CHAPTER 4: MANAGING DECISION MAKING

2. Evidence Based Management

Decision making - Commitment to finding and using the best theory and data available at the time to make
 Act of choosing one alternative from among a set of alternatives decision

Decision-making process - recognizing and defining the nature of a decision situation, identifying 3. Behavioral Aspects of Decision Making
alternatives, choosing the best alternative, and putting it into practice - How managers react, respond and make decisions
- ADMINISTRATIVE MODEL: argues that decision makers use incomplete and imperfect
TYPES OF DECISION MAKING: information, are constrained by bounded rationality, and then to “satisfice” when making
1. Programmed decision decision
- Relatively structures or recurs with some frequency, or both - BOUNDED RATIONALITY: decision makers are limited by their values and unconscious
- Implemented and contained in the organizational processes reflexes, skills, and habits
- Put into the books of operations and processes - SATISFICING: tendency to search for alternatives only until one is found that meets some
2. Non-programmed decision minimum standard of sufficiency
- relatively unstructured and occurs much less often than programmed decision - COALITION: informal alliance of individuals or groups forms to achieve a common goal
- not found in the manual nor foreseen, only if the situation arises
Intuition
DECISION-MAKING CONDITIONS: - Innate belief about something, without conscious consideration
1. Decision Making Under Certainty - “I have a feeling”
- STATE OF CERTAINTY: decision maker knows with the reasonable certainty what the
alternatives are and what conditions are associated with each alternative Escalation of commitment
o Everything else is included in the scenario, have experienced it already, seasonal, - When a decision maker stays with a decision even when it appears to be wrong
programmed decision
2. Decision Making Under Risk Managerial ethics
- The availability of each alternative and its potential payoffs and costs are all associated with - Individual ethics combine with the organization’s ethics
probability estimates o INDIVIDUAL ETHICS: personal beliefs about right and wrong behavior
- Programmed decision, decisions based on calculating the risks - Components:
3. Decision Making Under Uncertainty o Relationships of the firm to employees
- STATE OF UNCERTAINTY: decision maker does not know all the alternatives, the risks o Employees to the firm
associated with each, or the likely consequences of each alternative o The firm to other economic agents
o Cannot foresee, make decisions if it’s there, non-programmed decision

RATIONAL PERSPECTIVES ON DECISION MAKING: FORMS OF GROUP AND TEAM DECISION MAKING:
1. The Classical Model of Decision Making 1. Interacting group or team
- Prescriptive approach to decision making - Decision-making group or team in which members openly discuss, argue about, and agree
- Tells managers how they should make decisions on the best alternative
- Assumes that managers are logical and rational and that their decisions will be in the 2. Delphi group
organization’s best interest - Form of group decision making in which a group arrives at a consensus of expert opinion
- Decision making is central to the managers 3. Nominal group
 - Structured technique used to generate creative and innovative alternatives or ideas
4. Groupthink
- When a group or team’s desire for consensus and cohesiveness overwhelms its desire to
reach the best possible decision