BADM 371 Chapter 4: Managing Decision Making

Decision Making

The act of choosing one alternative from among a set of alternatives

risk propensity

The extent to which a decision maker is willing to gamble when making a decision Managers who are willing to take risks are more likely than their conservative counterparts to achieve big successes with their decisions; they are also more likely to incur greater losses.

Satisficing

The tendency to search for alternatives only until one is found that meets some minimum standard of sufficiency

Evidence based management (EBM)

-A commitment to finding and using the best theory and data available at the time to make decisions -Rational perspectives on decision making have recently been reformulated under the concept of EBM.

steps in rational decision making

1) Recognize and define the decision situation 2) identify appropriate alternatives 3)evaluate each alternative in terms of its feasibility, satisfactoriness, and consequences 4) select the best alternative 5) implement the chosen alternative 6) follow up and evaluate the results of the chosen alternative

Five Principles of Evidence Based Management

1)Face the hard facts and build a culture in which people are encouraged to tell the truth, even if it's unpleasant. 2)Be committed to "fact-based" decision making—which means being committed to getting the best evidence and using it to guide actions. 3)Treat your organization as an unfinished prototype—encourage experimentation and learning by doing. 4)Look for the risks and drawbacks in what people recommend. 5)Avoid basing decisions on untested but strongly held beliefs, what you have done in the past, or uncritical "benchmarking" of what winners do.

bounded rationally

A concept suggesting that decision makers are limited by their values and unconscious reflexes, skills, and habits

state of risk

A condition in which the availability of each alternative and its potential payoffs and costs are all associated with probability estimates Decision making under conditions of risk is accompanied by moderate ambiguity and the chances of a bad decision.

state of uncertaintly

A condition in which the decision maker does not know all the alternatives, the risks associated with each, or the likely consequences of each alternative To make effective decisions in these circumstances, managers must acquire as much relevant information as possible and approach the situation from a logical and rational perspective.

State of certainty

A condition in which the decision maker knows with reasonable certainty what the alternatives are and what conditions are associated with each alternative -few organizational decisions are made under conditions of true certainly

Programmed decisions

A decision that is relatively structured or recurs with some frequency (or both) ex: staring your car in the morning

Nonprogrammed decisions

A decision that is relatively unstructured and occurs much less often than a programmed decision ex: choosing a vacation destination

interacting groups or teams

A decision-making group or team in which members openly discuss, argue about, and agree on the best alternative

adminstrative model

A decision-making model that argues that decision makers (1) use incomplete and imperfect information, (2) are constrained by bounded rationality, and (3) tend to "satisfice" when making decisions The administrative model can be used by managers to develop a better understanding of their inherent biases and limitations.

Delphi group

A form of group decision making in which a group arrives at a consensus of expert opinion

classical decision model

A prescriptive approach to decision making that tells managers how they should make decisions; it assumes that managers are logical and rational and that their decisions will be in the organization's best interests The classical model explains how managers can at least attempt to be more rational and logical in their approaches to decisions

groupthink

A situation that occurs when a group or team's desire for consensus and cohesiveness overwhelms its desire to reach the best possible decision

nominal group

A structured technique used to generate creative and innovative alternatives or ideas

coalition

An informal alliance of individuals or groups formed to achieve a common goal -The common goal is often a preferred decision alternative. -The impact of coalitions can be either positive or negative. -Managers must recognize when to use coalitions, how to assess whether coalitions are acting in the organization's best interests, and how to constrain their dysfunctional effects.

Decision-making process

Recognizing and defining the nature of a decision situation, identifying alternatives, choosing the best alternative, and putting it into practice -The word "best" implies effectiveness. -Effective decision making requires that the decision maker understands the situation driving the decision.

escalation of commitment

When a decision maker stays with a decision even when it appears to be wrong

Intuition

an innate belief about something without conscious consideration