Core focus

• The Nature of Managerial Decision Making- differentiate

between programmed and nonprogrammed decisions
• 6 Steps in the Decision-Making Process
• Group Decision Making- advantages and disadvantages
of group decision making and improvement technique
• role of Organizational Learning and Creativity in
decisionmaking process
• encouraging and promoting entrepreneurship and
Creativity
Nature of managerial decision making process

• Decision making is the process by which managers

respond to opportunities and threats by analyzing the
options and making determinations,about specific
organizational goals and courses of action
• ==> improve organizational performance to benefit
customers, employees, and other stakeholder groups.
• first cell phone at Motorola and Apple’s decision to
develop the iPod
Why does decision making matter

Foster Serve as
Save time respect motivation

Prevent Increase
conflict productivity
Ethics in decision making

- Is this decision fair?

- Will I feel better or worse
about myself after I make this
decision?
- Does this decision break
any organizational rules?
- Does this decision break
any laws?
- How would I feel if this
decision was broadcast on
the news?
General types of decision making

• Programmed decision making: Routine, virtually automatic

decision making that follows established rules or guidelines
• occurs when managers have the information they need to create rules that will
guide decision making (UPS case)==> little ambiguity
• Nonprogrammed decision making: Nonroutine decision
making that occurs in response to unusual, unpredictable
opportunities and threats
- intuition: Feelings, beliefs, and hunches that come readily to mind, require
little effort and information gathering, and result in on-the-spot decisions.
- reasoned judgments—decisions that require time and effort and result from
careful information gathering, generation of alternatives, and evaluation of
alternatives==> causes the most problems for managers and inherently challenging
In business context
Decision making model

• Classical decision making model: A prescriptive approach

to decision making based on the assumption that the
decision maker can identify and evaluate all possible
alternatives and their consequences and rationally choose
the most appropriate course of action.
Optimum decision: the most appropriate decision
possible in light of what they believe to be the most
desirable consequences for the organization
Decision making model- classical one
Decision making model
• administrative model (March and Simon): An approach to
decision making that explains why decision making is
inherently uncertain and risky and why anagers usually make
satisfactory rather than optimum decisions
• based on three important concepts: bounded rationality,
incomplete information, and satisficing
- bounded rationality: Cognitive limitations that constrain
one’s ability to interpret, process, and act on information.
- why incomplete information: risk and uncertainty, ambiguity,
and
time constraints
• Satisficing: Searching for and choosing an acceptable, or
satisfactory, response to problems and opportunities,
ratherthan trying to make the best decision.
• ==> managers must rely on their intuition and judgment
to make what seems to them to be the best decision in
the face of uncertainty and ambiguity
Steps in decision making process

• Rational
decision making
model:
Steps in decision making process

• bounded
rationality
Assessing the alternatives

legality (law Ethicalness (

and regulation no harm)

Economic
feasibility Practicality
(economical
(C- B analysis- goals,
corporate threatening)
goals)
Learning from feedback- retrospective analysis- three step
procedure

Compare
Explore why
what actually Derive
happened to
any
guidelines
what was expectations
that will help
expected to for the
in future
happen as a decision
decision
result of were not
making
the decision met
• Types of group decision • https://www.youtube.com/
making watch?v=twnUTtjq5hY
• pros and cons
• managerial implication
The Perils of Groupthink
• groupthink: A pattern of faulty and biased decision making
that occurs in groups whose members strive for agreement
among themselves at the expense of accurately assessing
information relevant to a decision
• Commitment is often based on an emotional, rather than an
objective, assessment of the optimal course of action.
• President Kennedy and his advisers made to launch the
unfortunate Bay of Pigs invasion in Cuba in 1962, the
decisions made by President Johnson and his advisers from
1964 to 1967 to escalate the war in Vietnam
• family company- paternalistics
Groupthink

• Groupthink: deterioration of individual’s

mental efficiency, reality testing, and moral
judgments as a result of group pressures
◼ Members:
◼ Rationalize away resistance to
assumptions
◼ Pressure doubters to support the
majority
◼ Doubters keep silent/minimize their
misgivings
◼ Interpret silence as a “yes” vote
Minimizing Groupthink

• Limit group size to less than 10

• Encourage group leaders to actively seek
input from all members and avoid
expressing their own opinions
• Appoint a “devil’s advocate”
• Use exercises that stimulate active
discussion of diverse alternatives

.
Devil’s advocacy

• Critical analysis of a preferred alternative, made in

response to challenges raised by a group member
who, playing the role of devil’s advocate, defends
unpopular or opposing alternatives for the sake of
argument.
• => identify all the reasons that might make the
preferred alternative unacceptable
Three group decision making techniques- Brainstorming

• Brainstorming: a group • Group members are

encouraged to be as innovative
problem-solving technique and radical as possible.
in which managers meet • the greater the number of
face-to-face to generate ideas put forth, the better.
and debate a wide variety • group members are
of alternatives from which encouraged to “piggyback” or
build on each other’s
to make a decision suggestions
• debate the pros and cons of
each and develop a short list of
the best alternatives
Three group decision making techniques- Nominal group
technique
• A Decision-making • One manager outlines the
technique in which group problem to be addressed
members write down ideas • The alternatives are then
and solutions, read their discussed, one by one, in
suggestions to the whole the sequence in which
group, and discuss and they were proposed
then rank the alternatives. • rank from most prefered to
least prefer options
Three group decision making techniques- Delphi technique

• A decision-making • The questionnaire is sent

technique in which group to the managers and
members do not meet departmental
face-to-face but respond in experts=>solutions and
writing to questions posed mail the questionnaire
by the group leader. back to the group leader
• top managers records and
summarizes the responses
• repetitive until consensus
is reached and most
suitable course of action is
Organizational learning and creativity

• Organizational learning is • learning organization: is

the process through which
managers seek to improve
employees’ desire and
ability to understand and
manage the organization
and its task environment
one in which managers do
everything possible to
maximize the ability of
individuals and groups to
think and behave
creatively and thus
maximize the potential for
organizational learning to
take place
Organizational learning

• Senge’s
Principles for
Creating a
Learning
Organization
Creativity

• creativity, which is the ability of a decision maker to

discover original and novel ideas that lead to feasible
alternative courses of action
• Creativity results when employees have an opportunity
to experiment, to take risks, and to make mistakes and
learn from them
Creative decision making model
How to enhancing organizational creativity

• Diversify your team to give them more inputs to build on

and more opportunities to create functional conflict while
avoiding personal conflict.
• Change group membership to stimulate new ideas and
new interaction patterns.
• Leaderless teams can allow teams freedom to create
without trying to please anyone up front.
How to enhancing organizational creativity

• Challenge teams so that they are engaged but not

overwhelmed.
• Let people decide how to achieve goals, rather than
telling them what goals to achieve.
• Support and celebrate creativity even when it leads to a
mistake. But set up processes to learn from mistakes as
well.
• Model creative behavior.
Entrepreneur Vs intrapreneur

• Entrepreneurs are • Intrapreneur: A manager,

individuals who notice scientist, or researcher
opportunities and decide who works inside an
how to mobilize the organization and notices
resources necessary to opportunities to develop
produce new and new or improved products
improved goods and and better ways to make
services them.
CHARACTERISTICS OF ENTREPRENEURS

• openness to experience, daring and risk taking

• internal locus of control
• responsible for what happens to them
• high level of self-esteem and feel competent and
capable of handling most situations— stress and
uncertainty management when it comes to a plunge
into a risky new venture
• high need for achievement and have a strong desire
to perform challenging tasks and meet high personal
standard of excellent
ENTREPRENEURSHIP AND MANAGEMENT

• entrepreneurship: The • When an entrepreneur has

mobilization of resources
to take advantage of an
opportunity to provide
customers with new or
improved goods and
services.
• Management
encompasses all the
decisions involved in
planning, organizing,
produced something
customers want,
entrepreneurship gives
way to
manage_x0002_ment
because the pressing
need becomes providing
the product both efficiently
and effectively
Suggested ways to promote intrapreneurs

• Product champion, a • Skunkworks: A group of

manager who takes
“ownership” of a project
and provides the
leadership and vision that
take a product from the
idea stage to the final
customer
intrapreneurs who are
deliberately separated
from the normal operation
of an organization to
encourage them to devote
all their attention to
developing new products.