Data
are statistics and other individual facts and observations
Information
data presented in a meaningful way that assists decision making.
In management, having good________ is essential for effective decision making
information
Good information" has the following characteristics:
� Relevant
� Understandable
� Timely: The information does not arrive late; it can be accessed in time to make decisions.
� Accuracy
� Complete
Information technology
uses computers to assist people in gathering, storing, and processing information.
Intelligence information
taken from the external environment, as well as from the stakeholders such as stockholders, suppliers, and regulatory agencies.
Once this outside information is gathered, it must be processed by the management of the firm so that it can be used to its gre
Public information
is presented to those outside the organization, including stakeholders and the general public.
information systems
a structure that utilizes information technology to gather, systemize, and disseminate data in order to make decisions.
Management information systems (MIS)
use computerized information-processing systems to assist managers in decision making.
Since effective IT allows relatively quick and easy dissemination of knowledge..
it has caused organizations to lose layers and become "flatter" as more managers and employees are able to quickly gain access to relevant decision-making information.
To be the most effective, managers must be able to take maximum advantage of IT in their roles of planning, organizing, leading, and controlling.
� Planning: IT allows quicker information dissemination, as well as a wider availability of information, which enables more people to contribute to the planning process.
� Organizing: With IT, it is easier to have a steady stream of communication between
Problem solving
involves recognizing and finding solutions to problems;
In order to solve problems effectively, it is necessary to make good decisions
Decision
the choice of action taken from among various alternative options.
Managers primarily deal with:
- underperformance, also known as performance deficiency.
-On the other end of the spectrum, a manager also needs to learn how to recognize performance opportunities, which is when a situation either has the potential to turn out better than expected or a
There are three different types of managers in regard to their openness to problem solving:
1. Problem Avoiders are managers who ignore any and all information that would indicate a problematic situation. Usually, this is the approach of individuals who do not like to solve problems or make decisions.
2. Problem Solvers are reactive in their app
systematic thinking
is using rational methods of solving problems
intuitive thinking
has a spontaneous style, making decisions based on a quick and broad assessment.
multidimensional thinking
As a manager, it is essential to have the ability to recognize and evaluate many problems at once and how they relate to each other
strategic opportunism
a manager must be able to resolve long-term issues while prioritizing and resolving the everyday problems at a job, a skill scholar Daniel Isenberg
Cognitive styles are the approaches that humans utilize when solving problems.
...
There are four basic types of cognitive thinking
SENSATION THINKERS
SENSATION FEELERS
INTUITIVE THINKERS
INTUITIVE FEELERS
Sensation thinkers
prefer hard, conclusive data and high-control situations. They focus more on "the numbers" of a situation and take a more impersonal approach.
Sensation Feelers
are comfortable with open communication and take personal feelings and values into account. In addition, however, they also prefer to have the facts of a situation.
Intuitive thinkers
prefer abstract situations that are broad in scope. They tend to avoid details, and are both logical and impersonal.
Intuitive Feelers
tend to value personal relationships, are flexible, prefer broad issues, and usually do not take details into consideration.
Most managers, especially lower-level ones, face an assortment of _______ problems
structured
structured problems
can be solved by employing a clear sequence of activities with information that is readily available.
- can be solved with programmed decisions
programmed decisions
decisions that a person has already successfully implemented in the past.
unstructured problems
�situations that are characterized by incomplete information. These are usually new, unique situations that are most frequently encountered by upper management
- require nonprogrammed decisions
nonprogrammed decisions
�special solutions created for uncommon situations.
A crisis
is an unanticipated situation that must be solved quickly in order to prevent a large-scale calamity. Another way to view a crisis is as an extreme nonprogrammed decision with exceptionally high stakes.
crisis management programs
�courses designed to prepare managers for crises that could compromise an organization's well-being.
There are three different decision-making environments that exist on a continuum:
certainty, risk, and uncertainty.
A certain environment
has all of the necessary information regarding each choice of action and its predicted outcome.
Because the decision-maker has complete information, the only requirement is to analyze each possible decision and choose the one with the best outcome. While
A risk environment
is the setting for a high number of management problems.
A risk environment does not have all of the necessary information to make a decision; instead, there are probabilities of different outcomes for each possible decision.
Decision making under risky c
uncertain environment
there is so little information that a manager cannot even assign probabilities of various outcomes occurring.
For most people, this is a very high-stress situation, and for managers to be successful, they need to rely heavily on innovative thinking and cr
THE DECISION MAKING PROCESS
Step 1�Identify and Define the Problem
Step 2�Generate and Evaluate Alternative Courses of Action
Step 3�Decide on a Preferred Course of Action
Step 4�Implement the Decision
Step 5�Evaluate the Results
(STEP 1: ID/DEFINE THE PROBLEM)
There are three mistakes that many people make while trying to define a problem:
1. Trying to fix the symptoms of a situation rather than the root cause of the issue. A symptom is a sign that a problem may be present. A manager should focus on fixing the root cause of the problem, not simply the symptom.
2. Focusing on the wrong probl
(STEP 2: GENERATE/EVALUATE ALT COURSE OF ACTION)
The preferred course of action should, overall, satisfy these five criteria the best:
1. Costs�the negative side effects and necessary sacrifices
2. Benefits
3. Ethical soundness
4. Timeliness�how quickly the decision can be put into action
5. Acceptability�the degree to which the decision will be accepted by the people who will implement
(Step 3�Decide on a Preferred Course of Action)
When deciding on the best alternative out of all possible courses of action, the two primary decision-making models employed are the classical and behavioral models.
1. Classical Decision Model
2. Behavioral Decision Model
classical decision model
a manager is in a situation with all necessary information and makes decisions rationally, without bias
All courses of action are known, as well as the consequences of those actions.
the problem is well defined and structured
In a situation like this, it
optimizing decision
choosing the highest-quality alternative possible.
Steps in Classical Decision Model
1. Identify the problem (correctly)
2. Identify all of the criteria (what is important about the decision)
3. Identify all of the alternatives (what are all of the possible solutions to our problem/decision)
4. Rate all criteria in terms of their importan
The classical decision model is a ____ model
rational model:
meaning that a person has access to all relevant information (they know all of the criteria and all of the alternatives), they can accurately rate each of these factors, and they will choose the alternative that maximizes their utility (th
The behavioral decision model
assumes that humans are limited in their ability to be perfectly rational and unbiased in their decision making.
In addition, there is incomplete information and an unstructured problem, which makes decision making even more challenging.
When you combine
satisficing decision
which is the first acceptable solution that one can think of.
The most critical part of the decision-making process is the ________
(STEP 4)
Implementation;
If one cannot implement the chosen decision, the problem will remain despite all of the resources and effort spent on the first three steps.
Many times, a manager or management team will lay out an elaborate solution to an alternative, onl
participation error
�neglecting to involve the people needed in the implementation of an alternative during the planning phase of decision making.
(Step 5: Evaluate the results)
If the chosen solution does not produce the desired effect, or if there are unanticipated negative side effects, it may be necessary to take corrective action.
heuristics
common ways of simplifying the decision-making process. ("rules of thumb")
Availability Bias
When a person makes a decision primarily based on recent events and readily available information
Representation Bias
If a person makes a decision heavily rooted in assumptions that come from other situations that appear similar
-Representative heuristics are quite useful and are often identified as a key element of intuition.
Anchoring and adjustment heuristic
When a person makes a decision using a previous decision as a reference point
example of anchoring heuristic
When we ask for a raise, we generally ask for our previous base salary level (anchor) plus some upward adjustment. This is a logical way of thinking for most of us. Unfortunately, what we may not intend to overlook are the assumptions underlying the valid
Zero Based Budgeting
a method of budget formulation that recognizes our tendency to assume that the base anchor is a valid number. Effective cost containment and cost estimation should involve a thorough examination of all future expenses.
Escalating Commitment
Sometimes when a person makes a large investment of time or money into a certain course of action, they may be reluctant to abandon that decision despite the fact that the current course of action is not working.
---But irrational escalation of commitment
confirmation error
When one takes into consideration the information that supports a previously made decision
"selective hearing
framing error
a misunderstanding of information due to the context in which it is perceived
Satisficing
occurs when we look for alternatives only long enough to find one that satisfies our needs.
The danger in making a decision like this is that we might have found a better alternative if we had continued to search.
Hence, we tend to use the satisficing heu
Implicit favorite decision making
when you alter the criteria and assessment of the alternatives to confirm that your favorite is the most rational choice
Advantages of Group Decisions
� More information is available
� Multiple points of view from diverse backgrounds
� Increased number of action alternatives
� Group members have more acceptance of final decisions and are more likely to follow through, because they feel ownership in the
Disadvantages of Group Decisions
� Potential for conformity and lack of innovation if individuals feel pressure to fit in
� A vocal minority of the group may hold sway over the majority
� As more people become involved, the decision-making process may take longer
� Scheduling and spatial