Fundamental of Management Chap 6

8/18/2019 Fundamental of Management Chap 6

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to Accompany

Management, 10/eJohn R. Schermerhorn, Jr .

Prepared by: Jim LoPresti

University of Colorado, Boulder

Published by: John Wiley & Sons, In!

Chapter 6:The Decision Making Process


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Management 10/e - Chapter 6 2

Planning Ahead — Chapter 6 Study Questions

What is the role of information inthe management process?

o! "o managers #se informationto make "ecisions? What are the steps in the "ecision-

making process?

What are the c#rrent iss#es inmanagerial "ecision making?


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Management 10/e - Chapter 6 $

Study Question 1!hat is the role o" in"ormation inthe management process#

%nformation an" kno!le"ge & 'asiclinkages: (no!le"ge an" kno!le"ge !orkers pro)i"e a

"ecisi)e competiti)e factor in to"a*+s econom*,

(no!le"ge !orker, omeone !hose )al#e to the organi.ation

rests !ith intellect not ph*sical capa'ilities,

%ntellect#al capital, hare" kno!le"ge of a !orkforce that can 'e

#se" to create !ealth,


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Management 10/e - Chapter 6


%nformation an" kno!le"ge & 'asic

linkages cont, (no!le"ge an" intellect#al capital are

irreplacea'le organi.ational reso#rces,

The pro"#cti)it* of kno!le"ge an" kno!le"ge

!orkers "epen"s on:

Comp#ter competenc*,

%nformation competenc*,


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$igure 6.1 %nternal and e&ternal in"ormation needs o"an organi'ation


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Study Question 1!hat is the role o"in"ormation in the management process#

%mplications of %T !ithin

organi.ations:

4acilitation of comm#nication an"information sharing,

5perating !ith fe!er mi""le managers,

4lattening of organi.ational str#ct#res,

4aster "ecision making,

%ncrease" coor"ination an" control,


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Study Question 1 !hat is the role o"

in"ormation in the management process#

What is #sef#l information?Data,

7a! facts an" o'ser)ations,

%nformation, Data ma"e #sef#l for "ecision making, %nformation "ri)es management

f#nctions, Characteristics of #sef#l information:

Timel*, igh 8#alit*, Complete, 7ele)ant, 9n"erstan"a'le,


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%mplications of %T for relationships

!ith e;ternal en)ironment:

elps !ith c#stomer relationshipmanagement,

elps organi.ations !ith s#ppl* chain

management,elps in monitoring o#tso#rcing an"

other '#siness contracts,


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Management 10/e - Chapter 6 <

$igure 6.( %n"ormation technology is )rea*ing)arriers and changing organi'ations.


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Study Question 1 !hat is the role o" in"ormation in

the management process#

%nformation nee"s of organi.ations, %nformation e;changes !ith the

e;ternal en)ironment: =ather intelligence information,

Pro)i"e p#'lic information,

%nformation e;changes !ithin theorgani.ation: 4acilitate "ecision making,

4acilitate pro'lem sol)ing,


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Study Question 1 !hat is the role o" in"ormation in

the management process#

>asic information s*stem concepts:

%nformation s*stem,

9se of the latest %T to collect organi.e an"

"istri'#te "ata for #se in "ecision making,

Management %nformation *stem M%,

pecificall* "esigne" to meet the

information nee"s of managers in "ail*"ecision making,


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Study Question ( +ow do managers use in"ormation

to ma*e decisions#

Managerial a")antages of %T#tili.ation: Planning a")antages,

>etter an" more timel* access to #sef#linformation,

%n)ol)ing more people in planning,

5rgani.ing a")antages, More ongoing an" informe" comm#nication

among all parts of the organi.ation,

%mpro)e" coor"ination an" integration,


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Management 10/e - Chapter 6 1$

Study Question ( +ow do managers use in"ormation

to ma*e decisions#

Managerial a")antages of %T#tili.ation cont,: ea"ing a")antages,

%mpro)e" comm#nication !ith staff an"stakehol"ers,

(eeping o'@ecti)es clear,

Controlling a")antages,

More imme"iate meas#res of performanceres#lts, Allo!s real-time sol#tions to performance

pro'lems,


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$igure 6. -he manager as an in"ormation

processing ner/e center.


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Study Question ( +ow do managers usein"ormation to ma*e decisions#

A performance "eficienc* Act#al performance 'eing less than "esire"

performance,

A performance opport#nit* Act#al performance 'eing 'etter than "esire"performance,

Pro'lem sol)ing The process of i"entif*ing a "iscrepanc*

'et!een act#al an" "esire" performance an"taking action to resol)e it,

A "ecision A choice among possi'le alternati)e co#rse of

action,


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Study Question ( +ow do managers use

in"ormation to ma*e decisions#

Pro'lem-sol)ing approaches or st*les: Pro'lem a)oi"ers,

%nacti)e in information gathering an" sol)ing

pro'lems,

Pro'lem sol)ers, 7eacti)e in gathering information an" sol)ing

pro'lems,

Pro'lem seekers, Proacti)e in anticipating pro'lems an"

opport#nities an" taking appropriate action to gain

an a")antage,


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*stematic )ers#s int#iti)e thinking, *stematic thinking approaches pro'lems in a

rational step-'*-step an" anal*tical fashion,

%nt#iti)e thinking approaches pro'lems in a

fle;i'le an" spontaneo#s fashion,

M#lti"imensional thinking applies 'oth int#iti)e

an" s*stematic thinking,

Bffecti)e m#lti"imensional thinking re8#iresskill at strategic opport#nism,


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Cogniti)e st*les, ensation Thinkers emphasi.e the impersonal

rather than the personal an" take a realistic

approach to pro'lem sol)ing,

%nt#iti)e Thinkers are comforta'le !ith a'straction

an" ten" to 'e i"ealistic, spontaneo#s fashion,

%nt#iti)e 4eelers prefer 'roa" an" glo'al iss#es an"

are comforta'le !ith intangi'les,

ensation 4eelers emphasi.e anal*sis an" h#manrelations an" ten" to 'e realistic an" prefer facts,


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Management 10/e - Chapter 6 1<



Programme" "ecisions.

Appl* sol#tions that are rea"il* a)aila'le from

past e;periences to sol)e str#ct#re" pro'lems, tr#ct#re" pro'lems are ones that are familiar

straightfor!ar" an" clear !ith respect to

information nee"s,

>est applie" to ro#tine pro'lems that can 'e

anticipate",


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onprogramme" "ecisions.

De)elop no)el sol#tions to meet the

"eman"s of #ni8#e sit#ation that

present #nstr#ct#re" pro'lems,

9nstr#ct#re" pro'lems are ones that

are f#ll of am'ig#ities an" information

"eficiencies,

Commonl* face" '* higher-le)el

management,


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Crisis "ecision making, A crisis in)ol)es an #ne;pecte" pro'lem

that can lea" to "isaster if not resol)e"

8#ickl* an" appropriatel*,7#les for crisis management:

4ig#re o#t !hat is going on,7emem'er that spee" matters,

7emem'er that slo! co#nts too,7espect the "anger of the #nfamiliar,al#e the skeptic,>e rea"* to Efight fire !ith fire,F


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Decision en)ironments: Certain en)ironments,

5ffer complete information a'o#t possi'le actionalternati)es an" their o#tcomes,

7isk en)ironments, ack complete information a'o#t action

alternati)es an" their conse8#ences '#t offersome estimates of pro'a'ilities of o#tcomes forpossi'le action alternati)es,

9ncertain en)ironments %nformation is so poor that pro'a'ilities cannot 'e

assigne" to likel* o#tcomes of kno!n actionalternati)es,


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Management 10/e - Chapter 6 2$

$igure 6.0 -hree en/ironments "or managerial

decision ma*ing and pro)lem sol/ing.


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Study Question !hat are the steps in the

decisionma*ing process#

4i)e-step "ecision-making process:

%"entif* an" "efine the pro'lem,

=enerate an" e)al#ate possi'lesol#tions,

Choose a preferre" co#rse of action

an" con"#ct the Eethics "o#'le check,F

%mplement the "ecision,

B)al#ate res#lts,


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$igure 6. Steps in managerial decision ma*ing andpro)lem sol/ing.


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tep 1 & i"entif* an" "efine thepro'lem, 4oc#ses on information gathering

information processing an" "eli'eration,Decision o'@ecti)es sho#l" 'e esta'lishe",

Common mistakes in "efining pro'lems: Defining the pro'lem too 'roa"l* or too

narro!l*, 4oc#sing on s*mptoms instea" of ca#ses,

Choosing the !rong pro'lem,


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tep 2 & generate an" e)al#atepossi'le sol#tions, Potential sol#tions are form#late" an"

more information is gathere" "ata areanal*.e" the a")antages an""isa")antages of alternati)e sol#tionsare i"entifie"

Approaches for e)al#ating alternati)es: takehol"er anal*sis, Cost-'enefit anal*sis,


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tep 2 & generate an" e)al#atepossi'le sol#tions cont,, Criteria for e)al#ating alternati)es:

>enefits, Costs, Timeliness, Accepta'ilit*, Bthical so#n"ness,

Common mistakes: electing a partic#lar sol#tion too 8#ickl*, Choosing a con)enient alternati)e that ma* ha)e

"amaging si"e effects or ma* not 'e as goo" as otheralternati)es,


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Management 10/e - Chapter 6 2<



tep $ & "eci"e on a preferre"

co#rse of action,

Classical "ecision mo"el, Managers act rationall* in a certain !orl",

Managers face clearl* "efine" pro'lems

an" ha)e complete kno!le"ge of all

possi'le alternati)es an" theirconse8#ences,

7es#lts in an optimi.ing "ecision,


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Management 10/e - Chapter 6 $0



tep $ & "eci"e on a preferre"co#rse of action cont,,>eha)ioral "ecision mo"el

Managers act in terms of !hat the*percei)e a'o#t a gi)en sit#ation,

7ecogni.es limits to h#man information-processing capa'ilities, Cogniti)e limitations, >o#n"e" rationalit*, 7es#lts in a satisficing "ecision,


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tep & implement the "ecisionsol#tion,

%n)ol)es taking action to make s#re the

sol#tion "eci"e" #pon 'ecomes a realit*,

Managers nee" to ha)e !illingness an"

a'ilit* to implement action plans,

ack-of-participation error sho#l" 'e

a)oi"e",


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$igure 6.6 2i""erences in the classical and )eha/ioral

models o" managerial decision ma*ing.


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Management 10/e - Chapter 6 $$



tep 3 & e)al#ate res#lts,

%n)ol)es comparing act#al an" "esire"

res#lts,

Positi)e an" negati)e conse8#ences of

chosen co#rse of action sho#l" 'e

e;amine",

%f act#al res#lts fall short of "esire"res#lts the manager ret#rns to earlier

steps in the "ecision-making process,


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Study Question 0 !hat are the current issues in

managerial decision ma*ing#

T*pes of he#ristics for simplif*ing"ecision making: A)aila'ilit* he#ristic,

People #se information Erea"il* a)aila'leF from

memor* as a 'asis for assessing a c#rrent e)ent orsit#ation,

7epresentati)eness he#ristic, People assess the likelihoo" of something happening

'ase" #pon its similarit* to a stereot*pe" set ofocc#rrences,

Anchoring an" a"@#stment he#ristic, People make "ecisions 'ase" on a"@#stments to a

pre)io#sl* e;isting )al#e or starting point,


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4raming Brror, The ten"enc* to e)al#ate an" resol)e a

pro'lem in the conte;t in !hich it is

percei)e" G either positi)el* ornegati)el*,

Confirmation Brror,

the ten"enc* to foc#s onl* oninformation that confirms a "ecisionalrea"* ma"e,


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Bscalating commitment, The ten"enc* to increase effort an" appl* more

reso#rces to a co#rse of action that is not

!orking, Wa*s to a)oi" the escalation trap:

et a")ance limits an" stick to them,

Make *o#r o!n "ecisions,

Caref#ll* "etermine !h* *o# are contin#ing aco#rse of action,

7emin" *o#rself of the costs,

Watch for escalation ten"encies,


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Creati)e Decision making:Creati)it* is the generation of a no)el

i"ea or #ni8#e approach that sol)es a

pro'lem or crafts an opport#nit*, creati)it* is more likel* !hen "ecision

makers are highl* task moti)ate",

5rgani.ations sho#l" create an

en)ironment that s#pports an"enco#rages creati)it*,


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Potential a")antages of gro#p"ecision making:=reater amo#nts of information

kno!le"ge an" e;pertise are a)aila'le,More action alternati)es are

consi"ere", %ncrease" #n"erstan"ing an"

acceptance of o#tcomes, %ncrease" commitment to implement

final plans,


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Management 10/e - Chapter 6 $<



Potential "isa")antages of gro#p

"ecision making:

Press#re to conform,

Minorit* "omination ma* occ#r,

Decision making takes longer,


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When gro#p "ecision making !orks

'est:

%n"i)i"#al lacks e;pertise or information, Pro'lem is #nclear an" har" to "efine,

Acceptance '* others nee"e" for effecti)e

implementation

Time is s#fficient for gro#p in)ol)ement,


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Bthical "ecision making,An* "ecision sho#l" meet Eethics

"o#'le check,F mentione" in step $ of

the "ecision-making process, o! !o#l" % feel if m* famil* fo#n" o#t

a'o#t this "ecision?

o! !o#l" % feel if this "ecision !ere

p#'lishe" in the local ne!spaper? An* "iscomfort in ans!ering these

8#estions in"icates the "ecision hasethical shortcomings,


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Bthical "ecision making cont,Consi"ering the ethics of a propose"

"ecision ma* res#lt in 'etter "ecisions

an" pre)ention of costl* litigation, Bthical "ecisions satisf* the follo!ing

criteria: 9tilit*,

7ights, H#stice, Caring,


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Fundamental of Management Chap 6

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