1 Ch. 3 Outline Managerial Decision Making 1.Characteristics of Managerial Decisions 2.The Stages of Decision Making 3.The Best Decision 4.Barriers to.

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Ch. 3 OutlineManagerial Decision Making

1. Characteristics of Managerial Decisions

2. The Stages of Decision Making

3. The Best Decision

4. Barriers to Effective Decision Making

5. Decision Making in Groups

6. Managing Group Decision Making

7. Organizational Decision Making

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Characteristics of Decisions

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Lack of Structure

• Programmed Decisions– Decisions encountered

and made before, having objectively correct answers, and solvable by using simple rules, policies, or numerical computations

• Non-programmed Decisions– New, novel, complex

decisions having no proven answers

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Uncertainty and Risk

We operate in an environment— the Internet—where there’s an enormous amount of uncertainty. You can’t be sure what’s going to happen tomorrow,

never mind next year. The danger is that the uncertainty can lead to paralysis. You spend so

much time trying to nail down all the possibilities and risks, you never get around to taking action. And if that happens—if you become indecisive—

you’re dead.- George Conrades

Chairman and CEO Akamai Technologies

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Conflict

• Conflict exists when the manager must consider opposing pressures from different sources; occurs at two levels– Psychological conflict occurs when several

options are attractive, or when non of the options is attractive

– Interpersonal conflict

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Stages of Decision Making

• Ideal decision making process will have six stages1. Identify and diagnose the problem2. Generate alternative solutions3. Evaluate alternatives4. Make the choice5. Implement the decision6. Evaluate the decision

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The Best Decision

• To make the best decision managers must use vigilance– Vigilance is a process in which

a decision maker carefully executes all stages of the decision making process

• Research shows that when managers use a rational decision making process they tend to make better decisions

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Barriers to Effective Decision Making

• Psychological Biases

• Time Pressures

• Social Realities

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Psychological Biases

• The Illusion of Control—a belief that you can influence events when an objective analysis would reveal that you can’t.

• Framing—responding to the way the problem is stated rather than the problem itself.

• Discounting the Future—using selection criteria based on short-term gain and ignoring long-term costs or benefits.

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Decision Making in Groups

• The basic philosophy for group decision making is that ‘two heads are better than one’

• Group performance is a function of two variables– How effectively the group capitalizes on potential

advantages– How effectively the group minimizes potential

problems

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Decision Making in Groups

• 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

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Managing Group Decision Making

• There are three factors for effectively managing group decision making– Appropriate leadership

style– Constructive use of

disagreement and conflict

– The enhancement of creativity

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Brainstorming

• Brainstorming is a commonly used technique used to encourage creativity

• It is 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