Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin14C H A P T E RDecision MakingDecision MakinglCONTRAST programmed with nonprogrammed decisions.lIDENTIFY the steps in the decision-making process.lDISCUSS priority setting.lDESCRIBE the conditions governing alternative- outcomes relationships.lEXPLAIN the role of behavioral influences on decision making. lCOMPARE individual and group decision making.lIDENTIFY specific techniques for stimulating creativity.Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/IrwinTypes of Decisions Repetitive and routine decisions and where a definitive procedure is developed to handle them. Novel and unstructured decisions required for unique and complex management problems. 3Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/IrwinAttributes of of Decisions lDecisions should be thought of as a means rather than ends.lDecisions are the organizational mechanism through which an attempt is made to achieve a desired state.lDecisions are, in effect, an organizational response to a problem.lEvery decision is the outcome of a dynamic process influenced by many forces.4Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/IrwinA Rational Decision-Making Process Establishing specific goals and objectives and measuring resultsProblem identification and definitionEstablishing prioritiesReviseReviseConsideration of causesDevelopment of alternative solutionsEvaluation of alternative solutionsReviseReviseImplementationFollow-up ReviseReviseSolution Selection5Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/IrwinProblem Identification and DefinitionDefining Problems in Terms of SolutionsIdentifying Symptoms as ProblemsFactors Affecting Problem Identification:Perceptual Problems6Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/IrwinInvolves Considering Three Issues:Urgency Relates to time.Impact Seriousness of the problems effects.Establishing Priorities Growth Tendency Addresses future considerations.7Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/IrwinAlternative-Outcome RelationshipPOSSIBLE CONDITIONSPOSSIBLE CONDITIONS Certainty Complete knowledge of the probability of the outcome of each alternative. Uncertainty Absolutely no knowledge of the probability of the outcome of each alternative. Risk Some probabilistic estimate of the outcomes of each alternative.8Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/IrwinBounded Rationality AssumptionslRarely have all necessary or desired informationlUnaware of all alternatives or consequenceslEarly adoption of solutions due to limitations commonlOrganizational goals constrain decision-makinglConflicting constituents goals can force compromisesMarch and Simons administrative decision- making model depicts decision-makers aslOperating with incomplete informationlAffected by their cognitive abilitieslImpacted by psychological and sociological factors9Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/IrwinIntuitive Decision-Making Using experience, self-confidence, and self-motivation to process information, data, and the environment or address a problem or opportunity.Contributing Factors:lHigh levels of uncertaintylNo history or past experience to draw uponlIntense time pressureslExcessive number of alternatives10Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/IrwinBehavioral Influences ValuesValuesPotential for Potential for DissonanceDissonancePropensity Propensity for Riskfor RiskEscalation of Escalation of CommitmentCommitmentCultural ContextCultural ContextDecision-Decision- MakingMaking11Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/IrwinCognitive Dissonance Conditions contributing to anxiety:lPsychological and financial importance of decisionlNumber of foregone alternativeslNumber of favorable features of foregone alternativesLack of consistency or harmony among an individuals various cognitions after a decision has been made.12Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/IrwinEscalation of Commitment lNeed to turn a losing or poor decision into a winning or good decisionlFound in decision makers who: Are unclear of goals Have a fear of failure Are feeling pressured Work in a low trust cultureAn increasing commitment to a previous decision when a “rational” decision maker would withdraw.13Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/IrwinIndividual Versus Group Decision-MakingProbable Probable quality of quality of decis