Management chapter 6

Ambiguity

*most difficult decision situation goals to be achieved or the problem to be solved is unclear, alternatives are hard to define, and information outcomes are unavailable

What factors contribute to poor decision making?

- Conditions change, the the future environment may change - information may be incomplete - colleagues other opinions

The Political Model for Decision Making

- Conflicting goals (Pluralistic) - Condition of Uncertainty / Ambiguity - Inconsistent viewpoints / ambiguous information - bargaining and discussion among coalition members

The Classical Model of Decision Making (2)

- clear cut problems + solutions - condition of certainty - full information about alternatives + their solutions - rational choice by individual for maximizing out comes

Behavior Decision Making Style:

- deep concern for others as individuals - like to talk to people one on one, understand their feelings about the problem, and consider the effect of a given decision on them - place a high value on the personal development of others and may make decisions that help others achieve their goals

Directive Decision Making Style:

- like to be efficient and rely on existing rules or procedures to come up with simple, clear-cut solutions to problems. - often make decisions quickly because they do not like to deal with a lot of information and may consider only one or two alternatives.

Analytical Decision Making Style:

- like to use as much data as possible and carefully consider many alternatives to resolve complex solutions in the best way possible. - They often base their decisions on objective, rational data from management control systems and other sources.

The Classic Model of Decision Making

- managers will rationally analyze all the information relevant to a situation in order to make decisions, NOT using intuition - Managers determine all possible alternatives and the potential outcomes of each choice they could make. - Managers seek to achieve agreed-upon goals and solve precisely defined problems. - Managers use logic to evaluate options and maximize the attainment of organizational goals.

The Administrative Model of Decision Making

- vague problems + goals - Condition of uncertainty - Limited information about alternatives + their outcomes - Satisfying choice for resolving problem using intuition

non-programmed decisions

A choice made in response to a situation that is unique, is poorly defined and largely unstructured, and has important consequences for the organization. - high uncertainity

programmed decision

A decision made in response to a situation that has occurred often enough to enable managers to develop decision rules that can be applied in the future. -low uncertainity

Descriptive Model of Decision Making

How people actually make decisions. (usually under less than ideal conditions)

evidenced based decision making

Making decisions based on systematically finding, evaluating, and applying the best relevant evidence to a clearly defined problem (avoid making decisions based off of opinions, intuition, and initial impressions)

(example) L Brands, which owns Victoria's Secret, had to decide what to do with the struggling division. The decision executives at L Brands picked a new CEO for the company. Making the decision about who to pick for this position is a:

Non-programmed Decision. In making the decision of who to hire, L Brands executives had to consider multiple options, which made the decision poorly defined. In addition, the decision had important consequences for the company: Picking the wrong CEO could be very costly.

Certainty

Outcomes are well known, decision making is routine and follows rules

(example) Last spring, your spouse surprised you with a puppy. Fortunately, the puppy (named Loki after the Norse god of mischief) gets along well with your 17 cats. The decision you make every day about whether or not to feed Loki is a:

Programmed Decision. The rule that governs your actions is "Feed the dog every day." You really don't have a choice about whether or not to feed your dog—it has to be done. It's part of being a responsible pet guardian.

(example) Margarita is a manager at The New York Times who has lost five of her employees during the last year. Now she has to make a decision about how to retain the employees on her team. Having recently taken a class on decision making, Margarita decides to follow the six-step process for deciding what to do. What problem is Margarita most likely to face during the selection of desired alternative step in the decision-making process?

Satisficing, or choosing the first solution that works, not the best solution

Normative Model of Decision Making

a model that defines ideal performance under ideal circumstances when making decisions or solving problems

When Google created its China-based search engine www.google.cn, they did not foresee eventually abandoning it because of censorship issues with the Chinese government. Google created www.google.cn because country-based search engines, such as France-based www.google.fr and Greece-based www.google.gr, had been profitable for the company in the past. Which of the following biases could have been in effect when Google made the initial decision to launch www.google.cn?

a. Being influenced by emotions b. Perpetuating the status quo c. Initiating the sunk cost effect d. Justifying past decisions answer : B

Anastasia, a regional manager, started a project three years ago while riding high on the success of several other projects that had earned her a name within the company and accelerated her career path. Using her early successes as free rein to move forward with some risky decisions, she found after three years that her decisions were not paying off and the project was in jeopardy. Which of the following biases does Anastasia exhibit in this scenario?

a. Being influenced by initial impressions b. Justifying past decisions c. Seeing what one wants to see d. Being overconfident answer: D

Javier is the manager at a software company. His team has been tasked with finding a solution for some annoying bugs found in their new spreadsheet software. Javier knows that there is an elegant solution, but the time and effort it will take to implement would push back the software release significantly, so he works with his team to come up with a faster, less elegant solution that can be implemented in time for the software to be released on schedule. What type of decision is Javier making?

a. Intuition b. Bounded rationality c. Satisficing d. Brainstorming answer: C

Which of the following is an assumption underlying the political model of decision making?

a. It assumes that decision makers operate to accomplish goals that are known and agreed on. b. It assumes that decisions are the result of bargaining and discussion among coalition members. c. It assumes that managers have the time, resources, and mental capacity to identify all dimensions of the problem at hand. d. It assumes that decision makers are completely rational and use logic to assign values, order preferences, and evaluate alternatives. answer b

Which of the following is the first step in the managerial decision-making process?

a. Recognition of a decision requirement b. Development of alternative solutions to a problem c. Selection of the desired alternative to a problem d. Evaluation and feedback answer : A

Allison, a manager, must make decisions about a problem she is facing in her current project. She has identified the decision requirement and has analyzed the causes of the problem. Which of the following actions should she take next?

a. Select a desirable solution to the problem to engage her company's employees b. Generate possible alternative solutions to the problem c. Implement the eco-friendliest solution to the problem d. Evaluate her course of action and ask for realistic feedback answer :B

Which of the following is a difference between the classical model of decision making and the administrative model of decision making?

a. The administrative model assumes that managers settle for a maximizing solution, whereas the classical model assumes that managers settle for a satisficing solution. b. The classical model is most useful when applied to nonprogrammed decisions, whereas the administrative model is most useful when applied to programmed decisions. c. The administrative model is considered normative, whereas the classical model is considered descriptive. d. The classical model defines how managers should make decisions, whereas the administrative model defines how managers actually make decisions. answer : d

Reema is the manager of a high end restaurant. She likes to gather a broad amount of information, discuss the problems and potential solutions with her staff and other managers, and come up with creative ways to solve problems that keep her restaurant on the cutting edge of the food service industry. Which of the following decision styles does Reema use?

a. The analytical style b. The directive style c. The behavioral style d. The conceptual style answer : D

Emmanuel, a manager, takes a deep interest in the personal development of his team members. Therefore, whenever a problem arises, he talks to them one on one, understands their feelings about the problem, and considers the impact of a particular decision on them. Which of the following decision styles does Emmanuel use?

a. The directive style b. The behavioral style c. The analytical style d. The authoritative style answer: B

Which of the following is a difference between programmed decisions and nonprogrammed decisions?

a. Unlike nonprogrammed decisions, programmed decisions are made in response to situations that are unique and largely unstructured. b. Unlike programmed decisions, nonprogrammed decisions concern the types of skills required to fill certain jobs. c. Unlike nonprogrammed decisions, programmed decisions are made in response to recurring organizational problems. d. Unlike programmed decisions, nonprogrammed decisions concern the maintenance of a regular supply of raw materials. answer: c

Amanda, the CEO of a company, knows that constructive conflict can help bring problems to the forefront and develop innovative solutions for them. When she faced the conflict of whether or not to merge with a rival company, she brought the issue to the notice of a select group of employees and encouraged them to discuss the advantages and disadvantages of the merger. She assigned Steve, the vice president of the company, the task of challenging each and every assumption and assertion made by the group. In the given scenario, Steve played the role of a _____.

a. devil's advocate b. headhunter c. whistle-blower d. boomerang employee answer : A

In a food manufacturing company, the decision to reorder raw materials when inventories drop to a certain level is an example of a(n) _____.

a. nonprogrammed decision b. programmed decision c. unique decision d. aberrant decision answer: b

GM's decision to continue to manage eight brands, despite flagging sales and customer loss, is most strongly an example of ________.

a. perpetuating the status quo b. being overconfident c. being influenced by initial impressions d. being influenced by emotions answer : A

Dean owns a bakery that creates customized cakes for business events and weddings. When he faced a problem with the execution of the design for a wedding cake, he assembled his team members in a room, explained the problem to them, and asked them to spontaneously suggest ways to resolve the problem. Dean was surprised by the number of innovative solutions he received from his team members. In the given scenario, Dean used a technique called _____.

a. point-counterpoint b. diagnosis c. groupthink d. brainstorming answer : D

Boeing's decision to build the 707 after World War II would be considered a _______.

a. programmed decisions b. ambiguous decisions c. aberrant decisions d. nonprogrammed decisions answer : D

Overconfidence Bias

an individual places too much emphasis on their own knowledge. An effective way to overcome the overconfidence bias is by slowing down your decision making and looking at the facts of the situation rather than relying on her own knowledge and opinions.

Quasi-rationality (decision making)

combining intuitive and analytical thought (balanced approach to decision making)

The most effective managers:

tend to change decision styles as appropriate to the situation. While most managers have a dominant style, they can also change styles or use a mixture of styles to best make different kinds of decisions.

Decision making

the process of identifying problems and opportunities and then resolving them

Groupthink

the tendency of members in a group to express contrary opinions - harmony is more important than quality in this situation, which is not desired.

Risk propensity

the willingness to undertake greater risk when there is an opportunity of gaining a greater payoff