Download File - Dr. Mohammad Ta`Amnha

7
John R. Schermerhorn, Jr.
Daniel G. Bachrach
Introduction to
Management
13th edition
CHAPTER 7
THE DECISION-MAKING
PROCESS
PLANNING AHEAD — KEY TAKEAWAYS
 Discuss
the role of information in the
management process.
 Identify how managers approach problems and
decisions.
 Describe the six steps in the decision-making
process?
 Describe the potential pitfalls and sources of
creativity in managerial decision making.
Copyright ©2015 John Wiley & Sons, Inc.
CHAPTER 7 OUTLINE
1.
Information, Technology, and Management
a)
b)
c)
2.
Information and information systems
Data Mining and Analytics
Business Intelligence and Executive Dashboards
Problem Solving and Managerial Decisions
Managers as Problem Solvers
b) Problem-Solving Approaches and Styles
c) Structured and Unstructured Problems
d) Crisis Problems
e) Problem-Solving Environments
a)
Copyright ©2015 John Wiley & Sons, Inc.
CHAPTER 7 OUTLINE
3.
The Decision-Making Process
Step 1 – Identify and Define the Problem
b) Step 2 – Generate and Evaluate Alternative
Courses of Action
c) Step 3 – Decide on a Preferred Course of Action
d) Step 4 – Implement the Decision
e) Step 5 – Evaluate Results
f) At All Steps – Check Ethical Reasoning
a)
4.
Issues in Managerial Decision Making
a)
b)
Decision errors and traps
Creativity in decision making
Copyright ©2015 John Wiley & Sons, Inc.
THE DECISION-MAKING PROCESS
• Decision making a
choice from
two or more
alternatives
WHAT ARE THE TOP TEN SKILLS THAT EMPLOYERS
WANT?

1. Ability to work in a team structure
 2.
Ability to make decisions and solve problems
3. Ability to communicate verbally with people inside and
outside an organization
 4. Ability to plan, organize and prioritize work
 5. Ability to obtain and process information
 6. Ability to analyze quantitative data
 7. Technical knowledge related to the job
 8. Proficiency with computer software programs
 9. Ability to create and/or edit written reports
 10. Ability to sell and influence others

Copyright ©2015 John Wiley & Sons, Inc.
THE TOP 5 BUSINESS DECISIONS OF ALL TIME

#5 Greatest Decision—General
Electric. Jack Welch’s decision to
fully fund a first-in-class training
center at Crotonville, led to the
development of hundreds of great
leaders who practiced the “GE
Way”.
Copyright ©2015 John Wiley & Sons, Inc.
THE TOP 5 BUSINESS DECISIONS OF ALL TIME

#4
Greatest
Decision—
Samsung. Their decision to
launch a sabbatical program
that sends top talent all around
the world continues to be the
secret
behind
Samsung’s
success as a global brand.
Copyright ©2015 John Wiley & Sons, Inc.
THE TOP 5 BUSINESS DECISIONS OF ALL TIME

#3 Greatest Decision—WalMart. Sam Walton’s
decision to hold Saturday
morning, all-employee
meetings led to a culture of
rapid information and
decision making, which in
turn created one of the
biggest companies in the
world.
Copyright ©2015 John Wiley & Sons, Inc.
THE TOP 5 BUSINESS DECISIONS OF ALL TIME

#2
Greatest
Decision—
Apple. The board’s decision
to bring back Steve Jobs,
after firing him a decade
earlier, led to amazing
product innovation and to the
creation of one of the most
valuable companies in the
world.
Copyright ©2015 John Wiley & Sons, Inc.
THE TOP 5 BUSINESS DECISIONS OF ALL TIME

#1 Greatest Decision—Ford.
Henry Ford’s decision to double
the wages of his workers
enabled him to attract the talent
he needed, and helped insure a
class of worker who could afford
the very products they were
building.
Copyright ©2015 John Wiley & Sons, Inc.
EXHIBIT 6-1
DECISION-MAKING PROCESS
THE DECISION-MAKING PROCESS (CONT.)
• Step 1: Identify a Problem
– Problem - an obstacle that makes it
difficult to achieve a desired goal or
purpose.
– Every decision starts with a
problem, a discrepancy between
an existing and a desired condition
– Example - Amanda is a sales
manager whose reps need new
laptops
THE DECISION-MAKING PROCESS (CONT.)
• Step 2: Identify Decision Criteria
– Decision criteria are factors that are
important (relevant) to resolving the
problem
– Example - Amanda decides that
memory and storage capabilities,
display quality, battery life,
warranty, and carrying weight are
the relevant criteria in her decision.
THE DECISION-MAKING PROCESS (CONT.)
• Step 3: Allocate Weights to the
Criteria
– If the relevant criteria aren’t
equally important, the decision
maker must weight the items in
order to give them the correct
priority in the decision.
– The weighted criteria for our
example are shown in Exhibit 6-2.
EXHIBIT 6-2
IMPORTANT DECISION CRITERIA
THE DECISION-MAKING PROCESS (CONT.)
• Step 4: Develop Alternatives
– List viable alternatives that could
resolve the problem
– Example - Amanda, identifies
eight laptops as possible choices.
(See Exhibit 6-3.)
EXHIBIT 6-3
POSSIBLE ALTERNATIVES
THE DECISION-MAKING PROCESS (CONT.)
• Step 5: Analyze Alternatives
– Appraising each alternative’s
strengths and weaknesses
– An alternative’s appraisal is based
on its ability to resolve the issues
related to the criteria and criteria
weight.
THE DECISION-MAKING PROCESS (CONT.)
• Step 6: Select an Alternative
• Choosing the best alternative
– The alternative with the highest total weight is
chosen.
EXHIBIT 6-4
EVALUATION OF ALTERNATIVES
THE DECISION-MAKING PROCESS (CONT.)
• Step 7: Implement the Alternative
• Putting the chosen alternative into
action
- Conveying the decision to and gaining
commitment from those who will carry
out the alternative
THE DECISION-MAKING PROCESS (CONT.)
• Step 8: Evaluate Decision Effectiveness
– The soundness of the decision is judged
by its outcomes.
– How effectively was the problem
resolved by outcomes resulting from the
chosen alternatives?
– If the problem was not resolved, what
went wrong?
EXHIBIT 6-5
DECISIONS MANAGERS MAY MAKE
EXHIBIT 6-5
DECISIONS MANAGERS MAY MAKE (CONT.)
INFORMATION, TECHNOLOGY, &
MANAGEMENT
Information, Technology, & Management

Managers must have


Technological competency
 Ability to understand new technologies and to use
them to their best advantage
Information competency


Ability to locate, gather, organize, and display
information for decision making and problem solving
Analytical competency

Ability to evaluate and analyze information to make
actual decisions and solve real problems
Copyright ©2015 John Wiley & Sons, Inc.
INFORMATION, TECHNOLOGY, & MANAGEMENT
What is useful information?

Data


Information


Raw facts and observations
Data made useful and meaningful for decision
making
Information drives management functions
Copyright ©2015 John Wiley & Sons, Inc.
INFORMATION, TECHNOLOGY, & MANAGEMENT
 Characteristics
of useful information:
Timely
 High quality
 Complete
 Relevant
 Understandable

 Analytics:
systematic gathering and
processing of data to make it useful as
information
Copyright ©2015 John Wiley & Sons, Inc.
INFORMATION, TECHNOLOGY, & MANAGEMENT
 Data



Mining and Analytics
Data mining is the process of analyzing data to
produce useful information for decision makers.
Big data exists in huge quantities and is difficult to
process without sophisticated mathematical and
computing techniques.
Management with analytics involves systematic
gathering and processing of data to make informed
decisions.
Copyright ©2015 John Wiley & Sons, Inc.
United Nations buys social data from Twitter
 UPS spends over $1 Billion per year on technology.
 UPS The company expects to save some $50 million
per year form eliminating excess driving miles.

Copyright ©2015 John Wiley & Sons, Inc.
INFORMATION, TECHNOLOGY, & MANAGEMENT
Business intelligence and Executive
Dashboards

Management information systems


Use IT to collect, organize, and distribute data for
use in decision making
Business intelligence

Taps information systems to extract and report data
in organized ways that are helpful to decision
makers
Copyright ©2015 John Wiley & Sons, Inc.
Competitive information- Amazon
 Big picture information- financial results and contribution
 Function-specific information- cost- benefit analysis

Copyright ©2015 John Wiley & Sons, Inc.
INFORMATION, TECHNOLOGY, &
MANAGEMENT
Executive dashboards
Visually update and display key
performance indicators and information on a
real-time basis

Copyright ©2015 John Wiley & Sons, Inc.
Copyright ©2015 John Wiley & Sons, Inc.
Copyright ©2015 John Wiley & Sons, Inc.
Copyright ©2015 John Wiley & Sons, Inc.
INFORMATION, TECHNOLOGY, & MANAGEMENT
Information needs in organizations

Information exchanges with the external
environment:
Gather intelligence information
 Provide public information


Information exchanges within the
organization:
Facilitate decision making
 Facilitate problem solving

Copyright ©2015 John Wiley & Sons, Inc.
FIGURE 7.1 INTERNAL AND EXTERNAL INFORMATION
NEEDS IN ORGANIZATIONS
Copyright ©2015 John Wiley & Sons, Inc.
PROBLEM SOLVING AND MANAGERIAL DECISIONS
Problem Solving and Managerial Decisions

Managers as Information Processors
Continually gather, give, and receive information
 Now as much electronic as it is face to face
 Always on, always connected

Copyright ©2015 John Wiley & Sons, Inc.
FIGURE 7.2 THE MANAGER AS AN INFORMATIONPROCESSING NERVE CENTER
Copyright ©2015 John Wiley & Sons, Inc.
PROBLEM SOLVING AND MANAGERIAL
DECISIONS
Problem solving

The process of identifying a discrepancy between
actual and desired performance and taking action to
resolve it
Decision
Performance
threat
Performance
opportunity
A choice
among
possible
alternative
courses of
action
Something is
wrong or has
the potential to
go wrong
Situation offers
the chance for
a better future
if the right
steps are taken
Copyright ©2015 John Wiley & Sons, Inc.
PROBLEM SOLVING AND MANAGERIAL DECISIONS
Problem-solving approaches or styles:
Problem avoiders
Problem solvers
Problem seekers
• Inactive in information
gathering and solving
problems
• Reactive in gathering
information and
solving problems
• Proactive in
anticipating problems
and opportunities and
taking appropriate
action to gain an
advantage
Copyright ©2015 John Wiley & Sons, Inc.
PROBLEM SOLVING AND MANAGERIAL
DECISIONS
Systematic versus intuitive thinking
Systematic
thinking
• approaches
problems in a
rational, step-bystep, and
analytical fashion
Intuitive
thinking
• approaches
problems in a
flexible and
spontaneous
fashion
Copyright ©2015 John Wiley & Sons, Inc.
PROBLEM SOLVING AND MANAGERIAL
DECISIONS
Multidimensional thinking applies both
intuitive and systematic thinking

Effective multidimensional thinking requires
skill at strategic opportunism
Copyright ©2015 John Wiley & Sons, Inc.
PROBLEM SOLVING AND MANAGERIAL
DECISIONS
Managers use different cognitive styles
Copyright ©2015 John Wiley & Sons, Inc.
PROBLEM SOLVING AND MANAGERIAL
DECISIONS
Types of problems
Structured problems are ones that are
familiar, straightforward, and clear with
respect to information needs
 Programmed decisions apply solutions that
are readily available from past experiences to
solve structured problems

Copyright ©2015 John Wiley & Sons, Inc.
PROBLEM SOLVING AND MANAGERIAL
DECISIONS
Types of problems
Unstructured problems are ones that are full
of ambiguities and information deficiencies
 Nonprogrammed decisions apply a specific
solution to meet the demands of a unique
problem
 Commonly faced by higher-level
management

Copyright ©2015 John Wiley & Sons, Inc.
PROBLEM SOLVING AND MANAGERIAL
DECISIONS
Crisis decision making

A crisis involves an unexpected problem that
can lead to disaster if not resolved quickly
and appropriately
Copyright ©2015 John Wiley & Sons, Inc.
PROBLEM SOLVING AND MANAGERIAL
DECISIONS
Rules for crisis management:
•
•
•
•
•
•
Figure out what is going on
Remember that speed matters
Remember that slow counts, too
Respect the danger of the unfamiliar
Value the skeptic
Be ready to “fight fire with fire ”
Copyright ©2015 John Wiley & Sons, Inc.
PROBLEM SOLVING AND MANAGERIAL
DECISIONS
Managers make decisions with various
amounts of information
Certain environment
• offers complete information on possible action
alternatives and their consequences
Risk environment
• lacks complete information but offers probabilities of
the likely outcomes for possible action alternatives
Uncertain environment
• lacks so much information that it is difficult to assign
probabilities to the likely outcomes of alternatives
Copyright ©2015 John Wiley & Sons, Inc.
FIGURE 7.3 THREE ENVIRONMENTS FOR
MANAGERIAL DECISION MAKING AND PROBLEM
SOLVING
Copyright ©2015 John Wiley & Sons, Inc.
FIGURE 7.4 STEPS IN MANAGERIAL DECISION
MAKING AND PROBLEM SOLVING
Copyright ©2015 John Wiley & Sons, Inc.
THE DECISION-MAKING PROCESS
Step 1 — Identify and define the problem
Focuses on information gathering, information
processing, and deliberation
 Decision objectives should be established
 Common mistakes in defining problems:

Defining the problem too broadly or too narrowly
 Focusing on symptoms instead of causes
 Choosing the wrong problem

Copyright ©2015 John Wiley & Sons, Inc.
THE DECISION-MAKING PROCESS
Step 2 — Generate and Evaluate
Alternative Courses of Action
Potential solutions are formulated and more
information is gathered, data are analyzed,
the advantages and disadvantages of
alternative solutions are identified
 Approaches for evaluating alternatives:

Stakeholder analysis
 Cost-benefit analysis

Copyright ©2015 John Wiley & Sons, Inc.
THE DECISION-MAKING PROCESS
Step 2 — Generate and Evaluate Possible
Courses of Action (cont.)

Criteria for evaluating alternatives:
Benefits
 Costs
 Timeliness
 Acceptability
 Ethical soundness

Copyright ©2015 John Wiley & Sons, Inc.
THE DECISION-MAKING PROCESS
Step 2 — Generate and Evaluate
Possible Courses of Action (cont.)

Common mistakes:

Abandoning the search for alternatives too
quickly
Copyright ©2015 John Wiley & Sons, Inc.
THE DECISION-MAKING PROCESS
Step 3 — Decide on a Preferred Course
of Action
–
Two different approaches
•
•
Behavioral model leads to satisficing decisions
Classical model leads to optimizing decisions
Copyright ©2015 John Wiley & Sons, Inc.
FIGURE 7.5 DIFFERENCES IN THE CLASSICAL AND
BEHAVIORAL DECISION-MAKING MODELS
Copyright ©2015 John Wiley & Sons, Inc.
THE DECISION-MAKING PROCESS
Step 4 — Implement the Decision
Involves taking action to make sure the
solution decided upon becomes a reality
 Managers need to have willingness and
ability to implement action plans
 Lack-of-participation error should be avoided

Copyright ©2015 John Wiley & Sons, Inc.
THE DECISION-MAKING PROCESS
Step 5 — Evaluate Results
Involves comparing actual and desired results
 Positive and negative consequences of
chosen course of action should be examined
 If actual results fall short of desired results,
the
manager returns to earlier steps in the
decision-making process

Copyright ©2015 John Wiley & Sons, Inc.
THE DECISION-MAKING PROCESS
At all steps, check ethical reasoning!

Ask these spotlight questions
Utility
• Does the decision satisfy all
constituents or stakeholders?
Rights
• Does the decision respect the
rights and duties of everyone?
Justice
• Is the decision consistent with the
canons of justice?
Caring
• Is the decision consistent with my
responsibilities to care?
Copyright ©2015 John Wiley & Sons, Inc.
ISSUES IN MANAGERIAL DECISION MAKING
Issues in decision making
How do decision errors happen?
 Heuristics are strategies for simplifying
decision making

Copyright ©2015 John Wiley & Sons, Inc.
ISSUES IN MANAGERIAL DECISION MAKING
Availability Bias
• Bases a decision on recent information or events
Representativeness Bias
• Bases a decision on similarity to other situations
Anchoring and Adjustment Bias
• Bases a decision on incremental adjustment from a prior decision point
Framing Error
• Trying to solve a problem in the context in a positive or negative context
Confirmation Error
• Focusing on information that confirms a decision already made
Escalating Commitment
• Continuing a course of action even though it is not working
Copyright ©2015 John Wiley & Sons, Inc.
ISSUES IN MANAGERIAL DECISION MAKING
Creative Decision making:

Creativity is the generation of a novel idea or
unique approach that solves a problem or
crafts an opportunity
Big-C creativity occurs when extraordinary things
are done by exceptional people
 Little-C creativity occurs when average people
come up with unique ways to deal with daily events
and situations

Copyright ©2015 John Wiley & Sons, Inc.
ISSUES IN MANAGERIAL DECISION MAKING
Personal creativity drivers
Task
Motivation
Task
Expertise
Creativity
Skills
Creativity
Copyright ©2015 John Wiley & Sons, Inc.
ISSUES IN MANAGERIAL DECISION MAKING
Situational creativity drivers
Management
Support
Team
Creativity
Skills
Organizational
Culture
Creativity
Copyright ©2015 John Wiley & Sons, Inc.