Lecture Management (2nd edition) – Chapter 7: Making better decisions

This chapter’s objectives are to: Describe the seven steps of the decision making process, identify problems by analyzing causes and effects, describe how managers generate alternatives, predict possible consequences of alternatives, demonstrate how managers select the most desirable alternative.

MANAGEMENT SECOND EDITION Chapter Making Better Decisions Learning Objectives § § § § § Describe the seven steps of the decision making  process Identify problems by analyzing causes and effects Describe how managers generate alternatives Predict possible consequences of alternatives Demonstrate how managers select the most desirable  alternative Copyrightâ2017JohnWiley&Sons,Inc DecisionsThatMakeaDifference(p. 170) Đ Typesofdecisions(p.171) ã ã ã Programmed decision – based on pre­established rules in  response to a recurring situation (p. 172) Nonprogrammed decision – based on reason and/or  intuition in response to a unique situation that requires a  tailored decision Classical model – normative model that leads to an optimal  decision, assuming full availability of information,  sufficient time, and rationality of the decision maker § Optimal decision – best possible decision given all the needed  information Copyrightâ2017JohnWiley&Sons,Inc DecisionsThatMakeaDifference (cont.) Đ Classicalmodel Figure7.2 Copyrightâ2017JohnWiley&Sons,Inc DecisionsThatMakeaDifference (cont.) Đ Sevenstepstobetterdecisionmaking(p.173) Figure7.3 Copyrightâ2017JohnWiley&Sons,Inc DecisionsThatMakeaDifference (cont.) Đ Adaptivemanagement(p.173) ã ã Approachtodecisionmakingthatrequires managerstousecriticalthinking,collaboration, andreflectionskillstomakenonprogrammed decisions Importantinarapidlychangingbusiness environment Copyrightâ2017JohnWiley&Sons,Inc IdentifyingandUnderstandingthe Problem(p.173) Đ Ambiguity(p.174) ã Đ Informationaboutthesituation,goals,orcriteria thatisincompleteorcanbeinterpretedinmultiple ways Symptomaticeffects(p.174) ã ã Observablebehaviorsrelatedtounderlyingcausal variables Problemsundesirablebehaviors Đ Arenoticedduetotheirsymptomaticeffects Copyrightâ2017JohnWiley&Sons,Inc IdentifyingandUnderstandingthe Problem(cont.) Đ Underlyingcauses(p.175) ã Behaviorsthatleadtoadesiredorundesiredsymptomatic effect Đ Đ ã Intermediate causes – plausible and easily found Root causes Revealed by: § § Systemic­based analysis – takes into account the array of all  known variables associated with a problem and its symptoms,  including behavior over time Policy­based analysis – isolates the variables in a system that can  truly be addressed through management innovation (p. 177)  Copyrightâ2017JohnWiley&Sons,Inc IdentifyingandUnderstandingthe Problem(cont.) Đ Systemsarchetypeofcausalvariablesfor customersatisfaction Figure7.6 Copyrightâ2017JohnWiley&Sons,Inc IdentifyingandUnderstandingthe Problem(cont.) Driftinggoalssystemarchetype Figure7.7 Copyrightâ2017JohnWiley&Sons,Inc IdentifyingandUnderstandingthe Problem(cont.) Đ Frontdeskmanagersguestexpectationgap explanation Figure7.8 Copyrightâ2017JohnWiley&Sons,Inc IdentifyingandUnderstandingthe Problem(cont.) Đ DolphinResort:Annualizedrevenueandprofit Figure7.9 Copyrightâ2017JohnWiley&Sons,Inc IdentifyingandUnderstandingthe Problem(cont.) Đ DolphinResortrevenueperavailableroom Figure7.10 Copyrightâ2017JohnWiley&Sons,Inc IdentifyingandUnderstandingthe Problem(cont.) § Dolphin Resort: Annualized room rate Figure 7.11 Copyright ©2017 John Wiley & Sons, Inc Identifying and Understanding the  Problem (cont.) § Dolphin Resort: Annualized occupancy  percentage Figure7.12 Copyrightâ2017JohnWiley&Sons,Inc IdentifyingandUnderstandingthe Problem(cont.) Đ DolphinResort:Guestexpectationvariables Figure7.13 Copyrightâ2017JohnWiley&Sons,Inc GeneratingAlternatives(p.182) Đ Certainty ã Đ Uncertainty ã Đ Decisionmakerknowsallalternativesandtheir outcomes allalternativesandoutcomesarenotknown Levelofcertaintydeterminedby: ã ã ã Time Cognitiveability Information Copyrightâ2017JohnWiley&Sons,Inc GeneratingAlternatives(cont.) Đ Groupthink(p.182) ã Đ Productionblocking ã Đ Unconsciousmodeofgroupdecisionmakinginwhich individualsprioritizeagreementoveranalysis Lossofproductivityduringabrainstormingsession becauseindividualsareoverwhelmedbythenumberof possibilitiesbeinggenerated Heuristics(ruleofthumb) ã Setofinformalrulesusedtosimplifyandexpeditethe decisionmakingprocess Copyrightâ2017JohnWiley&Sons,Inc GeneratingAlternatives(cont.) Đ Expectationgapbetweenpriceanddrifting goals Figure7.15 Copyrightâ2017JohnWiley&Sons,Inc GeneratingAlternatives(cont.) Đ Brainstorming(p.183) ã Creatingasmanyalternativesaspossible,withoutmaking valuejudgmentsaboutanyidea Figure7.16 Copyrightâ2017JohnWiley&Sons,Inc EvaluatingAlternatives(p.184) Đ Predictandassesstheoutcomesofeach alternative ã § Nominal group technique • § Risk – degree to which the outcomes of an  alternative can be predicted Group members rate proposed solutions and the  total tally determines the final decision Delphi technique • Groupofexpertsproposeandquestionideasuntil aconsensusisreached Copyrightâ2017JohnWiley&Sons,Inc EvaluatingAlternatives(cont.) Đ Priorưhypothesisbias(p.186) ã ã Đ Basingdecisionsonbeliefsorassumptionsdespite evidencetothecontrary Processmaybeunconscious Dialecticalinquiry ã ã Aproposalandaconflictingcounterproposalare givenequalconsideration Usedtopreventpriorưhypothesisbias Copyrightâ2017JohnWiley&Sons,Inc PathSelection(p.186) Đ Intuitive(gut)decision ã Đ Basedonfeelings,previousexperience,and existingknowledge Satisficing ã ã Choosinganacceptablesolutionratherthanan optimalsolution balancestime,information,andabilitytoconsider andimplementalternatives Copyrightâ2017JohnWiley&Sons,Inc PathSelection(cont.) Đ Reasonedjudgment(p.187) • § Decision based on extensive information gathering, careful  analysis, and generation of alternatives Administrative model Recognizes the limits of information, time, and individuals  and seeks a satisfying rather than an optimum solution • Bounded rationality – rational decision making that is limited by time, cognitive abilities, and available  information ã Đ Representativebiasgeneralizingfromtoosmallasample Copyrightâ2017JohnWiley&Sons,Inc Implementation(p.188) Đ Đ Successfulimplementationinvolves connectingstrategy,people,andoperations Illusionofcontrol ã Overestimatingonesabilitytocontrolevensand activities Copyrightâ2017JohnWiley&Sons,Inc ... Copyrightâ2017JohnWiley&Sons,Inc DecisionsThatMakeaDifference (cont.) Đ Classicalmodel Figure7.2 Copyrightâ2017JohnWiley&Sons,Inc DecisionsThatMakeaDifference (cont.) Đ Sevenstepstobetterdecisionmaking(p.173)... Demonstratehowmanagersselectthemostdesirable alternative Copyrightâ2017JohnWiley&Sons,Inc DecisionsThatMakeaDifference(p. 170) Đ Typesofdecisions(p.171) ã ã • Programmed decision? ?–? ?based on pre­established rules in  response to a recurring situation (p. 172)... Sevenstepstobetterdecisionmaking(p.173) Figure7.3 Copyrightâ2017JohnWiley&Sons,Inc DecisionsThatMakeaDifference (cont.) Đ Adaptivemanagement(p.173) ã • Approach to decision? ?making? ?that requires  managers to use critical thinking, collaboration,