4 Chapter Foundations of Decision Making © Pearson Education Limited 2015 4-1 Learning Outcomes • Describe the decision-making process • Explain the three approaches managers can use to make decisions • Describe the types of decisions and decisionmaking conditions managers face © Pearson Education Limited 2015 4-2 Learning Outcomes (cont.) • Discuss group decision-making • Discuss contemporary issues in managerial decision making © Pearson Education Limited 2015 4-3 4.1 Describe the decision-making process © Pearson Education Limited 2015 4-4 How Do Managers Make Decisions? © Pearson Education Limited 2015 4-5 Identifying a Decision Problem Problem: a discrepancy between an existing and a desired state of affairs © Pearson Education Limited 2015 4-6 Identifying Decision Criteria Relevant Factors: • Price • Model • Size • Manufacturer • Options • Repair record © Pearson Education Limited 2015 4-7 Weighting Criteria Most important criterion assigned a weight of 10 Other weights assigned against this standard © Pearson Education Limited 2015 4-8 Developing Alternatives © Pearson Education Limited 2015 4-9 Analyzing Alternatives © Pearson Education Limited 2015 4-10 Problems, Decision Types, and Organizational Levels © Pearson Education Limited 2015 4-24 Decision-Making Conditions • Certainty • Risk • Uncertainty © Pearson Education Limited 2015 4-25 4.4 Discuss group decision-making © Pearson Education Limited 2015 4-26 How Do Groups Make Decisions? Decisions are often made by groups representing the people who will be most affected by those decisions •Committees •Task forces •Review panels •Work teams © Pearson Education Limited 2015 4-27 Advantages of Group Decision Making • • • • • More complete information Diversity of experiences/perspectives More alternatives generated Increased acceptance of solution Increased legitimacy © Pearson Education Limited 2015 4-28 Disadvantages of Group Decision Making • • • • Time-consuming Minority domination Ambiguous responsibility Pressures to conform © Pearson Education Limited 2015 4-29 Groupthink When a group exerts extensive pressure on an individual to withhold his or her different views in order to appear to be in agreement • What it does • How it occurs • How to minimize it © Pearson Education Limited 2015 4-30 When Are Groups Most Effective? Individual •Faster decision making •More efficient use of work hours Group •More accurate decisions •More creative •More heterogeneous representation •Greater acceptance of final solution © Pearson Education Limited 2015 4-31 Improving Group Decision Making Make group decisions more creative by: Brainstorming The nominal group technique Electronic meetings © Pearson Education Limited 2015 4-32 4.5 Discuss contemporary issues in managerial decision making © Pearson Education Limited 2015 4-33 Contemporary Issues National culture influences the way decisions are made and the degree of risk involved © Pearson Education Limited 2015 4-34 Contemporary Issues Creativity lets the decision maker: • Understand a problem more fully • See problems others can’t • Identify all viable alternatives © Pearson Education Limited 2015 4-35 Contemporary Issues Design thinking: approaching management problems as designers approach design problems © Pearson Education Limited 2015 4-36 Contemporary Issues Big data The vast amounts of quantifiable information that can be analyzed by highly sophisticated data processing © Pearson Education Limited 2015 4-37 © Pearson Education Limited 2015 4-38