7–1

Supervision in Organizations

Chapter 7

Solving Problems & Making Decisions

7–2

Learning OutcomesAfter reading this chapter, I will be able to:1. Describe the steps in the decision-making process.

2. Explain the four types of decision styles.

3. Identify and explain the common decision-making errors.

4. Compare and contrast group decision making and individual decision making.

5. List and describe three techniques for improving group decision making.

6. Explain three different ethical viewpoints.

7–3

Decision-making

• Decision-making processA set of seven steps that includes identifying a

problem, selecting a solution, and evaluating the effectiveness of the solution

• ProblemA discrepancy between an existing and a

desired state of affairs

• Decision criteriaFactors that are relevant in a decision

7–4

Examples of Planning-Function Decisions

What are the organization’s long-term objectives?

What strategies will best achieve those objectives?

What should the organization’s short-term objectives be?

What is the most efficient means of completing tasks?

What might the competition be considering?

What budgets are needed to complete department tasks?

How difficult should individual goals be?

Exhibit 4.1

7–5

The Decision-Making Process

7–6

Step 1: Identifying the Problem

• Problem “A discrepancy between an existing and a

desired state of affairs” (p. 186)

Ask the question, Why?

Determine the reason

Separating the symptoms from problems

Example:– A physician must identify reasons for a fever. Once the

cause is identified, the problem has been determined

7–7

Step 2: Collect Relevant Information

• Gather facts & information relevant to the problem:

• Ask questions:

When did the problem start appearing?

Why is appearing now?

What are the affects of the problem?

What are the costs associated with the problem?

7–8

Step 3: Develop Alternatives

• Generate a full range of alternatives for solving the problem

Creativity is critical

The more alternatives generated, the greater likelihood the best choice is among the possibilities

7–9

Step 4: Evaluate Each Alternative

• Evaluation of all the strengths and weaknesses of each alternative

Guard against biases

Estimate the cost of each alternative

Estimate the implementation time of each alternative

Identify the strengths and weaknesses of each alternative

Approximate the expected outcome of each alternative Favorable & Unfavorable

7–10

Step 5: Select the Best Alternative

• Selection of the best alternative will depend on:Comprehensiveness and accuracy of

information gatheredCreativeness of alternativesQuality of analysis

7–11

Step 6: Implement the Decision

• Establish a plan: When will the decision be implemented? Who will be involved? What will be involved? What changes will take place? How will they occur?

• Convey the decision to those affected

• Assign responsibilities

• Allocate necessary resources

• Identify and clarify deadlines

• Get commitment from those involved in the implementation

7–12

Step 7: Follow Up & Evaluate

• Continually monitor outcomesDid your choice accomplish the desired result?Did it correct the identified problem

7–13

Decision Tools Supervisors face three possible conditions

when making decisions:

1. Certainty The implication that the outcome of every possible

alternative is known.

2. Risk The probability that a particular outcome will result

from a given decision. Must rely on personal experiences, secondary information, and historical data.

3. Uncertainty A condition under which there is not full knowledge of

the problem and reasonable probabilities for alternative outcomes cannot be determined.

7–14

Decision Tools

What is the Expected Value Analysis?

• Expected Value Analysis:

“A procedure that permits decision makers to place monetary value on various consequences likely to result from the selection

of a particular course of action” (p. 190)

7–15

Decision Tools cont…

• How are Decision Trees Helpful?• Decision Tree

“A diagram that analyzes hiring, marketing, investment, equipment purchases

Encompass expected value analysis by assigning probabilities to each possible outcome and calculating payoffs for each decision path

7–16

Decision Tools cont…

• Marginal Analysis:

“A decision method that helps decision makers optimize returns or minimize costs by dealing with the additional cost in a particular decision, than the average cost” (p. 192)

Example: Taking on a new customer

What additional revenue would be generated by the new customer

What additional costs would be generated by the new customer

If the increased revenue exceeds the increased costs, total profits would be increased by accepting the new customer

7–17

Decision Making: Styles

• Directive style Characterizes the low tolerance for ambiguity and a

rational way of thinking of individuals who are logical and efficient and typically make fast decisions that focus on the short term.

• Analytic style Characterizes the high tolerance for ambiguity combined

with a rational way of thinking of individuals who prefer to have complete information before making a decision.

Careful decision makers with the ability to adapt or cope with new situations

– Example: Supervisors, business students, & top executives

7–18

Decision Making: Styles (cont’d)

• Conceptual style Individuals who tend to be very broad in

outlook, to look at many alternatives, and to focus on the long run and often look for creative solutions.

• Behavioral style Individuals who think intuitively but have a low

tolerance for uncertainty; they work well with others, are open to suggestions, and are concerned about the individuals who work for them.

7–19

Decision-Making Styles

7–20

Common Decision-making Errors

• Heuristics: Using judgmental shortcuts

Availability heuristic The tendency to base judgments on information that is

readily available.

Representative heuristic The tendency to base judgments of probability on things

(objects or events) that are familiar Example: Not hiring certain types of people based upon

previous performance of similar person

Escalation of commitment (Blackjack Strategy) An increased commitment to a previous decision despite

negative information about the decision’s present outcomes.

7–21

How Do Problems Differ?

• Well-structured problems Straightforward, familiar, easily defined problems (use

programmed decision to solve)

• Ill-structured problems New problems in which information is ambiguous or

incomplete

(hire consultants to solve problem)

• Programmed decision A repetitive decision that can be handled by a routine

approach

• Nonprogrammed decisions Decisions that must be custom-made to solve unique

and nonrecurring problems– New laws

– New organizational/departmental strategy

7–22

Group Decision Making

• Advantages Make more accurate

decisions Provides more complete

information Offers a greater

diversity of experiences and perspectives

Generates more alternatives

Increases acceptance of a solution

Increases the legitimacy of a decision.

• Disadvantages Is more time-consuming

and less efficient Minority domination can

influence decision process

Increased pressures to conform to the group’s mindset (groupthink)

Ambiguous responsibility for the outcomes of decisions

7–23

When Are Groups Most Effective?

• CreativityGroups tend to be more creative than

individuals.

• Acceptance of the final solutionGroups help increase the acceptance of

decisions.

• Effectiveness of group decision makingGroups of five to seven members are optimal

for decision process speed and quality.

7–24

Improving Group Decision Making

• BrainstormingAn idea-generating process that encourages

alternatives while withholding criticism.

• Nominal group techniqueA decision-making technique in which group

members are physically present but operate independently.

• Electronic meetingA type of nominal group technique in which

participants are linked by computer.

7–25

Ethics and Business

• EthicsA set of rules or principles that defines right

and wrong conduct

• Code of ethicsA formal document that states an

organization’s primary values and the ethical rules it expects managers and operatives to follow

7–26

Three Views of Ethics

• Utilitarian view of ethicsMaking decisions solely on the basis of their

outcomes or consequences.

“Providing the greatest good for the greatest number”

• Rights view of ethicsRespecting and protecting individual liberties

and privileges

“Decision consistent with Bill of Rights”

• Theory of justice view of ethicsFairly and impartially imposing and enforcing

rules.

“Union – pay is equal, seniority decides layoff, etc…