CH 8

Describe the differences between programmed and non-programmed decisions. What are the implications of these differences for decision makers?

Decision making is the act of choosing one alternative from among a set of alternatives. Programmed decisions are those which are fairly structured or recur with some frequency. Non-programmed decisions are relatively unstructured and occur much less often. Non-programmed decisions are those which involve a higher degree of uncertainty. This means that the chances of making a bad decision are higher because the problem which the non-programmed decision is trying to solve has no proven answer. In non-programmed decision-making there are higher risks. Usually top level managers have to operate with non-programmed decisions because they take longer to be formulated and require a lot of evaluation. Programmed decisions are usually those taken by lower level managers (first line managers) with situations of certainty where the decision-maker knows the alternatives and has direct control over a good outcome. For example, there are various procedures which are programmed decisions for first line managers, for example on how to handle customer services.

What is meant by the term escalation of commitment? In your opinion, under what conditions is escalation of commitment likely to occur?

Escalation of commitment refers to when a manager decides to continue with a wrong decision even if it is costly and is problematic to the organization. In my opinion escalation of commitment occurs either when the manager is too prideful to accept the mistake and has much more to lose in his reputation. For example, a company which runs on the basis of its image and its prestige will rarely accept its mistakes and will use escalation of commitment. Also escalation of commitment can be also used when the manager has no other option except to continue with the bad decision because he cannot afford to start from scratch nor completely give up on the endeavor. There could be various stakeholders which are pushing the manager to continue with the bad decision otherwise they will completely drop out.

Describe the behavioral nature of decision making. Be certain to provide some detail about political forces, risk propensity, ethics, and commitment in your description.

The behavioral nature of decision making involves many aspects including the administrative model, political forces, intuition, escalation of commitment, risk propensity and ethics. The administrative model argues that decision makers are bounded by rationality and are limited by their values, skills and habits. It also argues that decision makers seem to search for alternatives until one is found that satisfies some minimum standard of adequacy (satisficing). This results in a decision which may not be helpful for the organization. Political forces may also be part of the behavioral nature of decision-making. This is because if political and government forces are directly involved in business' decision making then the behaviors of business people are different. They have to appease the political figures (and or government) in order to gain profits, thus there are a different set of rules to be followed. Personal ethics also affect decisions, for example many people would find it unethical to be bribing governments or politicians in order to achieve profits and gain objectives. Intuition is also part of behavioral elements in decision making. Many people trust their gut, or the innate belief about something without conscious deliberation, through intuition in business decision-making. Additionally, escalation of commitment, when managers stay with a decision even if it is wrong and costly, is also a part of behavioral elements in decision making. This is because the manager is either too proud to admit the mistake or simply cannot afford to start from scratch, thus their decision-making is altered. Finally, risk propensity, or the extent to which a decision maker gambles when deciding, also affects decision making process. If a manager is open to making decisions and likes to partake in risky business behavior including expanding across many markets, then he will make different decisions then the manager which prefers safety and protecting his current market.

Explain the differences between three common methods of group decision making interacting groups, Delphi groups, and nominal groups. Give advantages and disadvantages.

There are three forms of group and team decision making: interacting groups and teams, delphi groups and nominal groups. Interacting groups and teams involve members who openly discuss and argue about and finally agree on the best alternative. This is the most common form. Delphi groups are used to achieve a consensus of expert opinion. Nominal groups involve a structured technique used to generate creative and innovative alternatives or ideas. The advantages of group decision making is that a bigger pool of information could be available and that more alternatives are generated, there is also better communication and even better decisions. The disadvantages are that the process of group decision making takes longer, will require compromise from others, one person may dominate the group and group think may occur (where there is such a strong desire for consensus that people agree with each other on everything thus possibly not reaching the best decision).