Managemnt ch # 6 & 7 & 8.pdf

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ninth edition

STEPHEN P. ROBBINS

PowerPoint Presentation by Charlie CookThe University of West Alabama

MARY COULTER

PLANNING FUNCTION OF

MANAGEMENT

•Chapter 6: Decision Making

•Chapter 7: Foundations Of Planning

•Chapter 8: Strategic Management

•Chapter 9: Planning Tools and Techniques © 2007 Prentice Hall, Inc.All rights reserved.

8/9/2019 Managemnt ch # 6 & 7 & 8.pdf

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ninth edition

STEPHEN P. ROBBINS

PowerPoint Presentation by Charlie CookThe University of West Alabama

MARY COULTER

© 2007 Prentice Hall, Inc.All rights reserved.

Decision-Making:

The Essence of

the Manager’s Job

Chapter

6

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© 2007 Prentice Hall, Inc. All rights reserved. 6 –3

Learning Outline

• The decision making process

Define decision and decision-making process Describe the eight steps in the decision-making process

• The Manager as Decision Maker Discuss the assumptions of a rational decision making

Explain intuitive decision making

Describe four decision making styles

Explain the managerial decision-making model

• Decision Making for Today’s World Explain how managers can make effective decisions in Today’s

world List the six characteristics of an effective decision making

process

Describe the five habits of highly reliable organizations

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• Decision making is the essence ofmanagement. All managers would

like to make good decisions.• Making good decisions issomething that every managerswant to do because they are

judged on the outcomes of thosedecisions.

• The overall quality of managerial

decisions has a major influenceon whether an organizationsucceeds or fails.

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• Managers at all levels and in all areas oforganizations make decisions.

• Top-level managers make decisions about theirorganization’s goals, where to locatemanufacturing facilities, what new market toenter, and what products and services to offer.

• Middle and lower level managers makedecisions about production schedules, qualityproblems, pay raises, and employee discipline.

• All organizational members make decisions that

effect their job and the organization they workfor.

How do they make those decis ions?

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THE DECISION-MAKING PROCESS

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Step 1: Identifying the Problem

• Problem

The decision-making process begins with the

existence of a problem. A discrepancy between an

existing and desired state of affairs.

• Characteristics of Problems A problem becomes a problem when a manager

becomes aware of it.

There is pressure to solve the problem.

The manager must have the authority, information, or

resources needed to solve the problem.

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Step 2: Identifying Decision Criteria

• Decision criteria are factors that are important (relevant)

to resolving the problem.

Costs that will be incurred (investments required)

Risks likely to be encountered (chance of failure)

Outcomes that are desired (growth of the firm)

• When you are trying to buy a laptop computer;

Price

Multimedia capability

Memory and storage capability

Display quality

Battery life

Warranty

Carrying weight are relevant criteria in your decision.

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Exhibit 6 –2 Criteria and Weights for Computer Replacement Decision

Criterion Weight

Memory and Storage 10

Battery life 8

Carrying Weight 6

Warranty 4

Display Quality 3

Step 3: Allocating Weights to the Criteria

• Decision criteria are not of equal importance:

Assigning a weight to each item places the items in

the correct priority order of their importance in thedecision making process.

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Step 4: Developing Alternatives

• This step requires the decision maker to list viable

alternatives that could resolve the problem.• Identifying viable alternatives Alternatives are listed (without evaluation) that can resolve the

problem.

• Our laptop alternatives are;

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Step 5: Analyzing Alternatives

• Appraising each alternative’s strengths and

weaknesses

An alternative’s appraisal is based on its ability to resolve theissues identified in steps 2 and 3.

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Step 6: Selecting an Alternative

• This step is choosing the best alternative from

among listed alternatives.

• Choosing the best alternative

The alternative with the highest total weight is

chosen, as shown on Exhibit 6-4.

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Exhibit 6 –4 Evaluation of Laptop AlternativesAgainst Weighted Criteria

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Step 7: Implementing the Alternative

• Putting the chosen alternative into action.

Conveying the decision to and gaining commitment from thosewho will carry out the decision.

• Managers also may need to do during the

implementation process is to reassess the environmentfor any changes, especially if the decision is one that

takes a longer period of time to implement.

• Do the criteria, alternatives, and choice still seem to be

best ones, or has the environment changed such a waythat we need to reevaluate?

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Step 8: Evaluating the Decision’sEffectiveness

• The soundness of the decision is judged by itsoutcomes.

How effectively was the problem resolved byoutcomes resulting from the chosen alternatives?

If the problem was not resolved, what went wrong?

Was the problem incorrectly defined?

Were errors made in the evaluation of the various

alternatives?

Was the right alternative selected but poorlyimplemented?

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THE MANAGER AS DECİSİON MAKER

• Everyone in an organization makes decisions,

but decision making is particularly important in a

manager’s job.

• Decision making is part of all four managerial

functions. That is why we say that decisionmaking is the essence of management.

• That is why managers –When they plan,

organize, lead, and control – are called decision

makers.

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Exhibit 6 –5 Decisions in the Management Functions

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Making Decisions

• How can we best describe the decision making

situation and the person who makes thedecision?

• We will look at three perspectives on how

decisions are made. These are;Rationality

Bounded Rationality

Intuition

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Rationality

We assume that managers’ decision making is going

to be rational.

Managers make consistent, value-maximizing choices

with specified constraints.

Assumptions are that decision makers:

Are perfectly rational, fully objective, and logical.

Have carefully defined the problem and identified all viable

alternatives.

Have a clear and specific goal

Will select the alternative that maximizes outcomes in the

organization’s interests rather than in their personal interests.

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Exhibit 6 –6 Assumptions of Rationality

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Bounded Rationality

Managers make decisions rationally, but are limited

(bounded) by their ability to process information.

Assumptions are that decision makers:

Will not seek out or have knowledge of all alternatives

Will sat isf ice —choose the first alternative encountered thatsatisfactorily solves the problem—rather than maximize the

outcome of their decision by considering all alternatives and

choosing the best.

Influence on decision making

Escalation of commitment: an increased commitment to a

previous decision despite evidence that it may have been

wrong.

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The Role of Intuition

• Managers often use their intuition and it may

actually help their decision making.

• What is Intuitive decision making?

Making decisions on the basis of experience,

feelings, and accumulated judgment.

Researchers have idendified five different aspects of

intuition, which are described in Exhibit 6-7.

How common is intuitive decision making? One survey of corporate executives found that almost half of

managers used intiution more than formal analysis to run

their companies.

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Exhibit 6 –7 What is Intuition?

Source: Based on L. A. Burke and M. K. Miller, ―Taking the Mystery Out of IntuitiveDecision Making,‖ Academy of Management Executive, October 1999, pp. 91 –99.

Q: Is it good or bad that managers rely on intuition inmaking decisions?

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Types of Problems and Decisions

• Managers in all kind of organizations will face

different types of problems and decisions asthey do their jobs.

• Depending of the nature of the problem, the

manager can use different types of decisions.• Structured Problems: Some problems are

straightforward. The goal of the decision maker

is clear, the problem is familiar, and the

information about the problem is easily definedand complete. These problems called structured

problems.

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• Programmed Decision: A repetitive decision that can be

handled by a routine approach. Because the problem is

structured, the manager doesn't have to go to the trouble

and expense of going through and involved decision

making process. Because once the structured problem is

defined, the solution is usually self-evident or at least

reduced to five alternatives that are familiar and have

proved successful in the past.• There are three types of programmed decisions;

Procedure

Rule

policy

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Types of Programmed Decisions

• Procedure

A series of interrelated steps that a manager can use to respond(applying a policy) to a structured problem. Ex: Follow all stepsfor completing merchandise return documentation.

• Rule

An explicit statement that limits what a manager or employeecan or cannot do. Ex: Managers must approve all refunds over$50.00.

• Policy

A general guideline for making a decision about a structured

problem. Ex: Accept all customer-returned merchandise.30 day return

policy

We promote within, whenever possible

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Unstructured Problems

• Many organizational situations involve

unsturctured problems, which are problems thatare new or unusual and for which information isnot clear or complete.

• Exp: Whether to build a new manufacturing

facility in China.• When problems are unstructured, managers

must rely on non-programmed decision makingin order to develop unique solutions.

• Nonprogrammed Decisions are unique andnon-recurring and require custom-madesolutions.

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Programmed Versus Nonprogrammed

Decisions

Characteristics Programmed Decisions Nonprogrammed

Decisions

Type of Problem Structured Unstructured

Managerial Level Lower Levels Upper Levels

Frequency Repetitive, routine New, unusual

Information Readily available Ambiguous orincomplete

Goals Clear, specific Unclear

Time Frame for

Solution

Short Long

Solution Relies On Procedures, rules, policies Judgment andcreativity

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Decision Making Conditions

• Certainty: The ideal situation for making decisions is

certainty, that is, a situation in which a manager canmake accurate decisions because the outcome of every

alternative is known.

• Risk: Conditions in which the decision maker is able to

estimate the likelihood of certain outcomes. The ability toassign probabilities may be result of past personal

experiences or secondary information.

• Uncertainty: Managers face decision-making situations

of uncertainty. Under these conditions, the choice ofalternative is influenced by the limited amount of

information available to the decision maker.

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Decision-Making Styles

• Managers have different styles when it comes to

making decisions.• Managers’ decision making styles differ along

two dimensions. The first is individuals’ way ofthinking. Some of us think Rational, and some of

us think Intuitively.• Second dimension is individuals’ tolerance for

ambiguity. Some of us tolerate low ambiguity,and some of us tolerate high ambiguity.

• Based on these dimensions, there are four typesof decision-making styles: directive, analytic,conceptual, and behavioral.

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Decision Making Matrix

BehavioralDirective

ConceptualAnalyticT ol er an c ef or Am b i g ui t y

Low

High

Way of Thinking

Rational Intuative

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Exhibit 6 –13 Common Decision-Making Errors and Biases

Bias = “asubjectivepoint of view”

Bias distortsreality

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Decision-Making Biases and Errorsfrom the book, Decide and Con quer , by S.P. Roundy

• HeuristicsUsing ―rules of thumb‖ to simplify decision making.

• Overconfidence Bias

Holding unrealistically positive views of one’s self andone’s performance.

• Immediate Gratification Bias

Choosing alternatives that offer immediate rewardsand that to avoid immediate costs.

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Decision-Making Biases and Errors

(cont’d)

• Anchoring Effect

Fixating on initial information and ignoring

subsequent information.

• Selective Perception BiasSelecting organizing and interpreting events based on

the decision maker’s biased perceptions.

• Confirmation BiasSeeking out information that reaffirms past choices

and discounting contradictory information.

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(cont’d)

• Framing BiasSelecting and highlighting certain aspects of a

situation while ignoring other aspects.

• Availability BiasLosing decision-making objectivity by focusing on themost recent events.

• Representation Bias

Drawing analogies and seeing identical situationswhen none exist.

• Randomness BiasCreating unfounded meaning out of random events.

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(cont’d)

• Sunk Costs Errors

Forgetting that current actions cannot influence past

events and relate only to future consequences.

• Self-Serving BiasTaking quick credit for successes and blaming

outside factors for failures.

• Hindsight Bias

Mistakenly believing that an event could have beenpredicted once the actual outcome is known (after-

the-fact).

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DECISION MAKING FOR TODAY’SWORLD

• Guidelines for making effective decisions:Understand cultural differences.

Know when it’s time to call it quits.

Use an effective decision-making process.

• Habits of highly reliable organizations (HROs)

Are not tricked by their success.

Defer to the experts on the front line.

Let unexpected circumstances provide the solution.Embrace complexity.

Anticipate, but also anticipate their limits.

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Characteristics of an Effective Decision-

Making Process

1. It focuses on what is important.

2. It is logical and consistent.

3. It acknowledges both subjective and objective thinking

and blends analytical with intuitive thinking.4. It requires only as much information and analysis as is

necessary to resolve a particular dilemma.

5. It encourages and guides the gathering of relevant

information and informed opinion.

6. It is straightforward, reliable, easy to use, and flexible.

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ninth edition

STEPHEN P. ROBBINS

PowerPoint Presentation by Charlie Cook

MARY COULTER

© 2007 P ti H ll I

THANK YOU FOR LISTENING

ANY QUESTIONS?????

Managemnt ch # 6 & 7 & 8.pdf

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