Chapter 3: Managerial decision making. Chapter 3 discusses the most fundamental managerial activity: decision making. Because managers make decisions constantly, sound decision-making skills are essential for good performance. | Managerial Decision Making Chapter Three McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Learning Objectives LO1 Describe the kinds of decisions you will face as a manager. LO2 Summarize the steps in making “rational” decisions. LO3 Recognize the pitfalls you should avoid when making decisions. LO4 Evaluate the pros and cons of using a group to make decisions. 3- Learning Objectives (cont.) LO5 Identify procedures to use in leading a decision-making group LO6 Explain how to encourage creative decisions LO7 Discuss the process by which decisions are made in organizations LO8 Describe how to make decisions in a crisis 3- Characteristics of Managerial Decisions 3- Figure Lack of Structure Programmed decisions Decisions encountered and made before, having objectively correct answers, and solvable by using simple rules, policies, or numerical computations. Nonprogrammed decisions New, novel, complex decisions having no proven answers. 3- Conflict Conflict Opposing pressures from different sources, occurring on the level of psychological conflict or of conflict between individuals or groups. 3- The Stages of Decision Making 3- Identifying and diagnosing the problem Making the Choice Satisficing Choosing an option that is acceptable, although not necessarily the best or perfect Optimizing Achieving the best possible balance among several goals 3- Implementing the Decision 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. 3- Implementing the Decision 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? 3- Psychological Biases Illusion of control People’s belief that they can influence events, even when they have no control over what will happen Framing effects A decision bias influenced by the way in which a problem or decision alternative is phrased or presented. 3- Potential Problems of Using a Group Groupthink A phenomenon that occurs in decision making when group members avoid disagreement as they strive for consensus Goal displacement A condition that occurs when a decision-making group loses sight of its original goal and a new, less important goal emerges. 3- Managing Group Decision Making 3- Constructive Conflict Cognitive conflict Issue-based differences in perspectives or judgments. Affective conflict Emotional disagreement directed toward other people. 3- Brainstorming Brainstorming A process in which group members generate as many ideas about a problem as they can; criticism is withheld until all ideas have been proposed. 3-
