copyright © 2002 by the mcgraw-hill companies, inc. all rights reserved. 3-0 bateman snell...
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Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
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Bateman Snell
Management
5thEdition
Competingin theNew Era
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
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Part OneChapter 3 - Managerial Decision Making
Chapter OutlineCharacteristics of Managerial DecisionsThe Stages of Decision MakingThe Best DecisionBarriers to Effective Decision MakingDecision Making in GroupsManaging Group Decision MakingOrganizational Decision Making
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
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Learning ObjectivesLearning Objectives
After studying Chapter 3, you will know: the kinds of decisions you will face as a manager how to make “rational” decisions the pitfalls you should avoid when making decisions the pros and cons of using a group to make decisions the procedures to use in leading a decision-making group how to encourage creative decisions the processes by which decisions are made in organizations how to make decisions in a crisis
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Lack ofStructure
Risk
Conflict
Uncertainty
Characteristics Of Managerial Decisions
Characteristics Of Managerial Decisions
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Characteristics Of Managerial Decisions
Characteristics Of Managerial Decisions
Lack of structure programmed decisions - decisions encountered and made in
the pasthave objectively correct answersare solvable by using simple rules, policies, or numerical computations
nonprogrammed decisions - new, novel, complex decisions having no proven answers
a variety of solutions exist, all of which have merits and drawbacks
demand creative responses, intuition, and tolerance for ambiguity
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Characteristics Of Managerial Decisions (cont.)
Characteristics Of Managerial Decisions (cont.)
Uncertainty and risk certainty - have sufficient information to predict precisely
the consequences of one’s actions uncertainty - have insufficient information to know the
consequences of different actionscannot estimate the likelihood of various consequences of their actions
risk - available information permits estimation of the likelihood of various consequences
probability of an action being successful is less than 100 percentgood managers prefer to avoid or manage risk
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Conflict opposing pressures from different sources occurs at two levels
psychological conflict - individual decision makers: perceive several attractive options perceive no attractive options
conflict between individuals or groups
Characteristics Of Managerial Decisions (cont.)
Characteristics Of Managerial Decisions (cont.)
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Identifying anddiagnosing
the problemGeneratingalternativesolutions
Evaluatingalternatives
Evaluatingthe decision
Implementingthe decision
Making thechoice
The Stages Of Decision MakingThe Stages Of Decision Making
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Stages Of Decision MakingStages Of Decision Making
Identifying and diagnosing the problem recognize that a problem exists and must be solved
problem - discrepancy between current state and past performance, current performance of other organizations, or future expected performance
decision maker must want to resolve the problem and have the resources to do so
Generating alternative solutions ready-made solutions - ideas that have been tried before
may follow the advice of others who have faced similar problem custom-made solutions - combining new ideas into creative
solutions
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Stages Of Decision Making (cont.)Stages Of Decision Making (cont.)
Evaluating alternatives determining the value or adequacy of the alternatives there are potentially more alternatives available than
managers may realize predict the consequences that will occur if the various
options are put into effect success or failure of the decision will affect the track record
of the decision maker contingency plans - alternative courses of action that can be
implemented based on how the future unfoldsrequired to prepare for different scenarios
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Stages Of Decision Making (cont.)Stages Of Decision Making (cont.)
Making the choice maximize - a decision realizing the best possible outcome
greatest positive consequences and fewest negative consequences
greatest benefit at the lowest cost and the largest expected total return
satisfice - choose an option that is acceptable although not necessarily the best or perfect
compare the choice with the goal, not against other optionssearch for alternatives ends when an okay solution is found
optimizing - achieving the best possible balance among several goals
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Stages Of Decision Making (cont.)Stages Of Decision Making (cont.)
Implementing the decision those who implement the decision must:
understand the choice and why it was madebe committed to its successful implementation
can’t assume that things will go smoothly during implementation
identify potential problemsidentify potential opportunities
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List the resources andactivities required toimplement each step
Estimate the time neededfor each step
Determine how things willlook when the decision
is fully operational
ImplementationPlan
Order the steps necessaryto achieve a fully
operational decision
Assign responsibility foreach step to specific
individuals
Steps In The Implementation PlanSteps In The Implementation Plan
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Stages Of Decision Making (cont.)Stages Of Decision Making (cont.)
Evaluating the decision collecting information on how well the decision is working if decision appears inappropriate, the process cycles back to
the first stageThe best decision
nothing can guarantee a “best” decision must be confident that the procedures used are likely to
produce the best decision given the circumstancesvigilance - decision maker carefully and conscientiously executes all stages of decision making
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Barriers To Effective Decision Making
Barriers To Effective Decision Making
Psychological biases biases that interfere with objective rationality illusion of control - a belief that one can influence events
even when one has no control over what will happen framing effects - how problems or decision alternatives are
phrased or perceivedsubjective influences can override objective facts
discount the future - weigh short-term costs and benefits more heavily than longer-term costs and benefits
the avoidance of short-term costs or the seeking of short-term rewards may result in negative long-term consequences
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Barriers To Effective Decision Making (cont.)
Barriers To Effective Decision Making (cont.)
Time pressures today’s economy places a premium on acting quickly and
keeping pace in order to make timely and high-quality decisions one must:
focus on real-time informationinvolve people more effectively and efficientlyrely on trusted expertstake a realistic view of conflict
Social realities many decisions result from intensive social interactions,
bargaining, and politicking
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Potential Advantages
1. Larger pool of information
1. More perspectives and approaches
3. Intellectual stimulation
3. People understand the decision
5. People are committed to the decision
Decision Making In GroupsDecision Making In Groups
Potential Disadvantages
1. One person dominates
1. Satisficing
1. Groupthink - team spirit discourages disagreement
1. Goal displacement - newgoals replace original goals
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Leadership 1. Avoid domination 2. Encourage input 3. Avoid groupthink and satisficing 4. Remember goals
Effective GroupDecision Making
Constructive Conflict 1. Air legitimate differences 2. Stay task-focused 3. Be impersonal 4. Play devil’s advocate
Managing Group Decision MakingManaging Group Decision Making
Creativity 1. Brainstorm 2. Avoid criticizing 3. Exhaust ideas 4. Combine ideas
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Managing Group Decision MakingManaging Group Decision Making
Leadership style leader should attempt to minimize process-related problems leader should:
avoid dominating the discussion encourage less vocal members to express themselvesmitigate pressures for conformitystay alert to groupthink and satisficingprevent group from losing sight of the primary objective
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Managing Group Decision Making (cont.)
Managing Group Decision Making (cont.)
Constructive conflict a certain amount of constructive conflict should exist cognitive conflict - issue-based differences in perspectives or
judgmentsmost constructive type of conflictcan air legitimate differences of opinion and develop better ideas
affective conflict - emotional disagreement directed toward other people that is likely to be destructive
devil’s advocate - has the job of criticizing others dialectic - structured debate comparing two conflicting
courses of action
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Managing Group Decision Making (cont.)
Managing Group Decision Making (cont.)
Encouraging creativity creativity involves:
creation - bringing a new thing into beingsynthesis - joining two previously unrelated thingsmodification - improving something or giving it new application
to become creative one must:recognize creative potential in little opportunitiesobtain sufficient resourcesescape from work once in awhile and read widely
brainstorming - group generates ideas about a problemcriticism is withheld until all ideas have been proposed
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Organizational Decision MakingOrganizational Decision MakingConstraints on decision makers
organizations cannot do whatever they wishface various constraints on their actions
Models of organizational decision processes bounded rationality - decision makers cannot be truly rational
because:they have imperfect, incomplete information about alternativesthe problems they face are so complexhuman beings cannot process all the information to which they are exposed
time is limitedpeople in the organization have conflicting goals
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Constraints On Decision Makers Constraints On Decision Makers
MarketHuman
Financial
Constraints
LegalOrganizational
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Organizational Decision Making (cont.)
Organizational Decision Making (cont.)
Models of organizational decision processes (cont.) incremental model - major decisions arise through a series of
smaller decisionspiecemeal approach to larger solutions
coalitional model - groups with differing preferences use power and negotiation to influence decisions
used when people disagree about goals or compete for resources garbage can model - a chaotic process leading to seemingly
random decisionsoccurs when people are unsure of their goals and what should be done
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Organizational Decision Making (cont.)
Organizational Decision Making (cont.)
Negotiations and politics negotiations necessary to galvanize the preferences of
competing groups and individuals organizational politics - people try to influence decisions to
promote their own interestsuse power to pursue hidden agendas
create common goals - helps to make decision making a collaborative rather than a competitive process
Decision making in a crisis stress and time constraints make decisions less effective should be prepared for crises in advance
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Plan For Crisis ManagementPlan For Crisis Management
Evaluation andDiagnostic Actions
CommunicationActions
StrategicActions
CrisisManagement
Technical andStructural Actions
Psychological andCultural Actions
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Organizational Decision Making (cont.)
Organizational Decision Making (cont.)
Emergent strategies the strategy that evolves from all the activities engaged in by
people throughout the organization result from dynamic processes in which people engage in
discovery, implement decisions, and reconsider the initial decision after discovering new things by chance
emergent strategies may start at any organizational level emergent strategies are generally the result of constructive
processes
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Choice
• Set objectives• Generate options
• Evaluate and selectacceptable, feasible,
suitable option
Discovery
• Systematic gathering• Analysis of the facts
• Monitoringoutcomes of
actions
Action
• Implementingchosen option• Correcting
deviations fromfrom plan
Emergent StrategiesEmergent Strategies