Foundation of Decision Making Ch: 4

7/28/2019 Foundation of Decision Making Ch: 4

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Fundamentals of Management: 4-1 Gao Junshan, UST Beijing

Chapter 4

Foundations of Decision Making


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Where We Are

Part 1 Introduction

Part 2 Planning

Part 3 Organizing

Part 4 Leading

Part 5 Controlling

Part 2 Planning

Chapter 3

Foundations of Planning

Chapter 4


Chapter 3

Foundations of Planning

Chapter 4



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Chapter Guide

Process of decision making Importance

The 8 step process Quantitative analysis tools

Assumptions on rationality Rational model of decision making

Modification of the rational model

Decision making in real world


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Decision-making process: importance



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An example of the decision-making process

Identifying

a Problem

Identifying

Decision Criteria

Allocating Weights

to Criteria

I need to buy

a new car.

Price

Interior Comfort

Durability

Repair Record

Performance

Price

Interior Comfort

Durability

Repair Record

Performance

10

8

6

4

2

Decision-making process: car buying example


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Decision-making process: car buying example

Developing

Alternatives

Analyzing

Alternatives

Selecting

an Alternative

Implementing

the Choice

The Toyota

is the best.

Ford

Jeep

Mazda

Dodge

Audi

Isuzu

Chevy

Price

Comfort

Durability

Repair Record

Performance

Toyota

ChevyIsuzuAudiDodge

MazdaJeepFordToyota

Appraising

Decision Results


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Problem Identification

Solving the wrong problem perfectly is no better

than do nothing for the right problem

Problem is identified by comparing the current

state with some standards that represent a desired

state of affaires:

Past performance, previously set goals, performance ofother units/organizations

Problem identification is subjective in nature

Decision-making process: step summary


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Decision Criteria

They reflect the factors that managers think

important in making the choice

They are not equally important

A simple approach to deal with different

criteria is to assign them different weights

Judgments are involved in selecting criteriaand assigning weighs



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Analyzing alternatives




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Selecting an alternative




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Implementation and Evaluation

Selecting the best choice based on the analysis

Putting into the decision into action includes

Communicating with those to be affected and

Gaining their commitment of support

Participation of decision making brings

enthusiasms

Evaluation of the decision result is an importantphase of decision making process and part of the

controlling function



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Chapter Guide

Process of decision making

Assumptions on rationality

Rational model of decision making

Creativity

Modification of the rational model Decision making in real world


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Rational Model of Decision Making

Decision choices are consistent, valuemaximizing within the specified constraints

Decision makers remain logical and objective

Outcomes of all alternatives are known and

accurate comparison of them can be made

MazdaJeepFordToyota

Rationality assumptions: rational model



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Becoming Creative

Think of yourself as creative

Pay attention to your intuition

Move away from your comfort zone

Engage in activities that put you outside your comfort zone

Seek a change of scenery

Find several right answers

Play your own devils advocate

Believe in finding a workable solution

Brain storming with others

Turn creative ideas into action



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Real WorldDecisional Conditions

Certainty UncertaintyRisk




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In the real world managers make rational

choice under the these constraintsUncertainty of environments

Incomplete information

Capabilities to process

massive information Time and cost

Rationality assumptions: modification of rational model



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A Search Process to Satisfice

Ascertain

the Need

for a Decision

Simplify

the Problem

Set

Satisficing

Criteria

Identify a

Limited Set

of Alternatives

Compare

Alternatives

Against Criteria

Expand

Search for

Alternatives

Select the

First Good

Enough Choice

A Satisficing

Alternative

Exists

Yes

No



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Simon was a pioneer of the development of computer artificial

intelligence. In economics, he contended that the theory of economic

man, which argues that the individual invariably chooses a course that

will maximize personal benefits, failed to account for the inherent

uncertainty of human action. His highly original work on decision-

making in such books as Administrative Behavior(1947), earned him the

Nobel Memorial Prize in Economic Sciences in 1978. Simon's other

books include Scienti f ic Discovery(1987).

From Columbia Electronic Encyclopedia, 6th Edition

Simon, Herbert Alexander

19162001

American social scientist and economist



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Chapter Guide

Process of decision making

Assumptions on rationality

Decision making in real world Types and styles of decision making

Common errors in decision making

Decision making in groups

Cultural factors


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How Do Problems Differ?

Programmed

Decisions

NonprogrammedDecisions

Well-

Structured

PoorlyStructured

Decision making in reality: types and style


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Making

programmed

Decisions




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Escalation of

Commitment

RepresentativeHeuristic

AvailabilityHeuristic

Common Errors

in Decision Making

Decision making in reality: errors and creativity


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Information Technology to Assist

Decision Makings Expert system

Software that acts like an expert in analyzing and solving

ill-structured problems

Neural network

Software that

is designed to imitate

the structure of brain

cells and connections

among them

Decision making in reality: errors and creativity



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Group Decision Making

More information

More alternatives

Increased acceptance

Legitimacy

Time-consuming

Minority domination

Pressures to conform

Unclear responsibility

Advantages Disadvantages

Decision making in reality: decision making in groups


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Evidence of Groupthink




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Techniques to ImproveGroup Decision

Making

Brainstorming

Nominal GroupTechnique

Electronic

Meetings



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NationalCulture and

Decision Making

Degreeof Risk

DecisionStyle

Decision making in reality: cultural factors


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Hofstedes Dimensions of National Culture

Decision making in reality: cultural factors (see Chap 2, p47)

See: G. Hofstede, Culture Consequences: Internat ional Dif ferences in Work

Related Values(Beverly Hills, CA: Sage Publications, 1980), pp. 2526; and

Hofstede, The Cultural Relativity of Organizational Practices and Theories,

Journ al of Internat ional Business Studies(Fall 1983), pp. 7589.



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Decision making in reality: cultural factors



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Chapter Summary



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Summary in numbers

8 steps of decision making process

7 assumptions of rational model

4 realities leading to bounded rationality

4 decision styles (in 2 dimensions)

4 evidences of groupthink

4 measures of Hofstede culture difference

3 levels of uncertainty

3 common ways of programmed decisions

3 common errors of decision making 3 elements of creativity

3 techniques to improve group decision making

2 types of decision problem vs. 2 types of decisions


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Fundamentals of Management: 4 43 Gao Junshan UST Beijing

Conducting Effective Meeting

Prepare and distribute an agenda well in advance of

the meeting

Consult with participants before the meeting to

ensure proper participation

Establish specific time parameters for the meeting;specify when it will start and end.

Maintain focused discussion during the meeting

Encourage and support participation by all

members

Encourage the clash of ideas discourage the clash of personalities

Bring closure by summarizing accomplishments

and allocating follow-up assignments

Management skills: Effective meeting

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Foundation of Decision Making Ch: 4