Heading

3- 1

Managerial Decision Making

McGraw-Hill

2003 The McGraw-Hill Companies, Inc. All rights reserved.

Characteristics HeadingOf Managerial Decisions

3- 2

Risk

Uncertainty

Lack of Structure

Conflict

McGraw-Hill

2003 The McGraw-Hill Companies, Inc. All rights reserved.

Characteristics HeadingOf Managerial Decisions (cont.)

3- 3

Lack of structure

the usual state of affairs in managerial decision making programmed decisions - decisions that have been encountered and made in the past

have objectively correct answers are solvable by using simple rules, policies, or numerical computations

nonprogrammed decisions - new, novel, complex decisions having no proven answers

decision maker must create or impose a method for making the decision
2003 The McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill

Comparison Of Types Of Decisions Heading

Programmed Decisions Problem Frequent, repetitive, routine. Much certainty regarding cause and effect relationships.

3- 4

Nonprogrammed Decisions Novel, unstructured. Much uncertainty regarding cause and effect relationships. Necessity for creativity, intuition, tolerance for ambiguity, creative problem solving.

Procedure Dependence on policies, rules, and definite procedures.

Business Periodic reorders of inventory. example

Diversification in new products and markets.

McGraw-Hill

2003 The McGraw-Hill Companies, Inc. All rights reserved.

Characteristics HeadingOf Managerial Decisions (

Uncertainty

3- 5

and risk

McGraw-Hill

certainty - have sufficient information to predict precisely the consequences of ones actions uncertainty - have insufficient information to know the consequences of different actions cannot estimate the likelihood of various consequences of their actions risk - available information permits estimation of the likelihood of various consequences probability of an action being successful is less than 100 percent, and losses may occur good managers prefer to manage risk
2003 The McGraw-Hill Companies, Inc. All rights reserved.

Characteristics HeadingOf Managerial Decisions

Conflict
opposing

3- 6

pressures from different sources occurs at two levels psychological conflict - individual decision makers: conflict between individuals or groups few decisions are without conflict
McGraw-Hill 2003 The McGraw-Hill Companies, Inc. All rights reserved.

Stages Of Decision Making Heading

Identifying
recognize

3- 7

and diagnosing the problem

that a problem exists and must be

solved problem - discrepancy between current state and:

past performance current performance of other organizations future expected performance

decision
McGraw-Hill

maker must want to resolve the problem and have the resources to do so

2003 The McGraw-Hill Companies, Inc. All rights reserved.

Stages of Managerial Decesions

Generating

Heading

3- 8

alternative solutions

ready-made

solutions - ideas that have been tried before may follow the advice of others who have faced similar problem custom-made solutions - combining new ideas into solutions
McGraw-Hill 2003 The McGraw-Hill Companies, Inc. All rights reserved.

Stages Of Decision Making (cont.) Heading

Evaluating

3- 9

alternatives
the value or adequacy of the

determining

McGraw-Hill

alternatives predict the consequences that will occur if the various options are put into effect contingency plans - alternative courses of action that can be implemented based on how the future unfolds contingency plans are necessary to prepare for different scenarios

2003 The McGraw-Hill Companies, Inc. All rights reserved.

Stages Of Decision Making (cont.) Heading

Making

3 - 10

the choice

maximize - a decision realizing the best possible outcome requires searching thoroughly for a complete range of alternatives each alternative is carefully assessed compare one alternative to another satisfice - choose an option that is acceptable although not necessarily the best or perfect compare the choice with the goal, not against other options search for alternatives ends when an okay solution is found optimizing - achieving the best possible balance among several goals
McGraw-Hill

2003 The McGraw-Hill Companies, Inc. All rights reserved.

Stages Of Decision Making (cont.) Heading

Implementing
those

3 - 11

the decision

McGraw-Hill

who implement the decision must: understand the choice and why it was made be committed to its successful implementation cant assume that things will go smoothly during implementation identify potential problems identify potential opportunities always expect the unexpected

2003 The McGraw-Hill Companies, Inc. All rights reserved.

Stages Of Decision Making (cont.) Heading Evaluating the decision

collecting

3 - 12

information on how well the decision is

working evaluation is useful whether the feedback is positive or negative if decision appears inappropriate, the process cycles back to the first stage The best decision

nothing can guarantee a best decision vigilance - decision maker carefully and conscientiously executes all stages of decision making
2003 The McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill

Barriers To Effective Decision Making Heading

Psychological

3 - 13

biases

biases that interfere with objective rationality Illusion of control - a belief that one can influence events even when one has no control over what will happen subjective influences can override objective facts discount the future - weigh short-term costs and benefits more heavily than longer-term costs and benefits the avoidance of short-term costs or the seeking of short-term rewards may result in negative long-term consequences
McGraw-Hill 2003 The McGraw-Hill Companies, Inc. All rights reserved.

Barriers To Effective Decision Making Heading

Time

3 - 14

pressures -todays economy places a premium on acting quickly and keeping pace

in order to make timely and high-quality decisions one must: focus on real-time information involve people more effectively and efficiently rely on trusted experts take a realistic view of conflict

Social

realities

many decisions result from intensive social interactions, bargaining, and politicking
2003 The McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill

Pros And Cons Of Using A Group To Heading Make Decisions

Potential Advantages
1. 2. Larger pool of information More perspectives and approaches Intellectual stimulation 1. 2. 3. 3.

3 - 15

Potential Disadvantages
One person dominates Satisficing Groupthink - team spirit discourages disagreement

4.

People understand the decision

People are committed to the decision

4.

Goal displacement - new goals replace original goals

5.

McGraw-Hill

2003 The McGraw-Hill Companies, Inc. All rights reserved.

Managing Group Decision Making Heading

Leadership

3 - 16

style

leader should attempt to minimize process-related problems leader should: avoid dominating the discussion encourage less vocal members to express themselves mitigate pressures for conformity stay alert to groupthink and satisficing prevent group from losing sight of the primary objective
McGraw-Hill 2003 The McGraw-Hill Companies, Inc. All rights reserved.

Managing Group Decision Making Heading

3 - 17

Encouraging creativity

creativity is essential to survival and involves:

creation - bringing a new thing into being synthesis - joining two previously unrelated things modification - improving something or giving it new application

to become creative one must:

recognize creative potential in little opportunities obtain sufficient resources escape from work once in awhile and read widely
evaluation of ideas is postponed until all have been proposed

brainstorming - group generates ideas about a problem

McGraw-Hill

2003 The McGraw-Hill Companies, Inc. All rights reserved.

Organizational HeadingDecision Making

3 - 18

Constraints on decision makers

organizations cannot do whatever they wish

Financial

Organizational Constraints

Legal

Human
McGraw-Hill

Market
2003 The McGraw-Hill Companies, Inc. All rights reserved.

Organizational HeadingDecision Making (cont.)

3 - 19

Models of organizational decision processes (cont.) incremental model - major decisions arise through a series of smaller decisions piecemeal approach to larger solutions coalitional model - groups with differing preferences use power and negotiation to influence decisions used when people disagree about goals or compete for resources garbage can model - a chaotic process leading to seemingly random decisions occurs when people are unsure of their goals and what should be done
McGraw-Hill 2003 The McGraw-Hill Companies, Inc. All rights reserved.

Organizational HeadingDecision Making (cont.)

3 - 20

Negotiations and politics

negotiations necessary to galvanize the preferences of competing groups and individuals organizational politics - people try to influence decisions to promote their own interests

use power to pursue hidden agendas

create common goals - helps to make decision making a collaborative rather than a competitive process stress and time constraints make decisions less effective should be prepared for crises in advance

Decision making in a crisis

McGraw-Hill

2003 The McGraw-Hill Companies, Inc. All rights reserved.

Organizational HeadingDecision Making (cont.)

3 - 21

Emergent strategies

the strategy that evolves from all the activities engaged in by people throughout the organization result from dynamic processes in which people engage in discovery, implement decisions, and reconsider the initial decision after discovering new things by chance emergent strategies may start at any organizational level emergent strategies are generally the result of constructive processes

McGraw-Hill

2003 The McGraw-Hill Companies, Inc. All rights reserved.

Heading

3 - 22

Communications

McGraw-Hill

2003 The McGraw-Hill Companies, Inc. All rights reserved.

Introduction Heading
Every

3 - 23

organization should have both discussion and dialogue

discussion

- discourse in which each person attempts to win a debate by having her/his view accepted by the group dialogue - members explore complex issues from many viewpoints in order to come to a common, deeper understanding
McGraw-Hill 2003 The McGraw-Hill Companies, Inc. All rights reserved.

Interpersonal Communication Heading

3 - 24

Communication

the transmission of information and meaning from one party to another through the use of shared symbols sender - initiates the process by conveying information

has a meaning s/he wishes to communicate encodes the meaning into symbols transmits the message through some channel decodes the messages attempts to interpret the senders meaning may provide feedback by encoding a message in response

receiver - person for whom the message is intended

McGraw-Hill

noise- interference in the system that blocks understanding 2003 The McGraw-Hill Companies, Inc. All rights reserved.

Interpersonal Communication (cont.) Heading

3 - 25

One-way communication

process in which information flows in only one direction

no feedback from the receiver

more common than it should be because it is faster and easier for sender process in which information flows in two directions

Two-way communication

receiver provides feedback sender is receptive to the feedback

basis for constructive exchanges more difficult and time consuming, but more accurate
2003 The McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill

Interpersonal Communication (cont.) Heading

3 - 26

Oral channel

includes face-to-face discussion, telephone conversations, and formal presentations and speeches advantages

questions can be asked and answered feedback is immediate and direct receiver can sense the senders sincerity more persuasive
can lead to spontaneous, ill-considered statements there is no permanent record of the communication
2003 The McGraw-Hill Companies, Inc. All rights reserved.

disadvantages

McGraw-Hill

Interpersonal Communication (cont.) Heading

3 - 27

Written channel

includes memos, letters, reports, and computer files advantages

message can be revised provides a permanent record message stays the same when sent to several receivers receiver has more time to analyze the message
sender has no control over where, when, or if the message is read sender does not receive immediate feedback receiver may not understand parts of the message message must be longer to answer anticipated questions 2003 The McGraw-Hill Companies, Inc. All rights reserved.

disadvantages

McGraw-Hill

Organizational HeadingCommunication

3 - 28

Downward communication
information

that flows from higher to lower levels in the organizations hierarchy problems: lack of openness - withhold information even if sharing is important filtering - some information is left out of a message
message can be distorted by adding personal interpretation information will be lost or distorted

McGraw-Hill 2003 The McGraw-Hill Companies, Inc. All rights reserved.

Organizational HeadingCommunication (cont.)

3 - 29

downward communication in difficult times communication important during mergers and acquisitions full communication helps employees deal with anxiety open-book management controversial practice of sharing with all employees vital information previously meant for managements eyes only done properly, complete communications system makes sense to people on the shop floor just as it does to the top executives
McGraw-Hill 2003 The McGraw-Hill Companies, Inc. All rights reserved.

Organizational HeadingCommunication (cont.)

3 - 30

Upward communication
information

that flows from lower to higher levels in the organization hierarchy important for several reasons managers learn what is going on employees gain from the opportunity to communicate upward facilitates downward communication

McGraw-Hill

2003 The McGraw-Hill Companies, Inc. All rights reserved.

Organizational HeadingCommunication (cont.)

Upward communication
problems

3 - 31

similar to those for downward communication managers may neglect or miss information due to the amount of communication they receive employees may filter information directed at their bosses
managers

may not learn about important

2003 The McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill

problems

Organizational HeadingCommunication (cont.)

Upward

3 - 32

communication (cont.) managing upward communication managers should facilitate upward communication managers must motivate people to provide valid information upward communication can use informal channels management by wandering around (MBWA)
2003 The McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill

Organizational HeadingCommunication (cont.)

3 - 33

Horizontal communication
information

sharing among people on the same hierarchical level may involve people outside of the organization has several important functions allows sharing of information among units helps solve conflicts provides social and emotional support to people
McGraw-Hill 2003 The McGraw-Hill Companies, Inc. All rights reserved.

Organizational HeadingCommunication (cont.)

3 - 34

Formal and informal communication

formal communication - official, organization-sanctioned episodes of information transmission informal communication - more unofficial

grapevine - the social network of informal communications

helps people to interpret the organization conveys information that the formal system leaves unsaid

managing informal communication

McGraw-Hill

managers need to work with the grapevine talk to the key people prevent rumors from starting neutralize rumors once they have started
2003 The McGraw-Hill Companies, Inc. All rights reserved.

Heading

3 - 35

Motivating for Performance

McGraw-Hill

2003 The McGraw-Hill Companies, Inc. All rights reserved.

Motivating For Performance Heading

Motivation

3 - 36

forces

that energize, direct, and sustain a persons efforts highly motivated people, with adequate ability and understanding of the job, will be highly productive managers must know what behaviors they want to motivate people to exhibit
McGraw-Hill 2003 The McGraw-Hill Companies, Inc. All rights reserved.

Setting Heading Goals

3 - 37

Goal setting theory

people have conscious goals that energize them and direct their thoughts and behaviors toward a particular end

Goals

that motivate

goals should be acceptable to employees goals should be challenging but attainable goals should be specific, quantifiable, and measurable
Limitations

of goal setting

McGraw-Hill

individualized goals create competition and reduce cooperation single productivity goals interfere with other dimensions of performance

2003 The McGraw-Hill Companies, Inc. All rights reserved.

Reinforcing Performance (cont.) Heading

3 - 38

Consequences of behavior
positive

reinforcement - applying valued consequences that increase the likelihood that a person will repeat the behavior that led to it negative reinforcement - removing or withholding an undesirable consequence can involve the threat of punishment
punishment - administering an aversive consequence extinction - withdrawing or failing to provide a reinforcing consequence

McGraw-Hill

2003 The McGraw-Hill Companies, Inc. All rights reserved.

 Expectancy

Performance-Related Beliefs Heading

theory

3 - 39

proposes that people will behave based on their perceived likelihood that their effort will lead to a certain outcome and on how highly they value that outcome

expectancy

- employees perception of the likelihood that their efforts will enable them to attain their performance goals

McGraw-Hill

instrumentality - perceived likelihood that performance will be followed by a particular outcome valence - value an outcome holds for the person contemplating it for motivation to be high, expectancy, instrumentalities, and total valence of all outcomes must all be high

2003 The McGraw-Hill Companies, Inc. All rights reserved.

Understanding HeadingPeoples Needs

3 - 40

Maslows need hierarchy

human

needs are organized into five major types physiological - food, water, sex, and shelter safety or security - protection against threat and deprivation social - friendship, affection, belonging, and love ego - independence, achievement, freedom, recognition, and self-esteem self-actualization - realizing ones potential
2003 The McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill

Understanding HeadingPeoples Needs (cont.)

3 - 41

McGraw-Hill

Maslows need hierarchy (cont.) postulates that people satisfy these needs one at a time, from bottom to top once satisfied, a need is no longer a powerful motivator ,made three major contributions identified important need categories helped to think in terms of lower- and higher-level needs increased salience of personal growth and selfactualization

2003 The McGraw-Hill Companies, Inc. All rights reserved.

Understanding HeadingPeoples Needs (cont.)

3 - 42

Alderfers ERG theory postulates that people have three basic need sets Existence needs - material and physiological desires Relatedness needs - involve relationships with other people

satisfied by the process of mutually sharing thoughts and feelings

Growth needs - motivate people to productivity or creativity

satisfied by fully utilizing personal capacities and developing new capacities

postulates that several different needs can be operating at once

2003 The McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill

Designing Motivating Jobs (cont.) Heading

3 - 43

Job rotation

changing from one routine task to another to alleviate boredom

can benefit everyone when done properly

Job enlargement

giving people additional tasks at the same time to alleviate boredom

additional tasks at the same level of responsibility

Job enrichment

changing a task to make it inherently more rewarding, motivating, and satisfying

adds higher levels of responsibility

2003 The McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill

Designing Motivating Jobs (cont.) Heading

Herzbergs

3 - 44

two-factor theory

distinguished between two broad categories of factors that affect people working on their jobs hygiene factors - characteristics of the workplace

make people unhappy will not make people truly satisfied when present, jobs presumed to be both satisfying and motivating

motivators - characteristics of the job itself

McGraw-Hill

2003 The McGraw-Hill Companies, Inc. All rights reserved.

Job Satisfaction Heading

3 - 45

Correlates of job satisfaction

job satisfaction is unrelated to job performance the greater the job dissatisfaction:

the higher turnover the higher absenteeism the lower corporate citizenship the more grievances and lawsuits the higher the probability of a strike the more likely that stealing and/or vandalism will occur the poorer the mental and physical health of the workers
2003 The McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill

Heading

3 - 46

Leadership

McGraw-Hill

2003 The McGraw-Hill Companies, Inc. All rights reserved.

Heading

3 - 47

What is leadership?

Leading people Influencing people Commanding people Guiding people

McGraw-Hill 2003 The McGraw-Hill Companies, Inc. All rights reserved.

Heading

3 - 48

Types of Leaders

Leader by the position achieved Leader by personality, charisma Leader by moral example Leader by power held Intellectual leader Leader because of ability to accomplish things

McGraw-Hill

2003 The McGraw-Hill Companies, Inc. All rights reserved.

Managers vs. Leaders

Managers Focus on things Do things right Plan Organize Direct Control Follows the rules
McGraw-Hill

Heading

3 - 49

Leaders Focus on people Do the right things Inspire Influence Motivate Build Shape entities
2003 The McGraw-Hill Companies, Inc. All rights reserved.

Leadership Traits
Are

Heading

3 - 50

leaders born or made? Great-person theory: idea that leaders are born with unique characteristics that make them quite different from ordinary people Contemporary views of leadership traits do not assume that leaders are born

McGraw-Hill

2003 The McGraw-Hill Companies, Inc. All rights reserved.

Traits of Successful Leaders

Higher

Heading

3 - 51

intelligence and self-confidence More initiative More assertiveness and persistence Greater desire for responsibility and the opportunity to influence others A greater awareness of the needs of others
McGraw-Hill 2003 The McGraw-Hill Companies, Inc. All rights reserved.

Leader Decision Making Styles

Autocratic

Heading

3 - 52

leadership: leaders make all major decisions themselves Democratic leadership: leader includes subordinates in decision making Consultative or participative leadership: leaders style falls midway between autocratic and democratic styles
McGraw-Hill 2003 The McGraw-Hill Companies, Inc. All rights reserved.

Contingency Theory
Assumption

Heading

3 - 53

that different styles and different leaders are more appropriate for different situations Two North American contingency theories of leadership
Fiedlers

theory of leadership Path-goal theory

McGraw-Hill 2003 The McGraw-Hill Companies, Inc. All rights reserved.

Fiedlers Theory of Leadership

Proposed

Heading

3 - 54

that managers tend to be either task- or person-centered leaders Theory suggests that task-centered leadership works best when situation is favorable or not favorable for leader
If

favorable, subordinates are positive about their workneed to be told what to do In unfavorable situations, job requirements are unclear, leader need to focus on getting things done
McGraw-Hill 2003 The McGraw-Hill Companies, Inc. All rights reserved.

Path-Goal Theory

Heading

3 - 55

Four leadership styles that a manager might choose depending on the situation Directive Supportive Participative Achievement-oriented When subordinates have high achievement needs adopt the achievement-oriented style Subordinates with high social needsadopt the supportive leadership style When job is unstructuredadopt a directive style or an achievement-oriented style
2003 The McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill

Heading National Context as a Contingency for Leadership Behaviors

3 - 56

Successful leadership in multinational companies requires that managers adjust their leadership styles to fit different situations. Two steps to adjust a leadership to a multination Step 1: understanding what local managers do to lead successfully in their own country Step 2: using this knowledge to modify ones leadership style National-context contingency model of leadership: shows how culture and related social institutions affect leadership practices
McGraw-Hill 2003 The McGraw-Hill Companies, Inc. All rights reserved.

Heading Leadership Perspectives: Contemporary Multinational Implications

3 - 57

Two basic forms of leadership Transactional leadership: managers use rewards or punishments to influence their subordinates Most ordinary leaders use transactional leadership Transformational Leaders (Charismatic) succeed because subordinates respond to them with high levels of performance, devotion and willingness to sacrifice Same leadership traits may not lead to transformational leadership in all countries
2003 The McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill

Transformational Leadership

Heading

3 - 58

Managers go beyond transactional leadership by

Articulating a vision Breaking from the status quo Providing goals and a plan Giving meaning or a purpose to goals Taking risks Being motivated to lead Building a power base Demonstrating high ethical and moral standards

McGraw-Hill

2003 The McGraw-Hill Companies, Inc. All rights reserved.