business management chapter 9-1 and 9-2

Simon proposed two concepts that were instrumental in shaping the administrative model:

- bounded rationality - satisficing

The approach managers use to make decisions usually falls into one of three types:

- classical model - administrative model - political model

characteristics of classical model

- clear cut problems and goals - condition of certainty - full information about alternatives and their outcomes - rational choice by individual for maximizing outcomes

examples of nonprogrammed decisions: (decisions to:)

- develop a new product or service - acquire a company - create a new division - build a new factory - enter a new geographical market - relocate headquarters to another city

Other programmed decisions concern the types of skills required to:

- fill certain jobs - reorder point for manufacturing inventory - selection of freight routes for product deliveries

managers may often walk a fine line between two extremes:

- on the one hand, making arbitrary decisions without careful study - on the other, relying obsessively on rational analysis

Managers have information on:

- operating conditions - resource costs - constraints and each course of action and possible outcome

characteristics of political model

- pluralistic; conflicting goals - condition of uncertainty or ambiguity - inconsistent viewpoints; ambitious information - bargaining and discussion among coalition members

Management decisions typically fall into one of two categories:

- programmed - nonprogrammed

Good decision making is a vital part of good management because decisions determine how the organization:

- solves problems - allocates resources - accomplishes its goals

The choice of model depends on:

- the manager's personal preference - whether the decision is programmed or nonprogrammed - the degree of uncertainty associated with the decision

characteristics of administrative model

- vague problem and goals - condition of uncertainty - limited information about alternatives and their outcomes - satisficing choice for resolving problem using intuition

Good intuitive decision making is based on:

an ability to recognize patterns at lightning speed

descriptive

an approach that describes how managers actually make decisions in complex situations rather than dictating how they should make decisions according to a theoretical ideal

intuition

an aspect of administrative decision making that refers to a quick comprehension of a decision situation based on past experience but without conscious thought

coalition

an informal alliance among managers who support a specific goal or solution

wicked decisions

associated with conflicts over goals and decision alternatives, rapidly changing circumstances, fuzzy information, unclear links among decision elements, and the inability to evaluate whether a proposed solution will work

bounded rationality

means that people have the time and cognitive ability to process only a limited amount of information on which to base decisions

For wicked problems, there often is:

no "right" answer

Managers in every industry face:

nonprogrammed decisions every day

The classical model of decision making is considered to be:

normative

uncertainty

occurs when managers know which goals they want to achieve, but information about alternatives and future events is incomplete

the administrative model relies on assumptions that differ from those of the classical model and focuses on:

organizational factors that influence individual decisions

The classical model is most useful when applied to:

programmed decisions and to decisions characterized by certainty or risk because relevant information is available and probabilities can be calculated

a new trend in decision making is referred to as:

quasirationality

Numerous studies have found that effective managers use a combination of:

rational analysis and intuition in making complex decisions under time pressure

because managers do not have the time or cognitive ability to process complete information about complex decisions:

they must satisfice

In some situations, managers involved in a decision create ambiguity because:

they see things differently and disagree about what they want

Many nonprogrammed decisions are related to strategic planning because:

uncertainty is great and decisions are complex

One primary difference between programmed and nonprogrammed decisions relates to the degree of:

uncertainty, risk, or ambiguity that managers deal with in making the decision

a highly ambiguous situation can create what is sometimes called a:

wicked decision problem

the administrative model of decision making is based on the work of:

Herbert A. Simon

decision

a choice made from available alternatives

nonprogrammed 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

example of a programmed decision

The decision to reorder paper and other office supplies when inventories drop to a certain level

ambiguity

a condition in which the goals to be achieved or the problem to be solved is unclear, alternatives are difficult to define, and information about outcomes is unavailable

programmed decisions

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

classical model

a decision-making model based on the assumption that managers should make logical decisions that are economically sensible and in the organization's best economic interest

administrative model

a decision-making model that includes the concepts of bounded rationality and satisficing and describes how managers make decisions in situations that are characterized by uncertainty and ambiguity

coalition building

a manager who supports a specific alternative, such as increasing the corporation's growth by acquiring another company, talks informally to other executives and tries to persuade them to support the decision

Without a coalition:

a powerful individual or group could derail the decision-making process

certainty

a situation in which all the information the decision maker needs is fully available

Decision making involves effort both:

before and after the actual choice

quasirationality

combining intuitive and analytical thought

Managers in different departments often have different priorities and goals for the decision, which can lead to:

conflicts over decision alternatives

many problems have no clear-cut solution, but managers rely on:

creativity, judgment, intuition, and experience to craft a response

intuition plays an increasingly important role in:

decision making

in the political model:

decisions are complex and involve many people, information is often ambiguous, and disagreement and conflict over problems and solutions are normal

Every organization grows, prospers, or fails as a result of:

decisions made by its managers

the administrative model is considered to be:

descriptive

Ambiguity is by far the most:

difficult decision situation

factors that may affect a decision, such as price, production costs, volume, or future interest rates, are:

difficult to analyze and predict

Ambiguity is what students would feel if an instructor created student groups and told each group to complete a project but:

gave the groups no topic, direction, or guidelines whatsoever

Research into decision-making procedures has found rational, classical procedures to be associated with:

high performance for organizations in stable environments

administrative and political decision-making procedures and intuition have been associated with:

high performance in unstable environments in which decisions must be made rapidly and under more difficult conditions

Another aspect of administrative decision making is:

intuition

The ideal, rational approach of the classical model is often unattainable by real people in real organizations, but the model has value because:

it helps decision makers be more rational and not rely entirely on personal preference in making decisions

Intuitive decision making is not arbitrary or irrational because:

it is based on years of practice and hands-on experience

Many people assume that making a choice is the major part of decision making, but:

it is only a part of it

with satisficing, the decision maker can't:

justify the time and expense of obtaining complete information

managers continuously perceive and process information that they may not consciously be aware of, and their base of knowledge and experience helps them:

make decisions that may be characterized by uncertainty and ambiguity

In difficult situations, such as those characterized by nonprogrammed decisions, uncertainty, and ambiguity, managers are typically unable to:

make economically rational decisions even if they want to

Managers often engage in coalition building for:

making complex organizational decisions

The third model (political) of decision making is useful for:

making nonprogrammed decisions when conditions are uncertain, information is limited, and there are manager conflicts about what goals to pursue or what course of action to take

risk

means that a decision has clear-cut goals and good information is available, but the future outcomes associated with each alternative are subject to chance

normative

means that it defines how a manager should make logical decisions and provides guidelines for reaching an ideal outcome

Programmed decisions are made in response to:

recurring organizational problems

satisficing

refers to choosing the first alternative that satisfies minimal decision criteria, regardless of whether better solutions are presumed to exist

Whereas programmed decisions can be made in situations involving certainty, many situations that managers deal with every day involve at least some degree of uncertainty and:

require nonprogrammed decision making

few decisions are certain in the real world; most contain:

risk or uncertainty

Every decision situation can be organized on a scale according to:

the availability of information and the possibility of failure

the administrative model recognizes:

the human and environmental limitations that affect the degree to which managers can pursue a rational decision-making process

decision making

the process of identifying problems and opportunities and then resolving them

The political model closely resembles:

the real environment in which most managers and decision makers operate

The growth of big data techniques has expanded:

the use of the classical approach

Managers can sometimes make the wrong decision, even when:

their intentions are right