaches

3. Intellectual stimulation

3. People understand the decision

5. People are committed to the decision

Decision Making In GroupsDecision Making In Groups

Potential Disadvantages

1. One person dominates

1. Satisficing

1. Groupthink - team spirit discourages disagreement

1. Goal displacement - newgoals replace original goals


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Leadership 1. Avoid domination 2. Encourage input 3. Avoid groupthink and satisficing 4. Remember goals

Effective GroupDecision Making

Constructive Conflict 1. Air legitimate differences 2. Stay task-focused 3. Be impersonal 4. Play devil’s advocate

Managing Group Decision MakingManaging Group Decision Making

Creativity 1. Brainstorm 2. Avoid criticizing 3. Exhaust ideas 4. Combine ideas


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Managing Group Decision MakingManaging Group Decision Making

Leadership style leader should attempt to minimize process-related problems leader should:

avoid dominating the discussion encourage less vocal members to express themselvesmitigate pressures for conformitystay alert to groupthink and satisficingprevent group from losing sight of the primary objective


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Managing Group Decision Making (cont.)


Constructive conflict a certain amount of constructive conflict should exist cognitive conflict - issue-based differences in perspectives or

judgmentsmost constructive type of conflictcan air legitimate differences of opinion and develop better ideas

affective conflict - emotional disagreement directed toward other people that is likely to be destructive

devil’s advocate - has the job of criticizing others dialectic - structured debate comparing two conflicting

courses of action


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Encouraging creativity creativity involves:

creation - bringing a new thing into beingsynthesis - joining two previously unrelated thingsmodification - improving something or giving it new application

to become creative one must:recognize creative potential in little opportunitiesobtain sufficient resourcesescape from work once in awhile and read widely

brainstorming - group generates ideas about a problemcriticism is withheld until all ideas have been proposed


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Organizational Decision MakingOrganizational Decision MakingConstraints on decision makers

organizations cannot do whatever they wishface various constraints on their actions

Models of organizational decision processes bounded rationality - decision makers cannot be truly rational

because:they have imperfect, incomplete information about alternativesthe problems they face are so complexhuman beings cannot process all the information to which they are exposed

time is limitedpeople in the organization have conflicting goals


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Constraints On Decision Makers Constraints On Decision Makers

MarketHuman

Financial

Constraints

LegalOrganizational


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Organizational Decision Making (cont.)


Models of organizational decision processes (cont.) incremental model - major decisions arise through a series of

smaller decisionspiecemeal approach to larger solutions

coalitional model - groups with differing preferences use power and negotiation to influence decisions

used when people disagree about goals or compete for resources garbage can model - a chaotic process leading to seemingly

random decisionsoccurs when people are unsure of their goals and what should be done


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Negotiations and politics negotiations necessary to galvanize the preferences of

competing groups and individuals organizational politics - people try to influence decisions to

promote their own interestsuse power to pursue hidden agendas

create common goals - helps to make decision making a collaborative rather than a competitive process

Decision making in a crisis stress and time constraints make decisions less effective should be prepared for crises in advance


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Plan For Crisis ManagementPlan For Crisis Management

Evaluation andDiagnostic Actions

CommunicationActions

StrategicActions

CrisisManagement

Technical andStructural Actions

Psychological andCultural Actions


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Emergent strategies the strategy that evolves from all the activities engaged in by

people throughout the organization result from dynamic processes in which people engage in

discovery, implement decisions, and reconsider the initial decision after discovering new things by chance

emergent strategies may start at any organizational level emergent strategies are generally the result of constructive

processes


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Choice

• Set objectives• Generate options

• Evaluate and selectacceptable, feasible,

suitable option

Discovery

• Systematic gathering• Analysis of the facts

• Monitoringoutcomes of

actions

Action

• Implementingchosen option• Correcting

deviations fromfrom plan

Emergent StrategiesEmergent Strategies

Documents

Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 3-0 Bateman Snell Management 5th Edition Competing in the New Era