MGMT 309 Ch 9

Decisoin Making Under Certainty

A condition in which the decision maker knows with reasonable certainty what the alternatives are and what conditions are associated with each alternative

Decision Making Under Uncertainty

A condition in which the decision makes does not know all the alternatives the risks associated with each, or the consequences of each alternative

Escalation of Commitment

A decision maker is staying with a decision even when it appears to be wrong

Programmed Decisions

A decision that is fairly structured decision or recurs with some frequency or both

Nonprogramed Decisions

A decision that is relatively unstructured and occurs much less often a programmed decision

Coalition

A political force in decision making which consists of an informal alliance of individuals or groups formed to achieve a goal Can be positive or negative

Managers Can Promote the Effectiveness of Group/Team Decision Making

Being aware of the pros and cons of having a group or team make a decision Setting deadlines for when decisions must be made Avoid problems with dominance by managing group membership Have each group member individually critically evaluate all alternatives Do not make your position known too early Appoint a group member to be a devil's advocate Hold a follow up meeting to recheck decision

Groupthink

Compliance or choice shift may occur; the group's desire for consensus and cohesiveness overwhelms its desire to reach the best possible decision

Brainstorming

Criticism is not allowed Freewheeling is welcome Quantity is encouraged

Ethics and Decision Making

Individual ethics combine with the organization's ethics to create managerial ethics

Intuition

Innate belief about something without conscious consideration

Forms of Group Decision Making

Interacting Groups or Teams Delphi Groups Nominal Groups

Unclear Means-end Relations

It is impossible to generate an exhaustive list of alternatives then select the most promision

Factors that Prevent Rationality

Lack of Consensus Unclear Means-end Relations Noisy Environment

Noisy Environment

Link between outcome and actions is hard to preduct

Advantages of Group/Team Decision Making

More information and knowledge is available More alternatives are likely to be generated More acceptance of the final decision is likely Enhanced communication of the decision may result Better decisions generally emerge

Interacting Groups or Teams

Most common form of decision making groups Consist of an existing group or newly formed team interacting and making a decision

Compliance

People conform to other's expectations or behaviors in the hope of acquiring rewards or avoiding punishment

Components of Managerial Ethics

Relationships of the firm to employees Employees to the firm The firm to other economic agents

Delphi Groups (Doesn't Meet in Person)

Sometimes used for developing a consensus of expert opinion from a panel of experts who individually contribute through a moderator

Nominal Groups

Structured technique designed to generate creative and innovative ideas through the individual contributions of alternatives that are winnowed down through a series ofrank ordering of the alternatives

Choice Shift

Tendency for groups to make decisions that appear more extreme than the decisions that group members would have made on their own

Decision Making

The act of choosing one alternative from among a set of alternatives

Decision Making Under Risk

The availability of each alternative and its potential payoffs and costs are all associated with risks

Bound Rationality

The concept that decision makers are limited by their values and unconscious reflexes, skills, and habits

Risk Propensity

The extent to which a decision maker is willing to gamble when making a decision

Base Rate Bias

The initial probability given no other information Bias occurs when people put too much weight on the evidence provided, or additional information, and not enough weight on the information provided by the base rate

Decision Making Process

The process of recognizing and defining the nature of a decision situation, identifying alternatives, choosing the 'best' alternative and putting it into practice Effective decision is one that optimizes some factors such as profits, sales, employee welfare and market share Managers make decisions about problems and oportunities

Disadvantages of Group/Team Decision Making

The process takes longer than individual decision making compromise decisions resulting from indecisiveness may emerge Groupthink may occur

Staisficing

The tendency to search for alternatives only until one is found that meets some minimum standard of sufficiency to reslove the problem

Lack of Consensus

There must be a general agreement of the definition of problems, decisions, and decision making goals at the beginning