midterm multiple choice

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PowerPoint Presentation by Charlie Cook The University of West Alabama

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Management 11e Griffin

Define decision making and discuss types of decisions and decision-making conditions.

Discuss rational perspectives on decision making, including the steps in rational decision making.

Describe the behavioral aspects of decision making.

Discuss group and team decision making, including the advantages and disadvantages of group and team decision making and how it can be more effectively managed.

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Learning Objectives

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The Decision Making Process

Decision Making

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

Decision-Making Process:

Recognizing and defining the decision situation

Identifying alternatives

Choosing the “best” alternative

Putting the alternative into practice

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The Nature of Decision Making

Decision-Making Process (cont’d)

An effective decision optimizes some set of factors such as profits, sales, employee welfare, and market share.

Managers make decisions about both problems and opportunities.

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Types of Decisions

Programmed Decision

is a fairly structured decision or one that recurs with some frequency or both.

Example: Starting your car in the morning.

Nonprogrammed Decision

is relatively unstructured and occurs much less often a programmed decision.

Example: Choosing a vacation destination.

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Decision-Making Conditions

Decision Making Under Risk

Decision Making Under Uncertainty

Decision Making Under Certainty

Conditions Affecting Decision Making

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Level of ambiguity and chances of making a bad decision

Uncertainty

Risk

Certainty

The decision maker faces conditions of…

Lower

Moderate

Higher

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9.1 Decision-Making Conditions

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Decision-Making Conditions

Decision Making Under Certainty

The decision maker knows with reasonable certainty what the alternatives are and what conditions are associated with each alternative.

Decision Making Under Risk

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

Decision Making Under Uncertainty

The decision maker does not know all the alternatives, the risks associated with each, or the consequences of each alternative.

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When faced with a decision situation, managers should…

obtain complete and perfect information

eliminate uncertainty

evaluate everything logically and rationally

…and end up with a decision that best serves the interests of the organization

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9.2 The Classical Model of Decision Making

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Step	Detail	Example
1. Recognizing and defining the decision situation	Some stimulus indicates that a decision must be made. The stimulus may be positive or negative.	A plant manager sees that employee turnover has increased by 5 percent.
2. Identifying alternatives	Both obvious and creative alternatives are desired. In general, the more important the decision, the more alternatives should be generated.	The plant manager can increase wages, increase benefits, or change hiring standards.
3. Evaluating alternatives	Each alternative is evaluated to determine its feasibility, its satisfactoriness, and its consequences.	Increasing benefits may not be feasible. Increasing wages and changing hiring standards may satisfy all conditions.
4. Selecting the best alternative	Consider all situational factors and choose the alternative that best fits the manager’s situation.	Changing hiring standards will take an extended period of time to cut turnover, so increase wages.
5. Implementing the chosen alternative	The chosen alternative is implemented into the organizational system.	The plant manager may need permission from corporate headquarters. The human resource department establishes a new wage structure.
6. Following up and evaluating the results	At some time in the future, the manager should ascertain the extent to which the alternative chosen in step 4 and implemented in step 5 has worked.	The plant manager notes that, six months later, turnover dropped to its previous level

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9.1 Steps in the Rational Decision-making Process

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Management Challenge Question

Your are captain of a container ship caught in a typhoon. Water is leaking into the cargo hold and you are unsure of whether or not you should abandon ship.

What state of uncertainty is described in this scenario?

How does the state of uncertainty affect the likelihood that you will make the correct decision?

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Is the alternative

feasible?

Eliminate from

consideration

Is the alternative

satisfactory?

Are the alternative’s

consequences

affordable?

Retain for further

consideration

Yes

Eliminate from

consideration

Eliminate from

consideration

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9.3 Evaluating Alternatives in the Decision-making Process

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Behavioral Aspects of Decision Making

Satisficing

Bounded rationality

Coalitions

Escalation of commitment

Intuition

Risk propensity

Influences on Decision Making

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When faced with a decision situation, managers actually…

use incomplete and imperfect information

are constrained by bounded rationality

tend to satisfice

…and end up with a decision that may or may not serve the interests of the organization

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9.4 The Administrative Model of Decision Making

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Behavioral Aspects of Decision Making

Bounded Rationality

Decision makers are limited by their values and unconscious reflexes, skills, and habits.

Satisficing

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

Coalition

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

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Behavioral Aspects of Decision Making (cont’d)

Intuition

An innate belief about something without conscious consideration.

Escalation of Commitment

Staying with a decision even when it appears to be wrong.

Risk Propensity

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

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Management Challenge Question

How could a coalition lead to escalation of commitment?

What can be done to prevent or avoid the escalation?

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Managerial Ethics and Decision Making

Individual Ethics

Managerial Ethics

Employees

Other economic agents

Organizational Ethics

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Ethics and Decision Making

Managerial Ethics

Individual ethics (personal beliefs about right and wrong behavior) combine with the organization’s ethics to create managerial ethics.

Components of Managerial Ethics:

Relationship of the firm to employees

Employees to the firm

The firm to other economic agents

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Group and Team Decision Making

Interacting group or team

Delphi groups

Nominal group

Forms of Group Decision Making

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Group and Team Decision Making

Forms of Group Decision Making

Interacting group or team

Consists of an existing group or newly formed team interacting and then making a decision.

Delphi groups

Developing a consensus of expert opinion from a panel of experts who individually contribute through a moderator.

Nominal groups

Generating ideas through the individual contributions of alternatives that are winnowed down to reach a decision.

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Advantages	Disadvantages
More information and knowledge are 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.	The process takes longer than individual decision making, so it is costlier. Compromise decisions resulting from indecisiveness may emerge. One person may dominate the group. Groupthink may occur.

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9.2 Advantages and Disadvantages of Group and Team Decision Making

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Making Group and Team Decisions More Effective

Being aware of the pros and cons of having a group or team make a decision.

Setting deadlines for when decisions must be made.

Avoiding dominance problems by managing group membership.

Having each group member individually critically evaluate all alternatives.

Not making your position known too early.

Appointing a group member to be a “devil’s advocate.”

Holding a follow-up meeting to recheck the decision.

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KEY TERMS

decision-making

decision-making process

programmed decision

nonprogrammed decision

state of certainty

stage of risk

state of uncertainty

classical decision model

steps in rational decision making

administrative model

bounded rationality

satisficing

coalition

intuition

escalation of commitment

risk propensity

interacting groups

Delphi group

nominal group

groupthink

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