Chapter 7

• Decision Making The process by which managers respond to opportunities and threats by analyzing options, and making decisions about goals and courses of action • Programmed Decision  Routine, virtually automatic decision making that follows established rules or guidelines. • Non-Programmed Decisions  Nonroutine decision making that occurs in response to unusual, unpredictable opportunities and threats. • Classical Model of Decision Making A prescriptive model of decision making that assumes 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 in light of what managers believe to be the most desirable future consequences for their organization. • Administrative Model of Decision Making An approach to decision making that explains why decision making is inherently uncertain and risky and why managers usually make satisfactory rather than optimum decisions  Bounded rationality There is a large number of alternatives and available information can be so extensive that managers cannot consider it all • Risk  The degree of probability that the possible outcomes of a particular course of action will occur. • Uncertainty  Probabilities cannot be given for outcomes and the future is unknown.

or satisfactory response to problems and opportunities. • Representativeness • The decision maker incorrectly generalizes a decision from a small sample or a single incident.• Ambiguous Information • • • • Information whose meaning is not clear allowing it to be ambiguous Information Satisficing Searching for and choosing an acceptable. Heuristics • • Rules of thumb to deal with complex situations. • Escalating Commitment • Committing considerable resources to project and then committing more even if evidence shows the project is failing. • Groupthink • Biased decision making resulting from group members striving for agreement. rather than trying to make the best decision. • Devil’s Advocacy • A group member who defends unpopular or opposing alternatives for the sake of argument • Dialectical Inquiry Two different groups are assigned to the problem and each group evaluates the other group’s choice of alternatives . Prior Hypothesis Bias • Allowing strong prior beliefs about a relationship between variables to influence decisions based on these beliefs even when evidence shows they are wrong. • Illusion of Control • The tendency to overestimates one’s own ability to control activities and events.

• Personal Mastery  Managers empower employees and allow them to create and explore. • Build a Shared Vision  People share a common mental model of the firm to evaluate opportunities.• Organizational Learning  Managers seek to improve a employee’s desire and ability to understand and manage the organization and its task environment so as to raise effectiveness. • Brainstorming Managers meet face-to-face to generate and debate many alternatives  Production blocking Members cannot absorb all information being presented during the session and can forget even their own alternatives • Delphi Technique  Provides a written format without having all managers meet face-toface. better methods to perform a task. • Systems Thinking  Knowing and understanding how actions in one area of the firm will impact other areas of the firm. • Mental Models  Challenge employees to find new. . • Team Learning  Is more important than individual learning since most decisions are made in groups. • Creativity  The ability of the decision maker to discover novel ideas leading to a feasible course of action.

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