Ch 8 2202-- 8-1,8-2,8-3

political forces in decision making

-can play major role in how decisions are made -coalition- an informal alliance of individuals or groups formed to achieve a common goal (usually a decision alternative)

Rational approach provides an analytical... whereas the behavioral approach provides a

-framework for making decisions -moderating influence

Ethics and Decision Making

-what constitutes right and wrong behavior Individual ethics combine with the organization's ethics to create managerial ethics

Evaluation process usually includes (3)

1) Describing the anticipated outcomes (benefits) of each alternative 2) Evaluating the anticipated costs of each alternative 3) Estimating the uncertainties and risks associated with each alternative

In addition to the behavioral elements in the administrative model, managers should also be aware of other forces

1- Political forces in decision making 2- intuition 3-escalation of commitment 4-risk propensity and decision making 5-ethics 6- prospect theory

The administrative model is characterized by (3)

1- the use of procedures and rules of thumb 2- sub optimizing 3- satisficing

Intuition

an innate belief about something without conscious consideration "feels right"

Next is to evaluate alternatives

assessing all possible alternatives in terms of predetermined decision criteria

rational decision making approach

assumes that managers follow a systematic, step- by-step process. -objective decision makers -having complete information

Crucial assumption of the administrative model is that decision makers operate with

bounded rationality rather than perfectly rationality assumed by the rational approach

Decision rule tells decision makers which alternative to

choose once they have predetermined information about the decision situation

important part of the choice phase is the consideration of

contingency plans- alternative actions that can be taken if the primary course of action is unexpectedly disrupted or rendered inappropriate

Administrative model of decision making

describes how decisions are made rather then how decisions should be made

Satisficing

examining alternatives only until a solution that meets minimal requirements is found

problem solving

finding the answer to a question

decisions made in organizations can be classified according to

frequency and to information conditions

purpose of problem identification is to

gather information relating to goal

Rational decision making process begins with a

goal for a particular situation

Suboptimizing

knowingly accepting less than the best possible outcome to avoid unintended negative effects on other aspects of the organization

Implementing the plan

post decision dissonance- closely related to cognitive dissonance -decision maker may seek to rationalize decision with new information

Then decision makers determine whether the problem represents a

programmed or a non-programmed decision

The frequency of recurrence determines whether a decision is

programmed or non-programmed

Rational approach strengths and weaknesses

pros -making a logical decision -analyze different alternatives and act on information not emotion cons -limited information (by costs constraints or time) -cant compare all alternatives -cant know all outcomes of each alternative

decision makers use some hybrid of the (3)

rational, behavioral, and integrated approaches to make decisions

risk propensity and decision making

risk propensity- is the extent to which a decision maker is willing to gamble when making a decision

Integrated approach suggests

that rather than generating all alternatives, the decision maker should try to go beyond rules of thumb and satisficing limitations and generate as many alternatives as time, money, and other practicalities of the situation allow.

Evidence based management

the commitment to identify and utilize the best theory and data available to make decisions

Final state of the rational decision making process is

the outcomes of the decision are measured and compared with the desired goal

Choosing an Alternative

usually most crucial step in the decision making process -Choosing option with highest payoff, benefits, risks, costs

when is appropriate decision rule used

whenever the same situation is encountered

5 basic principles of EBM

1. Face the hard facts, build culture to tell truth 2. Fact based decision making 3. treat organization as unfinished prototype (experimentation) 4. Look at risks and drawbacks in what people recommend 5. Avoid basing decisions on untested but strongly held beliefs, what you have done in past

decision making

Choosing among two or more alternatives.

condition of certainty

Manager knows what the outcomes of each alternative of a given action will be and has enough information to estimate the probabilities of various outcomes

Non-programmed decisions

Nonroutine decision making that occurs in response to unusual, unpredictable situations -poorly structured -no clear procedure

Escaltion of Commitment

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

Prospect theory and decision making

Prospect theory- Argues that when people make decisions under a condition of risk they are more motivated to avoid losses than they are to seek gains

programmed decision

Recurs often enough for a decision rule to be developed -highly structured (clear goals) -decision making procedure established -sources and channels of information are clearly defined

condition of risk

The decision maker cannot know with certainty what the outcome of a given action will be but has enough information to estimate the probabilities of various outcomes

condition of uncertainty

The decision maker lacks enough information to estimate the probability of possible outcomes

next step in making a non programmed decision is to generate

alternatives decision makers analyze the symptoms of the problem for clues or use intuition

bounded rationality

although individuals may seek the best solution to a problem, -the demands of processing all the information bearing on the problem, -generating all possible solutions, -and choosing the best solution are beyond decision maker capabilities