robbins_PPT06.ppt

1 Management 6 2 LEARNINGOUTLINEFollowthisLearningOutlineasyoureadandstudythischapter TheDecision MakingProcessDefinedecisionanddecision makingprocess Describetheeightstepsinthedecision makingprocess TheManagerasDecisionMakerDiscusstheassumptionsofrationaldecisionmaking Describetheconceptsofboundedrationality satisficing andescalationofcommitment Explainwhatintuitionisandhowitaffectsdecisionmaking Contrastprogrammedandnonprogrammeddecisions 6 3 LEARNINGOUTLINEFollowthisLearningOutlineasyoureadandstudythischapter TheManagerasDecisionMaker cont d Contrastthethreedecision makingconditions Explainmaximax maximin andminimaxdecisionchoiceapproaches Describethefourdecisionmakingstyles Discussthetwelvedecision makingbiasesmanagersmayexhibit Describehowmanagercandealwiththenegativeeffectsofdecisionerrorsandbiases Explainthemanagerialdecision makingmodel 6 4 LEARNINGOUTLINEFollowthisLearningOutlineasyoureadandstudythischapter DecisionMakingforToday sWorldExplainhowmanagerscanmakeeffectivedecisionsintoday sworld Listsixcharacteristicsofaneffectivedecision makingprocess Describethefivehabitsofhighlyreliableorganizations 6 5 DecisionMaking DecisionMakingachoicefromtwoormorealternatives TheDecision MakingProcessIdentifyingaproblemanddecisioncriteriaandallocatingweightstothecriteria Developing analyzing andselectinganalternativethatcanresolvetheproblem Implementingtheselectedalternative Evaluatingthedecision seffectiveness 6 6 Exhibit6 1 TheDecision MakingProcess 6 7 Step1 IdentifyingtheProblem ProblemAdiscrepancybetweenanexistinganddesiredstateofaffairs CharacteristicsofProblemsAproblembecomesaproblemwhenamanagerbecomesawareofit Thereispressuretosolvetheproblem Themanagermusthavetheauthority information orresourcesneededtosolvetheproblem 6 8 Step2 IdentifyingDecisionCriteria Decisioncriteriaarefactorsthatareimportant relevant toresolvingtheproblem Coststhatwillbeincurred investmentsrequired Riskslikelytobeencountered chanceoffailure Outcomesthataredesired growthofthefirm Step3 AllocatingWeightstothecriteria Decisioncriteriaarenotofequalimportance Assigningaweighttoeachitemplacestheitemsinthecorrectpriorityorderoftheirimportanceinthedecisionmakingprocess 6 9 Exhibit6 2 CriteriaandWeightsforFranchiseDecision 6 10 Step4 DevelopingAlternatives IdentifyingviablealternativesAlternativesarelisted withoutevaluation thatcanresolvetheproblem Step5 AnalyzingAlternatives Appraisingeachalternative sstrengthsandweaknessesAnalternative sappraisalisbasedonitsabilitytoresolvetheissuesidentifiedinsteps2and3 6 11 Step6 SelectinganAlternative ChoosingthebestalternativeThealternativewiththehighesttotalweightischosen Step7 ImplementingtheDecision Puttingthechosenalternativeintoaction Conveyingthedecisiontoandgainingcommitmentfromthosewhowillcarryoutthedecision 6 12 Exhibit6 3 AssessedValuesofFranchiseOpportunitiesUsingDecisionCriteria 6 13 Exhibit6 4 EvaluationofFranchiseAlternativesAgainstWeightedCriteria 6 14 Step8 EvaluatingtheDecision sEffectiveness Thesoundnessofthedecisionisjudgedbyitsoutcomes Howeffectivelywastheproblemresolvedbyoutcomesresultingfromthechosenalternatives Iftheproblemwasnotresolved whatwentwrong 6 15 MakingDecisions RationalityManagersmakeconsistent value maximizingchoiceswithspecifiedconstraints Assumptionsarethatdecisionmakers Areperfectlyrational fullyobjective andlogical Havecarefullydefinedtheproblemandidentifiedallviablealternatives HaveaclearandspecificgoalWillselectthealternativethatmaximizesoutcomesintheorganization sinterestsratherthanintheirpersonalinterests 6 16 Exhibit6 6 AssumptionsofRationality 6 17 MakingDecisions cont d BoundedRationalityManagersmakedecisionsrationally butarelimited bounded bytheirabilitytoprocessinformation Assumptionsarethatdecisionmakers WillnotseekoutorhaveknowledgeofallalternativesWillsatisfice choosethefirstalternativeencounteredthatsatisfactorilysolvestheproblem ratherthanmaximizetheoutcomeoftheirdecisionbyconsideringallalternativesandchoosingthebest 6 18 InfluencesonDecisionMaking EscalationofCommitmentIncreasingorcontinuingacommitmenttopreviousdecisiondespitemountingevidencethatthedecisionmayhavebeenwrong TheRoleofIntuitionIntuitivedecisionmakingMakingdecisionsonthebasisofexperience feelings andaccumulatedjudgement 6 19 Exhibit6 7 WhatisIntuition Source BasedonL A BurkeandM K Miller TakingtheMysteryOutofIntuitiveDecisionMaking AcademyofManagementExecutive October1999 pp 91 99 6 20 ProblemsandDecisions StructuredProblemsInvolvegoalsthatclear Arefamiliar haveoccurredbefore Areeasilyandcompletelydefined informationabouttheproblemisavailableandcomplete ProgrammedDecisionArepetitivedecisionthatcanbehandledbyaroutineapproach 6 21 TypesofProgrammedDecisions APolicyAgeneralguidelineformakingadecisionaboutastructuredproblem AProcedureAseriesofinterrelatedstepsthatamanagercanusetorespond applyingapolicy toastructuredproblem ARuleAnexplicitstatementthatlimitswhatamanageroremployeecanorcannotdoincarryingoutthestepsinvolvedinaprocedure 6 22 Policy Procedure andRuleExample PolicyAcceptallcustomer returnedmerchandise ProcedureFollowallstepsforcompletingmerchandisereturndocumentation RulesManagersmustapproveallrefundsover 50 00 Nocreditpurchasesarerefundedforcash 6 23 ProblemsandDecisions cont d UnstructuredProblemsProblemsthatareneworunusualandforwhichinformationisambiguousorincomplete Problemsthatwillrequirecustom madesolutions NonprogrammedDecisionsDecisionsthatareuniqueandnonrecurring Decisionsthatgenerateuniqueresponses 6 24 Exhibit6 8 TypesofProblems TypesofDecisions andLevelintheOrganization 6 25 Decision MakingConditions CertaintyAidealsituationinwhichamanagercanmakeanaccuratedecisionbecausetheoutcomeofeveryalternativechoiceisknown RiskAsituationinwhichthemanagerisabletoestimatethelikelihood probability ofoutcomesthatresultfromthechoiceofparticularalternatives 6 26 Decision MakingConditions UncertaintyLimitedorinformationpreventsestimationofoutcomeprobabilitiesforalternativesassociatedwiththeproblemandmayforcemanagerstorelyonintuition hunches and gutfeelings Maximax theoptimisticmanager schoicetomaximizethemaximumpayoffMaximin thepessimisticmanager schoicetomaximizetheminimumpayoffMinimax themanager schoicetominimizehismaximumregret 6 27 Exhibit6 9 ExpectedValueforRevenuesfromtheAdditionofOneSkiLift ExpectedExpected Probability ValueofEachEventRevenuesAlternativeHeavysnowfall 850 0000 3 255 000Normalsnowfall725 0000 5 362 500Lightsnowfall350 0000 2 70 000 687 500 6 28 Exhibit6 10 PayoffMatrix 6 29 Exhibit6 11 RegretMatrix 6 30 Decision MakingStyles DimensionsofDecision MakingStylesWaysofthinkingRational orderly andconsistentIntuitive creative anduniqueToleranceforambiguityLowtolerance requireconsistencyandorderHightolerance multiplethoughtssimultaneously 6 31 Decision MakingStyles cont d TypesofDecisionMakersDirectiveUseminimalinformationandconsiderfewalternatives AnalyticMakecarefuldecisionsinuniquesituations ConceptualMaintainabroadoutlookandconsidermanyalternativesinmakinglong termdecisions BehavioralAvoidconflictbyworkingwellwithothersandbeingreceptivetosuggestions 6 32 Exhibit6 12 Decision MakingStyles Source S P RobbinsandD A DeCenzo SupervisionToday 2nded UpperSaddleRiver NJ PrenticeHall 1998 p 166 6 33 Exhibit6 13 CommonDecision MakingErrorsandBiases 6 34 Decision MakingBiasesandErrors HeuristicsUsing rulesofthumb tosimplifydecisionmaking OverconfidenceBiasHoldingunrealisticallypositiveviewsofone sselfandone sperformance ImmediateGratificationBiasChoosingalternativesthatofferimmediaterewardsandthattoavoidimmediatecosts 6 35 Decision MakingBiasesandErrors cont d AnchoringEffectFixatingoninitialinformationandignoringsubsequentinformation SelectivePerceptionSelectingorganizingandinterpretingeventsbasedonthedecisionmaker sbiasedperceptions ConfirmationBiasSeekingoutinformationthatreaffirmspastchoicesanddiscountingcontradictoryinformation 6 36 Decision MakingBiasesandErrors cont d FramingBiasSelectingandhighlightingcertainaspectsofasituationwhileignoringotheraspects AvailabilityBiasLosingdecision makingobjectivitybyfocusingonthemostrecentevents RepresentationBiasDrawinganalogiesandseeingidenticalsituationswhennoneexist RandomnessBiasCreatingunfoundedmeaningoutofrandomevents 6 37 Decision MakingBiasesandErrors cont d SunkCostsErrorsForgettingthatcurrentactionscannotinfluencepasteventsandrelateonlytofutureconsequences Self ServingBiasTakingquickcreditforsuccessesandblamingoutsidefactorsf