Chapter 2- Making Decisions

Structured Problems

straightforward, familiar, and easily defined problems.

Programmed decision

repetitive decisions that can be handled by a routine approach and are used when the problem being resolved is straightforward, familiar, and easily defined (structured).

satisficing, escalation of commitment, intuitive decision making, evidence

4 ways managers make decisions

Decision

criteria are factors that are important (relevant) to resolving the problem.

Bounded Rationality

decision-making that's rational, but limited (bounded) by an individual's ability to process information.

Rational Decision Making-

describes choices that are logical and consistent while maximizing value.

Decision

making a choice from two or more alternatives.

Unstructured Problems

problems that are new or unusual and for which information is ambiguous or incomplete.

Intuitive decision making

Making decisions on the basis of experience, feelings, and accumulated judgment.

Identify the problem (opportunity) Identify the decision criteria Allocating weights to the criteria Developing the alternatives Analyzing the alternatives Selecting the alternative Implementing the alternative Evaluating the decision effectiveness

8 steps in decision making process

the decision maker's expertise and judgment, external evidence that's been evaluated by the decision maker, opinions, preferences, and values of those who have a stake in the decision, relevant organizational (internal) factors

The 4 essential elements of EBMgt

Assumptions of rationality

The problem is clear and unambiguous, A single well-defined goal is to be achieved, All alternatives and consequences are known, The final choice will maximize the payoff

Policy

a guideline for making decisions.

Nonlinear Thinking Style

a person's preference for internal sources of information; a method of processing this information with internal insights, feelings, and hunches.

Linear Thinking Style

a person's tendency to use external data/facts; the habit of processing information through rational, logical thinking.

Procedure

a series of sequential steps used to respond to a well-structured problem.

Certainty

a situation in which a manager can make accurate decisions because all outcomes are known.

Uncertainty

a situation in which a manager is not certain about the outcomes and can't even make reasonable probability estimates.

Risk

a situation in which the decision maker is able to estimate the likelihood of certain outcomes.

Satisfice

accepting solutions that are "good enough."

Rule

an explicit statement that tells managers what can or cannot be done.

Escalation of commitment

an increased commitment to a previous decision despite evidence it may have been wrong.

Problem

an obstacle that makes it difficult to achieve a desired goal or purpose. Every decision starts with one.

Design thinking

approaching management problems as designers approach design problems.

Nonprogrammed decisions

are unique decisions that require a custom-made solution and are used when the problems are new or unusual (unstructured) and for which information is ambiguous or incomplete.

Evidence based management(EBMgt)

the systematic use of the best available evidence to improve management practice.