Principles of Management Chapter 7

Decisions

A choice made from among available alternatives

Brainstorm

Bring greater intellectual stimulation and creativity to the decision-making process than is usually possible with one person acting alone

Decision Making

The process of identifying and choosing alternative courses of action

Stage 2 of Classical Decision Making

Think Up Alternative Solutions

Rational Decision Making Step 2

Think up alternative solutions

Ethical Decision Making/ Decision Tree

To help make ethical decisions, a decision tree—a graph of decisions and their possible consequences—may be helpful.

Evidence-Based Decision Making

Translation of principles based on best evidence into organizational practice, bringing rationality to the decision-making process

Stage 3 of Classical Decision Making

Evaluate Alternatives & Select a Solution

Rational Decision Making Step 3

Evaluate alternatives and select a solution

Intuition

Making a choice without the use of conscious thought or logical inference,

Groupthink

A cohesive group's blind unwillingness to consider alternatives--this occurs when group members strive for agreement among themselves for the sake of unanimity and avoid accurately assessing the decision situation

Nine Common Decision-Making Biases

Availability Bias- Managers use information readily available from memory to make judgements. Representativeness Bias- Tendency to generalize from a small sample or a single event. Confirmation Bias- People seek information to support their point of view and discount data that does not. Sunk-Cost Bias- When Managers add up all the money already spent on a project and conclude it is too costly to simply abandon it Anchoring and Adjustment Bias- Tendency to make decisions based on an initial figure Overconfidence Bias- Peoples subjective confidence in their decision making is greater thatn their objective accuracy Hindsight Bias- Tendency of people to view event as being more predictable thatn they really rae

Rational Decision Making

Four steps in making a rational decision are (1) identify the problem or opportunity (2) think up alternative solutions (3) evaluate alternatives and select a solution (4) implement and evaluate the solution chosen.

Nonrational Decision Making

Models of decision-making style that explain how managers make decisions; they assume that decision making is nearly always uncertain and risky, making it difficult for managers to make optimum decisions

Bounded Rationality

One type of nonrational decision making; the ability of decision makers to be rational is limited by numerous constraints

Satisficing

One type of nonrational decision-making model; managers seek alternatives until they find one that is satisfactory, not optimal

Classical Decision Making

Stage 1: Identify the Problem or Opportunity Stage 2: Think Up Alternative Solutions Stage 3: Evaluate Alternatives & Select a Solution Stage 4: Implement & Evaluate the Solution Chosen

Analytics

Term used for sophisticated forms of business data analysis, such as portfolio analysis or time-series forecast

Stage 1 of Classical Decision Making

Identify the Problem or Opportunity

Rational Decision Making Step 1

Identify the problem or opportunity

Stage 4 of Classical Decision Making

Implement & Evaluate the Solution Chosen

Rational Decision Making Step 4

Implement and evaluate the solution chosen.