MAN 3025 Chapter 9

Know the 5 criteria that should satisfy Step 2) generate and evaluate alternative course of action

1. Costs—the negative side effects and necessary sacrifices 2. Benefits—the possible upside of the decision 3. Ethical soundness—whether the decision would meet the ethical standards of the organization and its stakeholders 4. Timeliness—how quickly the decision can be put into action 5. Acceptability—the degree to which the decision will be accepted by the people who will implement it

The Decision Making Process

1. Identify and define the problem 2. Generate and Evaluate alternative courses of action 3. Decide on a preferred course of action 4. Implement the Decision 5. Evaluate the results

The steps in the classical decision model are:

1. Identify the problem (correctly) 2. Identify all of the criteria (what is important about the decision) 3. Identify all of the alternatives (what are all of the possible solutions to our problem/decision) 4. Rate all criteria in terms of their importance 5. Rate all alternatives in terms of how they satisfy each of the criteria 6. Calculate a weighted average for all alternatives such that each alternative has a score based on the sum of each criterion's weight (#4) times the corresponding alternative rating (#5) 7. Choose the alternative with the highest score

What characteristics does "good information" have?

1. Relevant: The information should pertain to the decision being made. No extraneous data should be included. 2. Understandable: The user should be able to comprehend the meaning of the information as easily as possible. 3. Timely: The information does not arrive late; it can be accessed in time to make decisions. 4. Accuracy: The information is correct and can be relied upon to make decisions. 5. Complete: The information is as complete as possible; it should be sufficient for the task at hand.

The Three mistakes associated with step 1) identify and define the problem

1. Trying to fix the symptoms of a situation rather than the root cause of the issue. A symptom is a sign that a problem may be present. A manager should focus on fixing the root cause of the problem, not simply the symptom. 2. Focusing on the wrong problem in the situation. Many times, there are multiple problems present at once. It is important to be able to prioritize each issue and take care of more pressing problems first. 3. Making the scope of the problem too narrow or too broad. Managers should choose the scope of a problem that gives them the best options for a solution.

Multidimensional Thinking - decision making approach

As a manager, it is essential to have the ability to recognize and evaluate many problems at once and how they relate to each other, an approach known as multidimensional thinking.

What is a Bounded Rationality?

Bounded rationality can be defined as making decisions in situations with incomplete information and a restricted amount of alternatives.

representative heuristic

If a person makes a decision heavily rooted in assumptions that come from other situations that appear similar

What is the most critical part of the decision making process?

Implementation

Implicit Favorite Decision Making

Implicit favorite decision making is when you alter the criteria and assessment of the alternatives to confirm that your favorite is the most rational choice.

What are information systems? Management information systems?

Information systems, a structure that utilizes information technology to gather, systemize, and disseminate data in order to make decisions. Management information systems (MIS) use computerized information-processing systems to assist managers in decision making.

What is the difference between information and data

Information: data presented in a meaningful way that assists decision making Data: statistics and other individual facts and observations

Intelligence Information vs. Public Information

Intelligence information is taken from the external environment, as well as from the stakeholders such as stockholders, suppliers, and regulatory agencies. Public information is presented to those outside the organization, including stakeholders and the general public.

Why does implementation sometimes fail?

Lack of participation error—neglecting to involve the people needed in the implementation of an alternative during the planning phase of decision making.

What is problem solving?

Problem solving involves recognizing and finding solutions to problems.

4 Basic Cognitive Styles

Sensation Thinkers Sensation Feelers Intuitive Thinkers Intuitive Feelers

When is a satisficing decision likely to happen?

The first acceptable solution that one can think of.

availability heuristics

When a person makes a decision primarily based on recent events and readily available information

anchoring and adjustment heuristic

When a person makes a decision using a previous decision as a reference point

Escalation of Commitment

When a person makes a large investment of time or money into a certain course of action, they may be reluctant to abandon that decision despite the fact that the current course of action is not working; occurs because people have a difficult time processing sunk costs and persist in trying to find ways to salvage what is already gone.

Classical Decision Model

a manager is in a situation with all necessary information and makes decisions rationally, without bias.

Strategic Opportunism

a manager must be able to resolve long-term issues while prioritizing and resolving the everyday problems at a job

Information Systems

a structure that utilizes information technology to gather, systemize, and disseminate data in order to make decisions

Sensation Feelers

are comfortable with open communication and take personal feelings and values into account. In addition, however, they also prefer to have the facts of a situation.

Problem Avoiders

are managers who ignore any and all information that would indicate a problematic situation. Usually, this is the approach of individuals who do not like to solve problems or make decisions

Problem Seekers

are proactive managers that actively search for signs of and anticipate a performance deficiency or performance opportunity. These types of managers are considered the best.

Problem Solvers

are reactive in their approach. When a situation calls for it, they are willing to make decisions and propose solutions to any troublesome issue that is present.

Data

are statistics and other individual facts and observations

Behavioral Decision Model

assumes that humans are limited in their ability to be perfectly rational and unbiased in their decision making.

Structured Problems

can be solved by employing a clear sequence of activities with information that is readily available.

Optimizing Decision

choosing the highest-quality alternative possible.

Crisis Management Programs

courses designed to prepare managers for crises that could compromise an organization's well-being

Programmed Decisions

decisions that a person has already successfully implemented in the past.

Intuitive Thinking

has a spontaneous style, making decisions based on a quick and broad assessment.

Problem Solving

involves recognizing and finding solutions to problems.

Information

is data presented in a meaningful way that assists decision making.

Public Information

is presented to those outside the organization, including stakeholders and the general public.

Intelligence Information

is taken from the external environment, as well as from the stakeholders such as stockholders, suppliers, and regulatory agencies.

Decision

is the choice of action taken from among various alternative options.

Satisficing Decision

is the first acceptable solution that one can think of.

Risk Environment

is the setting for a high number of management problems.

Systematic Thinking

is using rational methods of solving problems.

Bounded Rationality

making decisions in situations with incomplete information and a restricted amount of alternatives.

Rational Model

means that a person has access to all relevant information (they know all of the criteria and all of the alternatives), they can accurately rate each of these factors, and they will choose the alternative that maximizes their utility (the one with the highest score).

Lack of Participation Error

neglecting to involve the people needed in the implementation of an alternative during the planning phase of decision making.

Intuitive Thinkers

prefer abstract situations that are broad in scope. They tend to avoid details, and are both logical and impersonal.

Sensation Thinkers

prefer hard, conclusive data and high-control situations. They focus more on "the numbers" of a situation and take a more impersonal approach.

Unstructured Problems

situations that are characterized by incomplete information.

Non-programmed Decisions

special solutions created for uncommon situations.

Intuitive Feelers

tend to value personal relationships, are flexible, prefer broad issues, and usually do not take details into consideration.

Multi-dementional Thinking

the ability to recognize and evaluate many problems at once and how they relate to each other

Uncertain Environment

there is so little information that a manager cannot even assign probabilities of various outcomes occurring.

Management Information Systems

use computerized information-processing systems to assist managers in decision making.

Information Technology

uses computers to assist people in gathering, storing, and processing information.

Decision Conditions

• A certain environment has all of the necessary information regarding each choice of action and its predicted outcome. • A risk environment is the setting for a high number of management problems. A risk environment does not have all of the necessary information to make a decision; instead, there are probabilities of different outcomes for each possible decision. • Uncertain environment, there is so little information that a manager cannot even assign probabilities of various outcomes occurring.

Crisis and Crisis Management Programs - What are they designed for?

• A crisis is an unanticipated situation that must be solved quickly in order to prevent a large-scale calamity. Another way to view a crisis is as an extreme nonprogrammed decision with exceptionally high stakes. • crisis management programs—courses designed to prepare managers for crises that could compromise an organization's well-being.

Positive effects of Information Technology (IT)

• Allows relatively quick and easy dissemination of knowledge; cause orgs to become "flatter" with easy access of relevant information • Easier communication • More timely and accurate receiving of information • Saves time and money

Confirmation Error vs. Framing Error

• Confirmation Error When one only takes into consideration the information that supports a previously made decision • A framing error is a misunderstanding of information due to the context in which it is perceived.

Negative effects of Information Technology (IT)

• Costly • privacy • risk of losing information • less employment

Availability Heuristics vs. Representative Heuristics vs. Anchoring and Adjustment Heuristics

• Heuristics, common ways of simplifying the decision-making process. • Availability heuristics: When a person makes a decision primarily based on recent events and readily available information. • Representative heuristic: If a person makes a decision heavily rooted in assumptions that come from other situations that appear similar. • Anchoring and adjustment heuristic: When a person makes a decision using a previous decision as a reference point.

Classical Decision Model (Rational Model) vs. Behavioral Decision Model

• In the classical decision model, a manager is in a situation with all necessary information and makes decisions rationally, without bias. • The classical decision model is a rational model, which, in this context, means that a person has access to all relevant information (they know all of the criteria and all of the alternatives), they can accurately rate each of these factors, and they will choose the alternative that maximizes their utility (the one with the highest score).

advantages to Group decision (vs. Individual decisions)

• More information is available • Multiple points of view from diverse backgrounds • Increased number of action alternatives • Group members have more acceptance of final decisions and are more likely to follow through, because they feel ownership in the process

Performance deficiency vs. performance opportunities

• Performance deficiency: Managers have to resolve a nonstop barrage of problems while on the job, primarily dealing with underperformance. • Performance opportunities: is when a situation either has the potential to turn out better than expected or actually turns out better than previously thought.

What are the benefits of IT?

• Planning: IT allows quicker information dissemination, as well as a wider availability of information, which enables more people to contribute to the planning process. • Organizing: With IT, it is easier to have a steady stream of communication between different parties in the organization, resulting in better coordination. • Leading: IT allows a manager to communicate goals and objectives with individuals both inside of the organization and outside of it. • Controlling: A manager can use IT to quickly learn of current performance levels and make immediate decisions to solve problems.

disadvantages to Group decision (vs. Individual decisions)

• Potential for conformity and lack of innovation if individuals feel pressure to fit in • A vocal minority of the group may hold sway over the majority • As more people become involved, the decision-making process may take longer • Scheduling and spatial constraints may make it difficult for group members to meet

Openness to Problem Solving: Three different types of managers in regards to their openness

• Problem Avoiders • Problem Solvers • Problem Seekers

Satisficing Heuristic - what are the three possible times we use it? What is the danger?

• Satisficing occurs when we look for alternatives only long enough to find one that satisfies our needs. • The danger in making a decision like this is that we might have found a better alternative if we had continued to search. • We tend to use the satisficing heuristic when 1) we have limited time, 2) the cost of making a wrong decision is low, and 3) we can easily accept and put to good use a sub-optimal product.

Programmed vs. non-programmed decisions

• programmed decisions: decisions that a person has already successfully implemented in the past. (solve structured problems) • nonprogrammed decisions—special solutions created for uncommon situations. (solve unstructured problems)

Structured Problems vs. Unstructured Problems

• structured problems can be solved by employing a clear sequence of activities with information that is readily available. • unstructured problems—situations that are characterized by incomplete information.

Systematic Thinking vs. Intuitive Thinking

• systematic thinking is using rational methods of solving problems. • intuitive thinking has a spontaneous style, making decisions based on a quick and broad assessment.