Principles of Management Chapter 7
Decisions
A choice made from among available alternatives
Brainstorm
Bring greater intellectual stimulation and creativity to the decision-making process than is usually possible with one person acting alone
Decision Making
The process of identifying and choosing alternative courses of action
Stage 2 of Classical Decision Making
Think Up Alternative Solutions
Rational Decision Making Step 2
Think up alternative solutions
Ethical Decision Making/ Decision Tree
To help make ethical decisions, a decision tree—a graph of decisions and their possible consequences—may be helpful.
Evidence-Based Decision Making
Translation of principles based on best evidence into organizational practice, bringing rationality to the decision-making process
Stage 3 of Classical Decision Making
Evaluate Alternatives & Select a Solution
Rational Decision Making Step 3
Evaluate alternatives and select a solution
Intuition
Making a choice without the use of conscious thought or logical inference,
Groupthink
A cohesive group's blind unwillingness to consider alternatives--this occurs when group members strive for agreement among themselves for the sake of unanimity and avoid accurately assessing the decision situation
Nine Common Decision-Making Biases
Availability Bias- Managers use information readily available from memory to make judgements. Representativeness Bias- Tendency to generalize from a small sample or a single event. Confirmation Bias- People seek information to support their point of view and discount data that does not. Sunk-Cost Bias- When Managers add up all the money already spent on a project and conclude it is too costly to simply abandon it Anchoring and Adjustment Bias- Tendency to make decisions based on an initial figure Overconfidence Bias- Peoples subjective confidence in their decision making is greater thatn their objective accuracy Hindsight Bias- Tendency of people to view event as being more predictable thatn they really rae
Rational Decision Making
Four steps in making a rational decision are (1) identify the problem or opportunity (2) think up alternative solutions (3) evaluate alternatives and select a solution (4) implement and evaluate the solution chosen.
Nonrational Decision Making
Models of decision-making style that explain how managers make decisions; they assume that decision making is nearly always uncertain and risky, making it difficult for managers to make optimum decisions
Bounded Rationality
One type of nonrational decision making; the ability of decision makers to be rational is limited by numerous constraints
Satisficing
One type of nonrational decision-making model; managers seek alternatives until they find one that is satisfactory, not optimal
Classical Decision Making
Stage 1: Identify the Problem or Opportunity Stage 2: Think Up Alternative Solutions Stage 3: Evaluate Alternatives & Select a Solution Stage 4: Implement & Evaluate the Solution Chosen
Analytics
Term used for sophisticated forms of business data analysis, such as portfolio analysis or time-series forecast
Stage 1 of Classical Decision Making
Identify the Problem or Opportunity
Rational Decision Making Step 1
Identify the problem or opportunity
Stage 4 of Classical Decision Making
Implement & Evaluate the Solution Chosen
Rational Decision Making Step 4
Implement and evaluate the solution chosen.