Management Chapter 9

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.

normative

Means that it defines how a manager should make logical decisions and provides guidelines for reaching an ideal outcome.

Bounded rationality

Means that people have the time and cognitive ability to process only a limited amount of information on which to base decisions.

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.

Step 2. Diagnosis and analysis:

analyze underlying causal factors

Confirmation bias

occurs when the manager puts too much value on evidence that is consistent with a favored belief and discounts evidence that contradicts it.

Devil's advocate:

person assigned the role of challenging the assumptions and assertions made by the group

Loss aversion

place a higher value on avoiding losses than on potential gains.

premortem

purposefully imagining that a decision has been implemented and has failed, then identifying reasons for the failure so that problematic issues can be addressed in advance

Conceptual style:

use a broad amount of information to solve problems creatively

Personal Decision Framework

•Decision styles: distinctions among people with respect to how they evaluate problems, generate alternatives, and make choices.

Engage in Rigorous Debate

•Engage in rigorous debate −Ensure group diversity

Step 1. Recognition of decision requirement:

•Identify problem or opportunity -Problem: organization has not met one of their goals - Opportunity: managers see potential opportunity in the external environment

Innovative Decision Making

•Start with brainstorming −Brainstorming: uses a face-to-face interactive group to spontaneously suggest as many ideas as possible for solving a problem −Electronic brainstorming: brings people together in an interactive group over a computer network •Use hard evidence

Decision Making: Political Model

•Useful for nonprogrammed decisions when conditions are uncertain, information is limited, and there is conflict about goals to pursue or action to take •Assumptions: - Organizations are made up of groups with diverse interest, goals, and values - information is ambiguous and incomplete - Managers do not have the time, resources, or mental capacity to udentify all dimensions and process all information regarding a problem

Step 4. Selection of desired alternative:

•best alternative is one in which the solution best fits the firm's overall goals and achieves the desired results using the fewest recourses. - Risk propensity: willingness to undertake risk in exchange fir the opportunity of gaining an increased payoff

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.

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.

Remember This

A manager's personal decision style influences how he or she makes decisions. Decision styles are differences among people with respect to how they perceive problems and make choices. Four major decision styles are directive, analytical, conceptual, and behavioral. Evan Spiegel of Snapchat used a directive style when he made the decision to redesign Snapchat and directed Snapchat's team to implement it. Most experienced managers use a variety of styles depending on the decision situation.

postmortem example

A similar technique emphasized by Lenovo founder Liu Chuanzhi is called fu pan, which means "replaying the chessboard." The idea is to review every move to improve the next one. Lenovo managers are trained to apply fu pan to everything from a small, quick review of a workday incident to a full, in-depth review of a major decision.

Certainty

A situation in which all the information the decision maker needs is fully available.

Anchoring bias example

A study of NBA teams provides an illustration. Researchers found that draft selection order was the variable most responsible for how much time players got on the court, above and beyond actual performance or other factors. A player's tag as either a "high pick" or a "low pick" can act as an anchor and influence coaches' perception of player performance and subsequent decisions.

premortem example

A technology company used the premortem technique when designing a new advanced-analytics system for an aviation program. The team leader asked each member to write down one specific reason for why their advanced system had failed. After three rounds and writing all the reasons on a whiteboard, the team identified the biggest issues, such as getting sufficient resources for implementation, and was able to address them, leading to a better plan.

Nonprogrammed decisions example

Airbus executives decided to build a giant double-decker plane, the Airbus A380, to challenge the dominance of the Boeing 747 as the world's largest airliner. At the time, a representative said the A380 would "be the cement of the company for years to come." But the A380 decision was based on managers' assumptions that airlines would continue using large hub airports to transfer passengers between connecting flights and want to fly large four-engine jets on long routes. The environment changed. Technology advancements enabled Boeing to develop a smaller, highly efficient twin-engine model, the 787 Dreamliner, which could fly long distances and bypass giant airports altogether. Airline executives, focused on increasing profits, wanted these kinds of smaller jets, which were easier to fill with passengers and cheaper to fly. Airbus eventually developed its own smaller two-engine model. After investing $17 billion in the A380 project, Airbus got orders for only 251 of the super-jumbo jets and announced that it would shut down production of the plane at the end of 2021.

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.

Conceptual style:

An example of the conceptual style can be seen with Ed Stack, CEO of Dick's Sporting Goods. Stack didn't make lightly the decision to permanently remove assault rifles from the company's 850 stores and to stop selling guns of any sort to anyone younger than 21 years of age. Stack says it was a "long and evolutionary process" regarding how the company should handle the sale of firearms. Stack gathered thoughts from managers all around the company and the entire management team was involved in the decision.

Cassie likes to make decisions after considering many alternatives and looking at as much objective data as possible.

Analytical style Managers with an analytical style like to use as much data as possible and carefully consider many alternatives to resolve complex solutions in the best way possible. They often base their decisions on objective, rational data from management control systems and other sources.

Confirmation bias example

As an example of confirmation bias, managers at Tokyo Electric Power Company (Tepco) have been accused of delaying for far too long the decision to use seawater to cool nuclear reactors at Fukushima Daiichi following the 2011 Japan earthquake and tsunami. Tepco managers knew that seawater would destroy the reactors, so they gave greater weight to information that supported their decision to delay its use, and they emphasized that they were "taking the safety of the whole plant into consideration" in judging the appropriate timing to use seawater in the cooldown efforts. Unfortunately, it took an explosion at the plant to convince managers that using seawater was essential to control the overheating of the reactors.

Facing Certainty and Uncertainty example

As an example, managers at Airstream decided in late 2018 to build a new recreational vehicle factory despite uncertainty regarding the possibility of increased tariffs and slowing sales. Bob Martin, CEO of Airstream's parent company Thor Industries, said the executive's job is to engage in longer-term thinking in a business that is always facing uncertainty. Former U.S. treasury secretary Robert Rubin defined uncertainty as a situation in which even a good decision might produce a bad outcome.

Step 3. Development of alternatives examples:

As an example, several years ago, before Canadian mining group Goldcorp merged with Newmont, managers faced a problem regarding the company's Red Lake site. A nearby mine was thriving, but no one could seem to pinpoint where to find the high-grade ore at Red Lake. The company created the Goldcorp Challenge, putting Red Lake's closely guarded topographic data online and offering $575,000 in prize money to anyone who could identify rich drill sites. More than 1,400 technical experts in 50 countries offered alternatives to the problem, and two teams working together in Australia pinpointed locations that turned Red Lake into one of the world's richest gold mines.

Devil's advocate example:

At Catholic Health Initiatives, someone is appointed to act as devil's advocate at senior management meetings, particularly if critical issues are being discussed. Jeffrey McKeever, founder and Chief Mentor at MicroAge, says he sometimes plays the devil's advocate, changing his position in the middle of a debate to ensure that other executives don't just go along with his opinions.

Tom tends to consider the personal development of others when making decisions.

Behavioral style Managers with a deep concern for others as individuals often adopt a behavioral style. These managers like to talk to people one on one, understand their feelings about the problem, and consider the effect of a given decision on them. They usually place a high value on the personal development of others and may make decisions that help others achieve their goals.

Remember This

Being aware of biases that cloud judgment helps managers avoid decision traps and make better decisions. Biases to watch out for include being influenced by initial impressions, loss aversion, seeing only what you want to see, perpetuating the status quo, being influenced by emotions, and being overconfident. Studies have found that doctors make less effective decisions when they feel emotions of like or dislike for a patient. Anchoring bias occurs when a manager allows initial impressions, statistics, or estimates to act as anchors to subsequent thoughts and decisions. Loss aversion means that people typically respond more strongly to a potential loss than to an expected gain. Some managers have a tendency to put too much stock in evidence that is consistent with a favored belief or viewpoint and too little in evidence that contradicts their favored position; this is called confirmation bias. Overconfidence bias can be particularly dangerous when making risky decisions, which happened in the London Whale incident.

Decision-Making Models

Choice among three main models of decision-making approaches depends on the manager's personal preference, whether the decision is programmed or nonprogrammed, and the degree of uncertainty associated with the decision

quasirationality

Combining intuitive and analytical thought.

Kyle prefers to base decisions on lots of data, both objective data from information systems and qualitative data from people.

Conceptual style Like managers with an analytical style, managers with a conceptual style like to consider a lot of information and many alternatives. However, they are more socially oriented than those with an analytical style and enjoy discussing a problem and possible alternatives with others. They tend to rely on information from both people and systems and like to solve problems creatively.

classical model example

Consider that Amazon's Jeff Bezos—who once said that all of his "best decisions in business and in life have been made with heart, intuition, guts, not analysis"—is also a strong proponent of using data and rationality in making decisions. Whenever anyone requests a meeting, Bezos requires that individual to prepare a six-page memo that includes data, pros and cons of various ideas, and so forth, to force that person to incorporate rationality in the process.

Analytical style example:

Dawn M. Zier, former CEO of Nutrisystem, reflects a primarily analytical decision style. Zier, who studied electrical engineering and computer science in undergraduate school, likes to "break down a complex issue and then build it back up." Zier is known to tell managers and employees that she likes dialogue and is willing to have any conversation, but she wants information to be based on facts

administrative model assumptions

Decision goals often are vague, conflict with one another, and lack consensus among managers. Managers often are unaware of problems or opportunities that exist in the organization. Rational procedures are not always used, and, when they are, they are confined to a simplistic view of the problem that does not capture the complexity of real organizational events. Managers' searches for alternatives are limited because of human, information, and resource constraints. Most managers settle for a satisficing decision rather than a maximizing solution, partly because they have limited information and partly because they have only vague criteria for what constitutes a maximizing solution.

Step 3. Development of alternatives:

Develop possible alternative solutions that will respond to the needs of the situation

Directive style example:

Evan Spiegel of Snapchat, described in the previous chapter, illustrated a directive style when he made the decision to redesign Snapchat after meeting with managers of a popular news-aggregator app in China and directed Snapchat's team to implement it. Spiegel prefers making decisions quickly without a lot of consultation and typically doesn't like to consider a lot of data before making decisions.

Step 4. Selection of desired alternative example:

For example, Facebook would never have reached more than two billion users without Mark Zuckerberg's "move fast, break things" mind-set. Motivational posters with that slogan are papered all around the company to prevent delay from too much analysis of alternatives. Zuckerberg says, "If you're successful, most of the things you've done were wrong. What ends up mattering is the stuff you get right." Facebook runs a never-ending series of on-the-fly experiments with real users. Even employees who haven't finished their six-week training program are encouraged to work on the live site. That risky approach means that the whole site crashes occasionally, but Zuckerberg says, "The faster we learn, the better we're going to get to the model of where we should be."

administrative model example

For example, Liz Claiborne managers hired designer Isaac Mizrahi and targeted younger consumers in an effort to revive the flagging brand, but sales and profits continued to decline. Faced with the failure of the new youth-oriented line, a 90 percent cutback in orders from a large retailer, high unemployment, a weak economy, and other complex and multifaceted problems, managers weren't sure how to stem the years-long tide of losses and get the company back in the black. They satisficed with a quick decision to form a licensing agreement to have the Liz Claiborne brand sold exclusively at JC Penney, which handles all manufacturing and marketing.

Programmed decisions: example

For example, Royal Dutch Shell has begun using AI algorithms in some areas of its business to assign employees with the right skills and expertise to work on various projects. An algorithm can schedule work more efficiently, freeing up managers' time for more complex, nonprogrammed decisions.

Step 1. Recognition of decision requirement example:

For example, after spending more than a year trying to increase sales of products by lowering the products' prices, managers at Procter & Gamble reviewed data showing that the strategy wasn't working. They saw a problem and decided to shift toward increasing prices on some of P&G's biggest brands.

−Escalating commitment example:

For example, managers at British music company HMV steadfastly stuck to their strategy of opening stores where customers could browse through a massive collection and listen to tracks before making a purchase even as analysts, advisors, and even some customers warned that long-term trends toward online purchases and downloadable music would make that business model unsustainable. As another example, the decline of Nokia, once a global leader in mobile phones, was caused in part because managers continued investing in the company's proprietary operating system long after Android and iOS took over the market.

Loss aversion example

For example, one study of product development found that managers who initiate a new product are much more likely to continue funding it despite evidence that it is failing. Product managers hate to lose money, so they may continue to support a flawed decision in an effort to avoid the negative feelings of loss while trying to justify or correct the previous decision.

behavioral style example

For example, when the U.S. economy screeched to a halt amid the COVID-19 pandemic, Suzanne Wecker, president of Skyline Furniture, and her father, CEO Ted Wecker, made the gut-wrenching decision to shut down their family-owned manufacturing company near Chicago. The decision to continue paying Skyline's 300 employees for two weeks, even though the Weckers stopped paying themselves, was based on their personal concern for the people who had worked with Skyline for years.

Decision

a choice made from available alternatives

Remember This

Good decision making is a vital part of good management, but decision making is not easy. Decision making is the process of identifying problems and opportunities and then resolving them. A decision is a choice made from available alternatives. A programmed decision is one 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. A nonprogrammed decision is one made in response to a situation that is unique, is poorly defined and largely unstructured, and has important consequences for the organization. An example of a nonprogrammed decision was the decision to build the Airbus A380. Decisions differ according to the amount of certainty, risk, uncertainty, or ambiguity in the situation. Certainty is a situation in which all the information the decision maker needs is fully available. 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. Uncertainty occurs when managers know which goals they want to achieve, but information about alternatives and future events is incomplete. U.S. governors faced tremendous uncertainty in decisions concerning stay-at-home orders and business shut-downs during the COVID-19 pandemic. Ambiguity is 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. Highly ambiguous circumstances can create a wicked decision problem, the most difficult decision situation that managers face

Groupthink example

Harvey tells the story of how members of his extended family sat sweltering on the porch in 104-degree heat in a small town about 50 miles from Abilene, Texas. When someone suggested driving to a café in Abilene, everyone went along with the idea, even though the car was not air-conditioned. Everyone was miserable and returned home exhausted and irritable. Later, each person admitted that he or she hadn't wanted to make the trip, thought it was a ridiculous idea, and only went because of a belief that the others wanted to go.

Step 2. Diagnosis and analysis example:

In a New York Times article, author Charles Duhigg explained how his family used the 5 Whys technique to address the problem of not getting to eat dinner as a family often enough. By continually asking why, the family arrived at the root cause: It took the kids so long to get dressed in the mornings that everyone was late getting out the door, triggering a cascade of delays throughout the day and culminating in staggered dinner times rather than family meals. The solution—kids pick out clothes to wear the night before—allowed family dinners again.

Mintzberg's Managerial Roles

Interpersonal roles ○ Figurehead ○ Leader ○ Liaison ● Informal Roles ○ Monitor ○ Disseminator ○ Spokesperson ● Decision Roles ○ Entrepreneur ○ Disturbance Handler ○ Resource Allocator ○ Negotiator

Evaluation and Feedback example

Like other egg farmers, Marcus Rust, CEO of Rose Acre Farms, had to decide how to address the problem of meeting many different state rules and regulations aimed at improving the well-being of egg-laying hens as well as address the growing criticism from animal rights activists. The two primary alternatives for egg farmers are to build roomier cages or to invest in cage-free facilities. Building cage-free facilities is much more expensive, but Rust and his managers decided to bet that in the future egg farming will succeed based on a cage-free strategy. They selected the more expensive choice—that every facility Rose Acre builds or refurbishes will lack cages. Implementation of the decision has begun, and at the new Rose Acre facility in Frankfort, Indiana, 170,000 hens wander around a 550-foot-long open barn, perch on metal rods, or run up and down ramps. Evaluation and feedback are ongoing and have already revealed a need for some design changes.

Remember This

Managers need to make a decision when they either confront a problem or see an opportunity. A problem is a situation in which organizational accomplishments have failed to meet established goals. An opportunity is a situation in which managers see the potential for organizational accomplishments to exceed current goals. The decision-making process typically involves six steps: recognizing the need for a decision, diagnosing causes, developing alternatives, selecting an alternative, implementing the alternative, and evaluating decision effectiveness. Diagnosis is the step during which managers analyze underlying causal factors associated with the decision situation. The 5 Whys is a question-asking technique that can help diagnose the root cause of a specific problem. Selection of an alternative depends partly on managers' risk propensity, or their willingness to undertake risk in exchange for the opportunity of gaining an increased payoff. The implementation step involves using managerial, administrative, and persuasive abilities to translate the chosen alternative into action. Managers at Rose Acre Farms made and implemented a decision to shift to cage-free facilities for egg-laying hens.

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.

Remember This

Most decisions within organizations are made as part of a group. Although managers can't always see their own biases, they can build in mechanisms to prevent bias from influencing major decisions at the organizational level. Brainstorming is a technique that uses a face-to-face group to spontaneously suggest a broad range of alternatives for making a decision. Electronic brainstorming brings people together in an interactive group over a computer network rather than meeting face to face. Evidence-based decision making is founded on a commitment to examining potential biases, seeking and examining evidence with rigor, and making informed and intelligent decisions based on the best available facts and evidence. A devil's advocate is a person who is assigned the role of challenging the assumptions and assertions made by the group. This person's statements and questions can prevent premature consensus and help to avoid groupthink. Groupthink refers to the tendency of people in groups to suppress contrary opinions in a desire for harmony. Escalating commitment refers to continuing to invest time and money in a decision despite evidence that it is failing. British music company HMV steadfastly stuck to its strategy of opening stores where customers could browse through a massive collection even as evidence pointed to long-term trends that would make that business model unsustainable. A technique adopted from the U.S. Army, the postmortem or after-action review is a disciplined procedure whereby managers review the results of decisions to evaluate what worked, what didn't, and how to do things better. Decision makers can also perform a premortem, purposefully imagining that a decision has been implemented and has failed miserably, and then identifying reasons for the failure so that problematic issues can be addressed in advance.

Use your understanding of decision making under various conditions to complete the following sentences. Larry's company has decided to no longer lease office space and instead have all employees work from home. Larry needs to make a decision as he figures out how the newly dispersed workforce can cost-effectively order office supplies.

Nonprogrammed decisions are made in response to situations that are unique, are poorly defined and largely unstructured, and have important consequences for the organization. How to make sure employees working out of their homes get office supplies at a reasonable cost is a new problem for this company, so Larry has no precedent to fall back on as he makes his decision.

Kanha is a student at Fresno State University who recently got his first F. Now he has to make a decision about how to get his grades back up. Having recently taken a class on decision making, Kanha decides to follow the six-step process for deciding what to do. What problem is Kanha most likely to face during the recognition of decision requirement step in the decision-making process?

Not being aware enough of things going on around him to see where problems and opportunities exist Recognizing a decision requirement involves collecting extensive information and putting it together in a way that allows you to see problems and opportunities. People who aren't open to new information, or who can't process the information they get, may not be able to recognize the decision they need to make. For example, if Kanha never checks his grades, he may not recognize that he needs to make a decision about how he will improve them.

Jill is the manager of a local Toyota dealership that has lost eight employees in the last year. She needs to decide how to retain her current employees. She recently took a class on decision making and plans to use the six-step process she learned. What issue might she face during the "selection of desired alternative" step?

Not being comfortable taking a risk in exchange for the opportunity of gaining increased payoff Selecting the desired alternative involves assessing possible decisions: How much risk does each entail? To what extent will the decision help to meet our goals? People use satisficing because they simply don't have the time to consider all of their options. For example, Jill may decide to increase his hiring to make up for the loss of employees. That may work, but if Jill had considered other options, he might have made a much more effective decision: to create a positive work environment so employees don't leave.

Uncertainty

Occurs when managers know which goals they want to achieve, but information about alternatives and future events is incomplete.

Directive style:

People who prefer simple, clear-cut solutions to problems

Engage in Rigorous Debate example

Reed Hastings, CEO of Netflix, has built rigorous debate into the decision-making process to avoid another calamity like the one the company experienced following a disastrous decision to both increase the price of the service and split Netflix into two separate businesses—a move that forced users to manage their accounts in two places. Hastings said later that he "slid into arrogance based upon past success." Although he still often uses a directive style of decision making, as described earlier in this chapter, Hastings has since tried to involve more people when making highly important nonprogrammed decisions.

Satisficing

Refers to choosing the first alternative that satisfies minimal decision criteria, regardless of whether better solutions are presumed to exist.

−Escalating commitment:

Refers to continuing to invest time and money in a decision despite evidence that it is failing.

Decision Making: Political Model example

The Los Angeles Rams football franchise used a political model to hire a new coach. Club owner Stan Kroenke and other Rams leaders, including chief operating officer Kevin Demoff and general manager Les Snead, first came up with a list of about 30 desirable candidates, then involved people throughout the franchise in evaluating them. One name on the list was 30-year-old Sean McVay. Some leaders were apprehensive about the possibility of hiring a head coach who was 38 years younger than the team's defensive coordinator. To make sure everyone would support the final decision, the interviewing process with McVay took place over a period of eight days and involved McVay meeting with players, staff members, and managers throughout the organization. The decision to hire McVay turned out to be a good one: Two years later, McVay took the Rams to the Super Bowl, where he was the youngest head coach ever to reach the Super Bowl game and was eight years younger than the quarterback of the opposing team, Tom Brady.

classical model assumptions

The decision maker operates to accomplish goals that are known and agreed on. Problems are precisely formulated and defined. The decision maker strives for conditions of certainty and tries to gather complete information. All alternatives and the potential results of each are calculated. Criteria for evaluating alternatives are known. The decision maker selects the alternative that will maximize the economic return to the organization. The decision maker is rational and uses logic to assign values, order preferences, evaluate alternatives, and make the decision that will maximize the attainment of organizational goals

Eloise has never stocked any organic products, and her sales have always been fine. She also doesn't see any reason to allow customers to pay with their smartphones, since cash and credit cards have always worked perfectly well. Other stores have started stocking bags of organic chips and have converted their cash registers to accept a smartphone payment system, and their profits have increased. However, Eloise thinks that making these changes would just be more trouble than they're worth.

The dominant bias at work in Eloise's thinking is a desire to perpetuate the status quo. The things that have worked in the past are comfortable, and changing the inventory mix and register technology would require significant changes in her thought patterns, changes she is not willing to make. Nothing in the scenario indicates that Eloise is weighting some evidence more heavily than other evidence. She knows that stocking organic chips and allowing customers to pay with smartphones would probably result in greater profits. She just doesn't see a need to change things that have worked well for a long time. Of course, at some point more customers may choose stores that offer organic snacks and smartphone payment, and then the current way of operating will no longer work well. Waiting another month or two perpetuates the status quo bias. Too many alternatives may promote holding on to the status quo, according to Lee Merkhofer, author and practitioner in the field of decision analysis. If Eloise were to consider other types of chips, the decision may become too overwhelming and she would maintain the status quo. Consulting with other stores that haven't upgraded their registers or started selling organic chips would help Eloise to justify her position instead of overcoming the status quo bias. The best thing for Eloise to do is to examine how changing the status quo could benefit her store. Once Eloise sees the potential store profits, she would see how changing the status quo is beneficial.

Remember This

The ideal, rational approach to decision making, called the classical model, is based on the assumption that managers should make logical decisions that are economically sensible and in the organization's best economic interest. The classical model is normative, meaning that it defines how a manager should make logical decisions and provides guidelines for reaching an ideal outcome. Artificial intelligence software programs based on the classical model are being applied to programmed decisions, such as how to schedule airline crews or how to process insurance claims most efficiently. The administrative model includes the concepts of bounded rationality and satisficing and describes how managers make decisions in situations that are characterized by uncertainty and ambiguity. The administrative model is descriptive, meaning that it describes how managers actually make decisions, rather than how they should make decisions according to a theoretical model. Bounded rationality means that people have the time and cognitive ability to process only a limited amount of information on which to base decisions. Satisficing means choosing the first alternative that satisfies minimal decision criteria, regardless of whether better solutions are presumed to exist. Intuition is an aspect of administrative decision making that refers to a quick comprehension of a decision situation based on past experience but without deliberate rational thought or analysis. A global survey found that two-thirds of CEOs said they had ignored insights provided by data analysis or computer models because it contradicted their intuition. A new trend in decision making, quasirationality, combines intuitive and analytical thought. The political model takes into consideration that many decisions require debate, discussion, and coalition building. The Los Angeles Rams used a political model to hire a new head football coach. A coalition is an informal alliance among managers who support a specific goal or solution

Before approving a new drug, the U.S. Food and Drug Administration requires that companies submit the results of rigorous scientific testing on the drug's effectiveness. These results are reviewed by physicians, statisticians, chemists, pharmacologists, and other scientists who use logic to determine whether or not a drug is safe. These researchers are using the model of decision making.

The researchers at the FDA are using the classical model of decision making, which assumes that people have complete information and can use that information to make decisions rationally and logically.

Aaron is an administrative manager at EMC Insurance. His job includes updating the company website every morning to include the latest news articles about EMC. Aaron's decision about whether or not to update the EMC website is being made under conditions of_____ , because:

This decision is being made under conditions of certainty, because Aaron does exactly the same thing every day, and the outcomes of his actions are known.

Univision Communications Inc., a Spanish language entertainment giant, hired Randy Falco as its executive vice president and chief operating officer. The decision executives at Univision made about who to pick for this position is a:

This is a nonprogrammed decision. In making the decision of who to hire, Univision executives had to consider multiple options, which made the decision poorly defined. In addition, the decision had important consequences for the company: Picking the wrong COO could have been be very costly.

Last spring, your spouse surprised you with a puppy. Fortunately, the puppy (named Loki after the Norse god of mischief) gets along well with your 17 cats. The decision you make every day about whether or not to feed Loki is a:

This is a programmed decision. The rule that governs your actions is "Feed the dog every day." You really don't have a choice about whether or not to feed your dog—it has to be done. It's part of being a responsible pet guardian.

Suppose that you are part of Alpha Pi Omega, a service fraternity that is dedicated to doing good in your community. Recently, your chapter has been trying to decide on a new project for the upcoming year. There are three possibilities. You could relandscape the grounds of your local library, so people would have a nice place outdoors to read. You could also start a book drive to replace books lost in a fire at your local elementary school. Finally, you could work with Meals on Wheels in your county to deliver food to the elderly who can't go to the grocery store. You strongly feel that the best choice would be to run the book drive. In order to make it more likely that your chapter will pick that option, you talk with a number of other fraternity members and get them to agree with you. Luckily, you also find out that another chapter of your fraternity has done something similar, and they achieved grateful recognition from their community. So you bring this fact to the attention of all of your fellow fraternity members.

This is an example of a political decision making model. The decision is made with the help of a coalition, and an appreciation of external environmental factors.

The VP of marketing knows that the organization wants to increase sales by 10% and knows there are two ways to do this. In this decision involving , either option might fail, but the VP can estimate their chance of failure.

This sentence describes a situation of risk. With risk, a decision has clear-cut goals and good information about alternatives is available. Although the future outcomes associated with each alternative are subject to some chance of loss or failure, enough information is available to estimate the probability of success or failure. Uncertainty means that information about alternatives and their likelihood of success is incomplete. Ambiguity means that even what the goal should be or what problem should be solved is unclear.

Evidence-based decision making example

To keep emotion from clouding their judgment regarding patient care, for example, doctors in the Partners Health Care System incorporate the use of clinical decision support systems based on reams of data about what works and what doesn't.

Ambiguity example

Twitter has clear rules forbidding direct threats of violence and some forms of hate speech, but there are no rules prohibiting deception or misinformation. As CEO Jack Dorsey and a team of colleagues gathered to discuss how to get rid of "dehumanizing speech" even if it doesn't violate Twitter's rules, one team member said during his comments, "Please bear with me. This is incredibly complex." The policy meeting went on for more than an hour, with participants struggling to simply come up with a definition of what constitutes "dehumanizing speech." Karen Kornbluh, a senior fellow of digital policy at the Council of Foreign Relations, captured Twitter's wicked decision problem when she said, "There is no due process, no transparency, no case law, and no expertise on these very complicated legal and social questions behind these decisions."

Anchoring bias

a cognitive bias the causes us to rely too headily on the first piece of information we are given and therefore interpret never information from the reference point of our anchor, instead of seeing it objectively. •Justifying past decisions

Evidence-based decision making

a commitment to make more informed and intelligent decisions based on the best available facts and evidence

postmortem

a disciplined procedure whereby managers review the results of decisions to evaluate what worked, what didn't, and how to do things better; also called after-action review after-action review A disciplined procedure whereby managers review the results of decisions to evaluate what worked, what didn't, and how to do things better

Analytical style:

base decisions on all available rational data

behavioral style

exhibit a deep concern regarding effect of decision on others

Evaluation and Feedback

gather information to determine how well the decision was implemented and whether it achieved its goals.

Programmed decisions:

involve situations that have occurred often enough to enable decision rules to be developed and applied in future

Groupthink

tendency of people in groups to suppress contrary opinions

Decision Making:

the process of identifying problems and opportunities and the resolving them

Step 5. Implementation of chosen alternative

the use of managerial,, and persuasive abilities to ensure that the chosen alternative is carried out