decision making
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dec_ch_3_.pptxManagerial Decision Making
Chapter Three
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Learning Objectives
LO1 Summarize the steps in making “rational” decisions.
LO2 Evaluate the pros and cons of using a group to make decisions.
LO3 Understand how decisions are made in organizations.
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2
The Phases of Decision Making
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Identifying and Diagnosing the Problem
Generating Alternative Solutions
Evaluating Alternatives
Making the Choice
Implementing the Decision
Evaluating the Decision
Identifying and Diagnosing the Problem
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Typically, a manager realizes some discrepancy between the current state (the way things are) and a desired state.
Discrepancies may be detected by comparing current performance against:
Past performance.
The current performance of other organizations.
Future expected performance as determined by plans and forecasts.
Generating Alternative Solutions
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Ready-made solutions
Ideas that have been seen or tried before.
Custom-made solutions
New, creative solutions designed specifically for the problem.
Evaluating Alternatives
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Evaluating alternatives
Involves determining the value or adequacy of the alternatives that were generated.
Which solution will be the best?
Contingency plans
Alternative courses of action that can be implemented based on how the future unfolds.
Implementing the Decision (1 of 2)
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Determine how things will look when the decision is fully operational.
Chronologically order the steps necessary to achieve a fully operational decision.
List the resources and activities required to implement each step.
Estimate the time needed for each step.
Assign responsibility for each step to specific individuals.
Implementing the Decision (2 of 2)
What problems could this action cause?
What can we do to prevent the problems?
What unintended benefits or opportunities could arise?
How can we make sure they happen?
How can we be ready to act when the opportunities come?
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Evaluating the Decision
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Feedback that suggests the decision is working implies that the decision should be continued and applied elsewhere in the organization.
Negative feedback means that either the implementation will require more resources or the decision was a bad one.
Pros and Cons of Using a Group to Make Decisions
Potential Advantages
Larger pool of information
More perspectives and approaches
Intellectual stimulation
People understand the decision
People are committed to the decision
Potential Disadvantages
One person dominates
Satisficing
Groupthink
Goal displacement
Social loafing
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Potential Problems of Using a Group
Groupthink
Occurs when people choose not to disagree or raise objections because they don’t want to break up a positive team spirit.
Goal displacement
A condition that occurs when a decision-making group loses sight of its original goal and a new, less important goal emerges.
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Models of Organizational Decision Processes (1 of 2)
Bounded rationality
A less-than-perfect form of rationality in which decision makers cannot be perfectly rational because decisions are complex and complete information is unavailable or cannot be fully processed.
Incremental model
Model of organizational decision making in which major solutions arise through a series of smaller decisions.
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Models of Organizational Decision Processes (2 of 2)
Coalitional model
Model of decision making in which groups with differing preferences use power and negotiation to influence decisions.
Garbage can model
Model of organizational decision making depicting a chaotic process and seemingly random decisions.
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At chapter end, you should be able to:
LO1 Summarize the steps in making “rational” decisions.
LO2 Evaluate the pros and cons of using a group to make decisions.
LO3 Understand how decisions are made in organizations.
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education
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