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The Nature of Managerial Decision Making

Decision MakingThe process by which managers respond to opportunities and threats by analyzing options, and making determinations about specific organizational goals and courses of action.

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Decision Making

Programmed DecisionRoutine, virtually automatic decision making that follows established rules or guidelines.Managers have made the same decision

many times beforeThere are rules or guidelines to follow

based on experience with past decisionsLittle ambiguity involved

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Decision Making

Non-Programmed DecisionsNonroutine decision making that occurs in response to unusual, unpredictable opportunities and threats.

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Decision Making

Intuition – feelings, beliefs, and hunches that come readily to mind, require little effort and information gathering and result in on-the-spot decisions

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Decision Making

Reasoned judgment – decisions that take time and effort to make and result from careful information gathering, generation of alternatives, and evaluation of alternatives

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The Classical Model of Decision Making

Figure 5.1

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The Administrative Model

Administrative Model of Decision MakingAn approach to decision making that explains why decision making is inherently uncertain and risky and why managers usually make satisfactory rather than optimum decisions.

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The Administrative Model

Administrative Model of Decision Making Bounded rationality

There is a large number of alternatives and available information can be so extensive that managers cannot consider it all.

Decisions are limited by people’s cognitive abilities.

Incomplete informationMost managers do not see all alternatives

and decide based on incomplete information.

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Why Information Is Incomplete

Figure 5.2

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Satisficing

Searching for and choosing an acceptable, or satisfactory response to problems and opportunities, rather than trying to make the best decision.

Managers explore a limited number of options and choose an acceptable decision rather than the optimum decision.

Managers assume that the limited options they examine represent all options.

This is the typical response of managers when dealing with incomplete information.

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Six Steps in Decision Making

Figure 5.4

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Group Decision Making

Superior to individual makingChoices less likely to fall victim to bias

Able to draw on combined skills of group members

Improve ability to generate feasible alternatives

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Group Decision Making

Allows managers to process more information

Managers affected by decisions agree to cooperate

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Group Decision Making

GroupthinkA pattern of faulty and biased decision

making that occurs in groups whose members strive for agreement among themselves at the expense of accurately assessing information relevant to a decision

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Improved Group Decision Making

Devil’s AdvocacyCritical analysis of a preferred alternative to ascertain its strengths and weaknesses before it is implemented

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Organizational Learning and Creativity

Organizational LearningManagers seek to improve a

employee’s desire and ability to understand and manage the organization and its task environment so as to raise effectiveness.

The Learning OrganizationManagers try to maximize the people’s

ability to behave creatively to maximize organizational learning.

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Senge’s Principles for Creating a Learning Organization

Figure 5.6

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Organizational Learning and Creativity

CreativityA decision maker’s ability to discover original and novel ideas that lead to feasible alternative courses of action