Critical Thinking and Decision-Making Processes. Overview Decisions are made in an atmosphere in...
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ADVANCED ORGANIZATIONAL MANAGEMENT Chapter 1 Critical Thinking and Decision-Making Processes
Critical Thinking and Decision-Making Processes. Overview Decisions are made in an atmosphere in which there is uncertainty, risk, time pressure, imperfect
Overview Decisions are made in an atmosphere in which there is
uncertainty, risk, time pressure, imperfect information and a lack
of knowledge as to responses. Decision making is a part of ALL the
management functions: planning, organizing, leading, and
controlling; Focus on this chapter: decisions made in the name of
the organization by managers.
Slide 3
A.Organizational Decision Making Managers primary function =
decision makingthe process of identifying and solving problems
creatively; making appropriate and rational decisions! 1.Theories
of Managerial Decision Making A. Classical theory B. Behavioral
(administrative) theory
Slide 4
A.Organizational Decision Making (contd) A. Classical theory: *
represents an ideal model, with maximizing outcomes as a primary
goal; * maximizing = process of making decisions that is aimed at
realizing the best possible outcome on one dimension seeking the
best answer! Used with non-programmed decisions * considered the
normative model defines how a decision maker should make decisions
B. Administrative theory: * describes how managers actually make
decisions with uncertain outcomes where satisficing is
necessary
Slide 5
A.Organizational Decision Making (contd) Satisficing: * manager
adopts the solution that minimally meets the objectives, often
found in the first acceptable option that arises; * alternatives
are not studied much; * commonly used and appropriate with
programmed and recurring decisions Example: Purchasing software
without reviewing whether the same needs exist this year as last
year.
Slide 6
A.Organizational Decision Making (contd) Optimizing: * involves
the selection of the BEST alternative from a range of options that
have been evaluated within existing time/price constraints; *
involves the use of the classical decision-making model more than
the other two types. Example: Selecting a particular brand of
computers to buy for use within the entire office from a range of
six major options and within the time allotted.
Slide 7
A.Organizational Decision Making (contd) Characteristics of
Classical Theory Managers are expected to: * gather information *
examine it objectively * consider all alternative solutions * make
an appropriate choice of alternatives leading to the best possible
outcome * managers who are left-brain thinkers tend to arrive at
logical and analytical decisions and are stronger advocates of the
classical theory
Slide 8
A.Organizational Decision Making (contd) Identification of the
problem clearly stated/defined Presence of certainty amount of risk
is evident and easily determined Information about alternatives
full set of information about each alternative available and
expected outcomes are determined Maximization of outcomes direct
application of classical theory results in rational choice of
alternatives in relation to the maximization of outcomes Goal
attempt to make the ideal decision
Slide 9
A.Organizational Decision Making (contd) Characteristics of
Behavioral (administrative) Theory based on work of Herbert A.
Simon; how managers actually make decisions in business situations
Model incorporates two basic concepts: (1) bounded rationality and
(2) satisficing * managers who are right-brain thinkers tend to
rely more on intuitive and creative pursuits and more apt to follow
a behavioral model
Slide 10
A.Organizational Decision Making (contd) Identification of the
problem problem exists and is identified but difficulty in
determining what it is; vagueness Presence of uncertainty and
intuition exists because there is only incomplete information
available; sometimes manager must use intuition, based on personal
experience Information about alternatives limited information
available about alternative solutions and outcomes Satisficing
decision making - managers select the alternative solution that
satisfies minimal decision criteria and seems good enough
Slide 11
A.Organizational Decision Making (contd) Classical procedures
associated with high performance in stable environment Behavioral
procedures associated with high performance in unsuitable
environments where decisions made under more complex and difficult
conditions within a short time span
Slide 12
A.Organizational Decision Making (contd) 2. Two Types of
Decisions to be Made Programmed: * decisions made
routinely/recurring basis * most often do not require huge
expenditures * less complex in nature (buying copy paper/stocking
the supply cabinet) Nonprogrammed: * have no precedents/situations
not dealt with previously * have no rules, procedures or policies
for manager to follow
Slide 13
A.Organizational Decision Making (contd) 3. Personal v.
Organizational Decisions follow proper protocol to make sure the
two areas do not collide! 4. Business Decisions * leaders are
expected to act in a totally rational manner * moral responsibility
of management making decisions that affect the work lives of others
* emotions and intuition enter into the making of business
decisions
Slide 14
A.Organizational Decision Making (contd) * need for rational
behavior follow a well- established logical process * most
decisions combine objectivity and subjectivity * use of
decision-making aids - computers - statistics - decision trees
Slide 15
B. Critical Thinking Definition: means using evidence and
reason to evaluate claims, dilemmas, or choice options * rational
decision making requires critical thinking * unique, unanticipated,
not encountered before requires a more detailed process to define,
analyze and solve nonprogrammed decisions 1.Scientific Method steps
of critical thinking; method of research follows scientific rules
that knowledge can be obtained in an unbiased manner
Slide 16
B. Critical Thinking (contd) 2. Logical Reasoning Using the
Scientific Process a. Identifying/defining problem most important
step! * reasons for failure to identify real causes: 1) haste;
2)work pressure; 3)discomfort with ambiguous, vague and ill-defined
situations * results of failure to identify real cause b. Gathering
information about the problem investigate fully the
circumstances
Slide 17
B. Critical Thinking (contd) c. Developing alternative
solutions * need for clear objectives clear statement of the
objective must be developed * need for creative solutions
brainstorming = technique designed to help individuals become freer
in exercising their creativity - brainwriting = individuals write
down their ideas independently; group reviews and critiques each
idea
Slide 18
B. Critical Thinking (contd) * need for alternative scenarios
an analytical method with the advantage being the ability of the
manager to examine multiple possibilities rather than selecting one
path to follow d. Evaluating alternatives test of logic requires
that alternatives be evaluated according to same set of standards *
decision criteria stated in quantitative or qualitative terms 1.
statistical analysis the term statistics is used generally to mean
DATA (characteristics) for a sample (subset) of a population;
statistical analysis is a set of methods or techniques for
collecting, organizing and interpreting the data
(graphs/tables)
Slide 19
B. Critical Thinking (contd) The way data data are displayed
can aid the reader to derive meanings from the data: * Graphs data
organized and presented in terms of: 1) most common plot, or 2)
total volume per time period * Tables data organized into arrays by
chronology, size, location or some other characteristic
Slide 20
B. Critical Thinking (contd) * Inferential statistics provide
techniques for calculating the odds, or probabilities that certain
events will happen * Payoff tables or matrices show results of a
comparison of different alternatives; arranges information so that
comparisons of outcomes can be examined simultaneously * Computers
have made the preparation of payoff tables and matrices a much
simpler process (Fig. 1-3)
Slide 21
B. Critical Thinking (contd) 2.Operations research includes a
wide range of mathematical formulas and techniques for analyzing a
complex decision problem * linear programming used to find the best
answer to situations where many known elements may be put together
in different combinations that yield different profits
3.Qualitative factors are those which cannot be measured directly
in quantitative terms
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B. Critical Thinking (contd) a. certainty all possible
alternatives must be known, direct and predictable methods and all
possible outcomes must be known * Question in the realm of
certainty = What is the least expensive way to ship a package from
point A to point B? * uncertainty we have little or no information
about possible alternatives or outcomes * limited certainty
decision maker has some knowledge about some alternatives but has
little information about outcomes
Slide 23
B. Critical Thinking (contd) b. Risk where alternatives, the
possible outcomes, and the probabilities of those outcomes
occurring are known, the problem can be converted to one of
gambling or risk 4.Analytical tools for decision making * Decision
trees powerful method of graphing complex decision problems,
especially in which one is considering a sequence of decisions to
be made across a period of time * VROOM MODEL most common decision-
making tree developed by Vroom and Yelton
Slide 24
B. Critical Thinking (contd) * Decision making using groups T
group, Delphi technique, nominal group technique, quality circles,
brainstorming (all covered in Ch. 8) * Computerized decision making
decision support system (DSS) is an interactive computer-based
system that aids decision makers in solving problems e. Choosing an
alternative final step * use judgment as it is needed in addition
to quantitative data * consider possible negative consquences *
personal values bias, attitude toward risk, ambition, fear of
public opinion come into play in the act of choosing the
alternative
Slide 25
B. Critical Thinking (contd) * use of groups or committees for
implementation compromise, trading votes, filibustering are all
involved in the process of making important decisions *
implementing the decision (decision has been made) * monitoring the
decision - feedback: either positive (decision was appropriate) or
negative (poor decision) * internal and external environments
(evaluate outcomes)
Slide 26
B. Critical Thinking (contd) 3.Logical Thinking Patterns a.
Inductive reasoning defines the problem then moves to identify
factors or variables inherent to the problem; b. Deductive
reasoning thought processes move from a general premise toward
specific conclusions c. Comparison key is to use the same
procedures for comparing all objects or attributes being
investigated d. Causation most difficult thought process
Slide 27
C. Creative Thinking in Organizational Decision Making
CREATIVITY generation of new ideas; INNOVATION is the translation
of a new idea into a new product, service, method of production or
even a new organization Creativity and innovation need to be
encouraged and fostered by individuals and organizations.
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C. Creative Thinking in Organizational Decision Making (contd)
1. Individual creativity manager has the awesome task of
identifying people within the organization who are creative and
fostering that creativity *Highly creative people tend to be: -
more original in thought and ideas; - willing to shift from one
approach to another; - more flexible and less rigid with time,
resources; - more independent in their pursuit of solutions - more
apt to disobey orders that make no sense - more difficult to manage
(question authority)
Slide 29
C. Creative Thinking in Organizational Decision Making (contd)
2. Creative process in Organizations a. Idea generation variety of
sources: outside consultants, employees, new employees, etc. b.
Idea development or problem solving supported or inhibited c.
Implementation of creative ideas high degree of integration is
required among units of an organization d. Monitoring of innovation
enables the organization to examine the results to see if further
research is needed