Chapter 4

Regardless the method, the one selected must meet the criteria established in step 2 of the decision making model

if none of the alternatives meet this criteria, you return to step two or return to step 3. based upon rational judgement

Break even analysis

if you buy a carpet cleaner for 300 and rent it for 25 a day how long until you have broken even on your investment? allows calculation of the volume of sales or revenue that will result in a profit. level at which no profit or loss results.

At any step, you may have to return to a prior step to make changes

if you have not defined the problem accurately you may have to go back to the beginning.

innovation

implementation of a new idea. the tow important types of innovation are 1. product- new things or good or services 2. process- new way of doing things

analyze alternatives and select the most feasible

only after you gather evidence supported alternatives is when you analyze them and analytical thinking is an important skill job recruiters are looking for in candidates. In evaluating alternatives think forward and try to predict the possible outcome if each action on your stakeholders that will be affected by the decision.

control methods

should be developed while planning to measure and monitor decision outcomes. escalation of commitment- when we do not admit that we have made mistakes loss aversion

Non programmed decisions

significant decisions that arise in nonrecurring and non routine situations for which the decision maker should use the decision making model tend to take longer upper level more than lower level managers Significant nonrecurring and non routine longer time to make decisions

Weighing criteria

some criteria are more important than others. must criteria are essential want criteria can be weighed by importance

Setting criteria

specify the criteria for choosing an alternative solution to a problem as they set the level of performance criteria are the standards that an alternative must meet to be selected as the decision that will accomplish the objective helps maximize the decision

Incubation

take a break sleep on it your subconscious works on the problem and you may gain an insight into the solution.

identify the problem, define it, and determine the level of participation to use.

4-5 pg 106 example

Decision trees

a diagram of alternatives gives a visual picture of alternatives which makes it easier for some people to analyze them. info overload

Problem

a problem exists whenever objectives are not being met

distinguish symptoms from the cause of the problem

cause and effect relationship. by asking the right questions and listing the observable occurrences (symptoms) you can determine the cause of the problem only after knowing the symptoms

Creativity

creativity is a way of thinking that generates new ideas

Evaluation

evaluate the alternative to make sure the idea is practical

The creative process

giving people time and space to think helps creativity

Apple

one of the most creative and innovative companies in the world

Nominal grouping

process of generating and evaluating alternatives using a structured voting method 1. listening 2. recording 3. clarification 4. ranking 5. discussion 6. vote use in situations in which groups may be affected by disadvantages of domination global displacement conformity and group thinking bc it minimizes these effects department level round robin fashion

Decision making types

rational vs bounded

Setting objectives

setting clear objectives gets you to focus on the final result you want to accomplish drives decisions

technology can help with environmental sustainability problems

such as sewage treatments plants and in china where they are turning sea into fresh water.

Decision Making

the process of selecting a course of action that will solve a problem.

pros and cons analysis

you identify the advantages and the disadvantages (benefits vs costs)

Creativity and innovation killers

Barriers to changing and trying something different. "it is impossible" we have never done it it wont work it costs too much let us form a committee

Queuing theory

Focuses on waiting time. An organization can have any number of employees providing service to customers. balances the two costs of employees and customers

Reflective

Decision maker likes to take plenty of time to make decisions gathering considerable information and analyzing several alternatives positive: Does not make hasty decisions negative: they may procrastinate, lose opportunites, and waste valuable time and others resources

Consistent

Decision makers tend to make decisions without either rushing or wasting time they know when they have enough information and alternatives to make a sound decision tend to have the best record for making good i scored on the consistent side

When to use

Maximizing with rational decisions- the more complex and non programmed the decision- the higher the degree of risk and uncertainty. The more significant the decision outcome, the greater the need to spend time as maximizer conducting research with the aid of the decision making model to make a rational decision. Nike and signing athletes.

Decision making structure

Programed decisions non programmed decisions

When to use

Satisficing- often due to time pressure. the more programmed the decision the more certain the outcomes of the decision and the less important the decision outcome and the less research and use of the decision making model needed to make a satisfying decision. When dell does computers it cant think of all the countries, so it does the ones that other companies are currently using.

Decision making model

a six step process for arriving at a decision and involves 1. classify and define the problem or opportunity 2. set objectives and criteria 3. generate creative and innovative alternatives 4. analyze alternatives and select the most feasible 5. plan and implement the decision 6. control the decision

Generating creative and innovative alternatives

after the problem is defined and the objectives and criteria are set, you generate possible alternatives for solving the problem or exploiting the opportunity.

Define the problem

after you have classified the problem you must define it clearly

Problems with the classical model

all necessary info for optimal decision is not always known. Unable to use some info cognitive abilities information overload.

Big data

also a quantitative technique that is used with or rapidly replacing the other techniques.

Nike

also innovative changes fashion looks Nike ID

When making decisions we want to avoid using bad intuition a hunch gut feeling knowing suspicion or belief arrived at unconsciously without the use of a rational reasoning process

also known as winging it. do not use this because you can be deceived into making a bad decision as you can have biases and h ave false beliefs

Intuition

based upon rational judgement low risk decisions

Reflexive

decision maker likes to make quick decisions without taking the time to get the information that may be needed without considering alternatives positive- they are decisive and they do not procrastinate negative- making quick decisions can lead to waste and duplication you might want to slow down on really important decisions

Preparation

define the problem look at new angles use imagination do not limit yourself

Decision making styles

determine your preferred style

probability theory

enables the user to make decisions that take into consideration conditions of risk used to determine whether to expand facilities and to what size to select the most profitable investment portfolio and to determine the mount of inventory to stock take risks / likelihood of event into consideration

Set objectives and criteria

generally with simple programmed decisions the objectives and the criteria have been set. so do not complete steps 2 through 4 in the DMM. when it is non programmed you need to start with setting objectives.

Devils advocate approach

group members focus on defending a solution while others try to come up with reasons the solution will not work

Classify and define the problem or opportunity

half the decisions made by managers fail to solve the problems they are aimed at. this is due to not classifying and defining the problem correctly.

The delphi technique

involves using a series of confidential questionnaires to refine a solution this is used for a specific decision not in person

Big data

is the analysis of large amounts of quantified facts to aid in maximizing decision making. Algorithms and their related software data driven businesses make faster decisions and are more profitable still in infancy reveal patterns and opportunities that 99% of business-people would miss. being used to predict patterns and changes in everything from consumer behavior to the maintenance requirements and operating lifetimes of machinery google Microsoft and FB have been trying to figure this out GE Visa Six Spoke Twitter and FB figured out females were better targeted for marketing than males bc of this

cost benefit analysis

it is helpful to use this bc it compares the cost of implementing a decision to the benefits received should be a mix of EBM information and judgment

Plan, Implement the decision, and control

last two steps. 5. plan and implement decision 6. controlling.

Many employees come up with great ideas and managers fail to implement them or give credit.

managers who ask for employees ideas and reward them overall increases performance

Combining styles

nothing suggests that either results in making bad decisions it is good to have people using both these styles to balance speed and quality.

Linear programming

optimum allocation of resources is determined using linear programming the resources that managers typically allocate are time money space material equipment and employees fedex using the best sequence of deliveries to minimize costs

capital budgeting

payback approach average rate of return discounted cash flow etc. used to analyze alternative investments in assets that will be used to make money such as machines to make products and equipment to provide a service like a lawn mower make or buy fix or replace and upgrade-replacement and rent/ lease or buy decisions

globalization brings diversity

technology can help you think about problems and how to solve them or create opportunities profitable opportunities as well decision making is globally as well in countries that are less time conscious like Egypt the decision styles are more reflective US is more reflexive bc of time conscious

Using technology to generate alternatives

technology especially the internet has shown considerable potential for assisting with problem solving and decisions. provides data instantly

Bounded rational staistficers

tend to make bounded rational decisions and would rather be fast than thorough they prefer to quickly choose the option that fills the minimum criteria

rational maximizers

tend to make rational decisions taking their time and weighting a wide range of options before choosing

after making a decision you develop a plan of action with a schedule for implementation

the plan needs to be clearly communicated so that everyone knows what is going on

Consensus Mapping

the process of developing group agreement on a solution to a problem there can be no competitive struggle ending in a vote departmental level

Synthetics

the process of generating novel alternatives through role playing and fantasizing. generating novel ideas rather than a large quality of ideas specific decision making

Brainstorming

the process of suggesting many possible alternatives without evaluation. department level

problem solving

the process of taking corrective action to meet objectives

Programmed decisions

those that arise in recurring or routine situations and they decision maker should use decision rules or organizational policies and procedures to make the decision. It is not necessary to follow all the steps. non significant recurring and routine shorter time to make decisions

The creative process

three states. preparation incubation illumination

Using groups to generate creative alternatives

toward using groups to develop creative ideas and make decisions

when it comes to making decisions we need to be ethical and socially responsible globally

true

Using info to generate alternatives

use facts data info and knowledge to make decisions and they are more creative and innovative.

Quantitative Techniques

uses math and science to solve techniques.