Decision making
- 1. Decision Making The Essence of the Manager’s Job
- 2. Management Decision Making Management decision making is a complex mix of knowledge, experience, creative thinking, and risk taking. It is often a rapid-fire, fragmented process More and more companies are pushing critical decision making down to the level of the organization most affected by the decision A decision can be defined as a conscious choice among alternatives followed by action to implement the decision Decision-making process is a series of steps that is followed, either consciously or unconsciously, to make a choice and undertake action
- 3. Management Decision Making (cont.) Managers must learn how to deal with a decision- making environment that emphasizes communicating, working with others, and working with incomplete information Decisions are often based on impressions, estimates, and personal experience Management researchers have developed a set of useful concepts to understand the phenomenon Individual decision making differs from group decision making
- 5. Types of Managerial Decisions Programmed and Non-Programmed Decisions Proactive and Reactive Decisions Intuitive and Systematic Decisions
- 6. Programmed and Non-Programmed Decisions Programmed Decisions One that would be made if a particular situation occurs and a routine procedure or policy has been established to handle it Repetitive and routine A large number in daily operations Although they should be made with care and concern about effectiveness, they should be made efficiently without needlessly tying up organizational resources
- 7. Types of Problems, Types of Decisions, and Level in the Organization Level Well-Structured Programmed Decisions Top Ill-Structured Type Lower Nonprogrammed Decisions
- 8. Programmed and Non-Programmed Decisions (cont.) Non-Programmed Decisions No pre-existing structure or decision- making procedure in place Have significant implications for the future of the organization and must be made only after careful analysis
- 9. Proactive and Reactive Decisions Proactive Decision Made in anticipation of an external change or other conditions Can prevent many common problems Reactive Decision Made in response to changes that have already occurred
- 10. Intuitive and Systematic Decisions Intuitive Decision Making Use of estimates, guesses, or hunches to decide among alternative courses of action “Voice of experience” that speaks to managers when faced with a decision situation Don’t rely on intuition alone; supplement intuition with systematic information gathering and analysis Systematic Decision Making Organized, exacting, data-driven process Requires a clear set of objectives, a relevant information base, and a sharing of ideas among key managers and other employees
- 12. The Decision-Making Process Clarify the problem or opportunity Develop alternative courses of action Evaluate and select a course of action Implement the decision Monitor its effectiveness
- 13. The Decision-Making Process •Price •Brand Name and Model •Warranties and Support •Reliability •Repair Record •Reliability •Brand Name and Model •Warranties and Support •Repair Record •Price 10 8 6 4 2 Clarification Of a Problem Identification Of Decision Criteria Allocation Of Weights To Criteria My salespeople need new computers.
- 14. Development of Alternatives Fujitsu AST Sharp IBM HP TI NEC Analysis of Alternatives NEC AST HP Fujitsu IBM Sharp TI Selection of an Alternative Implementation of the Alternative Control, Assess, and Evaluation of Decision Effectiveness •Reliability •Brand Name and Model •Warranties and Support •Repair Record •Price The Fujitsu is the best. Compaq Compaq
- 15. Step 1: Clarify the Problem or Opportunity Problems are defined as the realization that a discrepancy exists between a desired state and current reality Several common biases or mistakes managers make when identifying and clarifying a problem: Perceptual inaccuracies Defining problems in terms of solutions Identifying symptoms as problems Consider an issue from a variety of perspectives Consult various perspectives before making decisions
- 16. Step 2: Develop Alternative Courses of Action Examine the organization’s internal and external environments for information and ideas that may lead to creative solutions to a problem A popular approach to this is known as benchmarking (identify and study firms who are leaders in a given area of business) Managers should encourage creativity and innovation among employees Encourage a diversity of approaches to problem solving can lead to better solutions and courses of action
- 17. Step 3: Evaluate Alternatives and Select a Course of Action Select the alternatives that will produce the most favorable outcomes and the least unfavorable outcomes Two cautions should be kept in mind Keep this step distinct from the previous step— especially in a group context Be wary of solutions that are evaluated as being “perfect” Rather than being an optimizer, the decision maker is said to be a “satisficer” —a person who accepts a reasonable alternative course of action that isn’t necessarily the optimum course of action
- 18. Step 4: Implement the Selected Alternative Course of Action A decision is an abstraction if it isn’t implemented Actions must be implemented effectively if it is to achieve an objective Implementing decisions involves delegating responsibilities to people Here are six steps to effective delegation: Define the task clearly Give guidelines to begin to follow Give authority to accomplish the task Monitor the tasks, but don’t hover Give feedback along the way Reward and recognize effort as well as results
- 19. Step 5: Control and Assess the Consequences of the Action Periodic assessment of the results of the chosen course of action If actual results aren’t meeting planned results, changes must be made Two types of feedback that managers use to gather the necessary information: Formative Summative
- 20. Evaluating Decision Effectiveness Does the problem still exist? Was the problem defined properly? Were all alternatives evaluated? Was the right alternative chosen? Was implementation effective?
- 21. Influences on Individual Decision Making
- 23. Influences on Individual Decision Making Importance of the decision Time pressures Manager’s values Manager’s propensity for risk
- 24. The Importance of the Decision Numerous yardsticks for measuring the importance of a decision exist, including the amount of resources involved, the number of people influenced by the decision, and the time required to make the decision Managers must allot more time and attention to significant problems
- 25. Time Pressures Managers must make the most of their decisions in others’ time frames When time pressures are significant, managers may be unable to gather enough information Time management is a priority Managers who effectively manage their time feel less stress and tend to make better decisions than their stress-filled counterparts
- 26. The Manager’s Values An individual’s values become guidelines when s/he confronts a choice Values are one of the most important influences on human behavior Values are the likes, dislikes, shoulds, oughts, judgments, and prejudices that determine how the world is viewed Value-based decision making is methodical and ensures that organizational values enter into all major decisions Although people don’t think consciously about their values and rarely arrange them in any kind of order, managers should be very aware of their values Serious conflicts can occur among values
- 27. The Manager’s Propensity for Risk People vary greatly in their propensity to take risks The issue for managers is not whether to take risks, but how to take reasonable risks
- 29. Organization’s Best Interest Rational Decisions Maximum Payoff Constant Preferences No Time Constraints
- 33. Analytic Conceptual Behavioral Directive Rational Intuitive Way of Thinking High Low Tolerance for Ambiguity Decision-Making Styles
- 35. Alterations in People Alterations in Structure Alterations in Technology What is Change? C
- 36. External Forces for Change Labor Markets Technology Laws and Regulations Economic Changes Marketplace
- 37. Internal Forces of Change Corporate Strategy The Workforce Employee Attitudes Technology and Equipment
- 38. Who Are the Agents of Change? Outside Consultants Staff Specialists Managers C
- 39. The “Calm Waters” Metaphor Unfreezing Changing Refreezing Lewin’s Three-Step Process C
- 40. Lack of Stability The “White- Water Rapids” Metaphor Lack of Predictability Virtual Chaos Constant Change C
- 41. Resistance to Change Uncertainty and Ambiguity Concern Over Personal Loss Belief That Change Is Not Beneficial C
- 42. Coercion Manipulation and Cooptation Education and Communication Negotiation Techniques for Reducing Resistance Facilitation and Support Participation C
- 47. How Can Workplace Stress Be Reduced? Employee selection Organizational communications Performance planning Job redesign Employee counseling Time-management programs C
- 48. What Is Creativity? Combining new ideas in unique ways or associating ideas in unusual ways What Is Innovation? Turning creative ideas into useful products, services, or methods of operation C
- 49. Conflict C
- 50. Conflict Management What is Conflict? Why should we study Conflict? Is conflict bad or good?
- 51. Conflict Management Traditional View Human relational View Interactionist View Functional View Dysfunctional View Task View Relationship View Process View Normative View
- 54. Ethics and Social Responsibility The issue of ethics and practicing ethical behavior took on a new meaning with the passage in 1991 of the U.S. Sentencing Commission Guidelines Under the Guidelines, companies and managers could be prosecuted and punished even if they didn’t know about the unethical behavior The Guidelines cover such laws as price fixing, fraud, antitrust violations, civil rights, money laundering, conflict of interest, stolen property, copyrights, and extortion
- 55. The Meanings of Social Responsibility Social Obligation Corporation engages in socially responsible behavior when it pursues profit only within the constraints of law Social Reaction Firms are reactive Social reaction is behavior that is in reaction to currently prevailing social norms, values, and performance expectations Business must be accountable for the ecological, environmental, and social costs incurred by its actions
- 56. The Meaning of Social Responsibility (cont.) Social Responsiveness (SR) Behaviors are anticipatory and preventive, rather than reactive and retroactive SR involves actions that exceed social obligation and social reaction SR actively seeks solutions to social problems The SR view is the broadest meaning of social responsibility
- 57. Specific Socially Responsible Activities 1. Product Line 2. Marketing Practices 3. Environmental Control 4. Employee Education and Training 5. Employee Relations, Benefits, and Satisfaction 6. Employment and Advancement of Minorities or Women 7. Employee Safety and Health 8. Corporate Philanthropy
- 58. Internal Beneficiaries Customers Respond promptly to complaints Provide complete and accurate product information Implement advertising programs that are completely truthful
- 59. Internal Beneficiaries (cont.) Employees Adhere particularly to the safety and health issues, wage and hour provisions, and union and unionization Provide environments where employees are free from pressure to act in unethical or illegal ways Provide fringe benefits Stockholders Disclose fully and accurately to stockholders its uses of corporate resources and the results of those uses
- 60. External Beneficiaries Specific Special-interest groups: racial and ethnic minorities, women, the handicapped, and the aged Corporate actions: obligatory, reactive, or responsive Important characteristic of these actions: economic, social, and political well-being of a special group is enhanced through the corporation’s efforts
- 61. External Beneficiaries (cont.) General Involves efforts to solve or prevent environmental or ecological water, air, and noise pollution, and waste and radiation disposal Introduce stakeholder management devices (SMDs)—relatively new mechanisms through which organizations respond to stakeholder concerns
- 62. Business Ethics Today Business ethics refers to: Standards of right and wrong Development of one’s own ethical standards Implicit, informal social contract between the corporation and its employees Will not guarantee lifetime employment Will offer employees new responsibilities, new benefits, and new power New compensation schemes such as stock options and gain sharing Employee rights “Human Rights Audit”
- 63. Technology and Business Ethics Credit card fraud Telecommunications fraud Employee use of computers for personal reasons Unauthorized access to confidential files Unlawful copying of copyrighted or licensed software Computer-based sexual harassment Pornography Copyright infringement Obscenities Software piracy The inadvertent and deliberate communication of trade secrets to external audiences Most common crimes reported were:
- 64. Managerial Ethics Ethics are used by managers as guidelines in making decisions that affect employees, the organization, consumers, and other parties Continues to be a topic of concern because businesses are realizing that ethical misconduct by management can be extremely costly for the company and society as a whole Determining what is and isn’t ethical is often difficult to do Currently, several ethical issues are being debated in employee surveillance and polygraph tests
- 65. Ethical Standards Managers must reconcile competing values in making decisions. They make decisions that have consequences Some prefer a pluralistic approach comprising several principles arranged in a hierarchy of importance The advantage of the pluralistic approach to ethical decision making is that the decision maker, with intentions to do right, has the basis for evaluating decisions
- 66. The Organization’s Role in Ethical Behavior Provides managers with specific guidelines concerning ethics in decision making
- 67. How Companies Make Ethical Governance the Norm Create credo that publicly proclaims ethical position Ensure that top management makes clear that it believes in and personally lives up to those standards Establish ethics officers Establish ongoing education training programs Include ethics as part of performance reviews Place procedures for dealing with those who violate the code of ethics
- 68. Synopsis What does it take to be a manager? The debate is endless. It is a long list of attributes. In efforts to help managers manage better, intricate systems have been implemented, but there’s still no real precision around what it truly is to manage. Similarly when it comes to decision-making, there is no substitute for managerial judgment. This module explains the complex process of decision making and what pitfalls a manager must guard against, if a good decision is to be implemented.