Decision Making
Content
Decision making Decision making: A process by which manager respond to opportunities and threats by analyzing options and making decision about goals and cources of actions. Types of decision making Programmed: Routinewise, rational, in which managers have decision many times before.e.g deciding to reorder office supplies. Non programmed: unusual situation that not occur before e.g should firm invest in new technology . Classical model: list alternative/choose best alternative/evaluate it/apply it Administrative model of decision making: challenge the classical assumptions that managers have process all information(decision is risky) Bounded rationality: so many alternatives and information’s so manager cannot consider all. Incomplete information: most managers do not see all alternative and choose in limited number of alternatives that based on incomplete information. Incomplete information factors Time constraints and cost:managers donot have time or money to see all alternatives.this lead managers to decide on incomplete information. Satisficing: manager explore limited number of alternative and choose among them rather then optimum decision.manager assume that limited information is enough. Decision making steps 1.recognise need for decision:manager must first decide that decision must made.like environment changes. 2. generate altelnatives:managers must generate feasible alternative cources of actions.if good alternative is misses the resulting decision is poor. 3.evaluate alternatives: what are the advantages and disadvantages of alternative 4. choose among alternative:managers rank alternative and decide. 5. implement choosen alternative: managers now must carry out alternative. 6.learn from feedback:manager should consider what went right and wrong with decision and learn for the future. Evaluate alternatives
Is it legal :manager should sure that alternative is legal. Is it ethical: the alternative must be ethical and did not hurt stakeholders Is it economically feasible: Is it practical: does the management have the capabilities and resources to do it? Cognitive biases Suggest decision makers use heuristics to deal with bounded rationality. a heuristic is the rule of thumb to deal with complex situations. Systematic errors: can result from use of an incorrect heuristic. These error will appear over and over since the rule used to make decision is flawed. Types of cognitive biases Prior hypothesis bias: manager allows strong prior beliefs about a relationship between variables and makes decisions based on these beliefs even when evidence shows they are wrong. Representative : decision maker incorrectly generalizes a decision from small sample or one incident. Illusion of control: manager over-estimates their ability to control events. Escalating commitment: manager has already committed considerable resource to project and then commits more even after feedback indicates problems. Group decision making Groups tend to reduce cognitive biases and can call on combined skills, and abilities. There are some disadvantages with groups: Group think: biased decision making resulting from group members striving for agreement. Usually occurs when group members rally around a central manger’s idea (CEO), and become blindly committed without considering alternatives. The group tends to convince each member that the idea must go forward. Improved Group Decision Making Devil’s Advocacy: one member of the group acts as the devil’s advocate and critiques the way the group identified alternatives. Points out problems with the alternative selection. Dialectical inquiry: two different groups are assigned to the problem and each group evaluates the other group’s alternatives. Top managers then hear each group present their alternatives and each group can critique the other. Promote diversity: by increasing the diversity in a group, a wider set of alternatives may be considered.
Organizational Learning & Creativity: Organizational Learning: Managers seek to improve member’s ability to understand the organization and environment so as to raise effectiveness. The learning organization: managers try to improve the people’s ability to behave creatively to maximize organizational learning . Creativity: is the ability of the decision maker to discover new ideas leading to a feasible course of action. A creative management staff and employees are the key to the learning organization.
Is it legal :manager should sure that alternative is legal. Is it ethical: the alternative must be ethical and did not hurt stakeholders Is it economically feasible: Is it practical: does the management have the capabilities and resources to do it? Cognitive biases Suggest decision makers use heuristics to deal with bounded rationality. a heuristic is the rule of thumb to deal with complex situations. Systematic errors: can result from use of an incorrect heuristic. These error will appear over and over since the rule used to make decision is flawed. Types of cognitive biases Prior hypothesis bias: manager allows strong prior beliefs about a relationship between variables and makes decisions based on these beliefs even when evidence shows they are wrong. Representative : decision maker incorrectly generalizes a decision from small sample or one incident. Illusion of control: manager over-estimates their ability to control events. Escalating commitment: manager has already committed considerable resource to project and then commits more even after feedback indicates problems. Group decision making Groups tend to reduce cognitive biases and can call on combined skills, and abilities. There are some disadvantages with groups: Group think: biased decision making resulting from group members striving for agreement. Usually occurs when group members rally around a central manger’s idea (CEO), and become blindly committed without considering alternatives. The group tends to convince each member that the idea must go forward. Improved Group Decision Making Devil’s Advocacy: one member of the group acts as the devil’s advocate and critiques the way the group identified alternatives. Points out problems with the alternative selection. Dialectical inquiry: two different groups are assigned to the problem and each group evaluates the other group’s alternatives. Top managers then hear each group present their alternatives and each group can critique the other. Promote diversity: by increasing the diversity in a group, a wider set of alternatives may be considered.
Organizational Learning & Creativity: Organizational Learning: Managers seek to improve member’s ability to understand the organization and environment so as to raise effectiveness. The learning organization: managers try to improve the people’s ability to behave creatively to maximize organizational learning . Creativity: is the ability of the decision maker to discover new ideas leading to a feasible course of action. A creative management staff and employees are the key to the learning organization.
