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