CH 04 Ed 6

Exploring Management
John Schermerhorn, Jr. and Daniel G. Bachrach

Sixth Edition
Chapter 4
Managers as Decision Makers

There is No Substitute for a Good
Decision
“Estamos bien en el réfugio
– los 44.” For 69 days shift
leader Luis Urzua kept the
men trapped in the Chilean
mine organized and
hopeful. On the 70th day,
he was the last man safely
out.
Copyright ©2018 John Wiley & Sons, Inc. 2

Your Chapter 4 Takeaways
• How do managers use information to solve
problems? (4.1)
• What are the five steps in the decision-making

process? (4.2)
• What are current issues in managerial decision

making? (4.4)

USING INFORMATION TO SOLVE PROBLEMS 4.1
Takeaway 4.1 – answers to come

• Managers use technological, informational, and analytical
competencies to solve problems.
• Managers deal with problems posing threats and offering
opportunities.
• Managers can be problem avoiders, problem solvers, or problem
seekers.
• Managers make programmed and non-programmed decisions.
• Managers use both systematic and intuitive thinking.
• Managers use different cognitive styles to process information for
decision making.
• Managers make decisions under conditions of certainty, risk, and
uncertainty.
Managers Use Competencies to Solve

Problems
• Information competency - the ability to locate,
retrieve, evaluate, organize, and analyze information
to make decisions that solve problems
• Technological competency – the ability to
understand new technologies and use them to their
best advantage.
• Analytical competency – the ability to evaluate and
analyze information to find

Problems Pose Threats and
Opportunities
Figure 4.1 In What Ways Do

Managers Serve as Information
Nerve Centers in Organizations?
6
Copyright ©2018 John Wiley & Sons, Inc.
Problems Pose Threats and Opportunities

• Problem Solving
• Identifying and taking action to solve problems
• Knowledge Workers
• Use information to solve problems, describes managers
well
• Performance Threat
• A situation where something is wrong or likely to be
wrong
• Performance Opportunity
• A situation that offers the possibility of a better future,
if the right steps are taken

Problem Solving Approaches

• Problem avoiders – prefer not to make decisions and
ignore problems
• Problem solvers – react to problems as they occur
• Problem seekers – proactive in anticipating threats

and opportunities

Types of Decisions
• A decision is a choice among possible alternative
courses of action.
• Programmed decisions
• applies a solution from past experience to a
routine problem
• Non-programmed decisions
• applies a specific solution crafted for a unique
problem

Approaches to Problem Solving

• Systematic Thinking
• Approaches problems in a rational and
analytical fashion.
• Intuitive Thinking
• Approaches problems in a flexible and
spontaneous fashion.
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Wiley Wiley
& Sons,&Inc. 10
Copyright ©2018 Sons, Inc.
Problem Solving Approaches

Managers use different cognitive styles
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©2018 John John
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& Sons,&Inc.
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Problem Solving Environments

Managers make decisions under various types of
environments
Figure 4.2 What Are the Differences Between Certain,

Risk, and Uncertain Decision-Making Environments?

Study Guide for Takeaway 4.1

Rapid Review:
• A problem can occur as a threat or an opportunity; it involves an existing or potential
discrepancy between an actual and a desired state of affairs.
• Managers can deal with structured and routine problems using programmed decisions;
novel and unique problems require special solutions developed by non-programmed
decisions.
• Managers deal with problems in different ways, with some being problem avoiders,
others being reactive problem solvers, and still others being proactive problem seekers.
• Managers using systematic thinking approach problems in a rational step-by-step
fashion; managers using intuitive thinking approach them in a more flexible and
spontaneous way.
• Managers display different cognitive styles when dealing with information for decision
making—sensation thinkers, intuitive thinkers, intuitive feelers, and sensation feelers.
• The problems that managers face occur in environments of certainty, risk, and
uncertainty.


Questions for Discussion:
1. Can a manager be justified for acting as a
problem avoider in certain situations?
2. Would an organization be better off with mostly
systematic or mostly intuitive thinkers?
3. Is it possible to develop programmed decisions
for use in conditions of risk and uncertainty?

Be Sure You Can…for Takeaway 4.1

• explain the importance of information competency for
successful problem solving
• differentiate programmed and nonprogrammed
decisions
• describe different ways managers approach and deal
with problems
• discuss the differences between systematic and
intuitive thinking
• identify differences between the four cognitive styles
used in decision making
• explain the challenges of decision making under
conditions of certainty, risk, and uncertainty
environments
THE DECISION MAKING PROCESS 4.2

• Step 1 is to identify and define the problem.
• Step 2 is to generate and evaluate alternative
courses of action.
• Step 4 is to decide on a preferred course of
action.
• Step 4 is to implement the decision.
• Step 5 is to evaluate results.
• Ethical reasoning is important at all steps in
decision making.

Steps in the Decision Making Process
Figure 4.3 What Are Five Steps in the Decision-Making Process?

Step 1 – Identify and Define the

Problem
• Gather information and decide what
should be accomplished
• Common mistakes include

• Defining problem too broadly or too narrowly
• Focusing on symptoms instead of causes
• Choosing the wrong problem to deal with

Step 2 – Generate And Evaluate

Alternatives
• Who are the stakeholders and how will the
alternatives affect them?
• Criteria for evaluating alternatives
• Cost benefit analysis
• Timeliness
• Acceptability
• Ethical soundness

Step 3 – Decide on a Preferred Course

of Action (cont.)
• Two different outcomes
• Behavioral model leads to satisficing decisions –
choosing the first solution that appears satisfactory
• Classical model leads to optimizing decisions – the
absolute best solution to the problem

Step 3 – Decide on a Preferred Course

of Action
FIGURE 4.4 How Does the Classical Model of Managerial Decision

Making Differ from the Behavioral Model?
Step 4 – Implement the Decision

• Take action on the selected alternative
• Lack-of-participation error occurs when
parties necessary for supporting the
decision were not included in the process

Step 5 – Evaluate Results

• Did the decision solve the problem?
• Results must be evaluated against
objectives set at the beginning of the
process.

Ethical Reasoning is Important

Checking the Ethics of a Decision:
Criteria from Ethicist Gerald Cavanagh
Utility Does the decision satisfy all constituents or
stakeholders?
Rights Does the decision respect the rights and duties of
everyone?
Justice Is the decision consistent with the canons of justice?
Caring Is the decision consistent with my responsibilities to

care?

Ethical Reasoning is Important

• Spotlight questions
• How would I feel if my family found
out about this decision?
• How would I feel if this decision
were published in the local
newspaper or posted on the
Internet?
• What would the person I know who
has the strongest character and best
ethical judgment say about my
decision?

THE DECSION MAKING PROCESS 4.2

Rapid Review:
• The steps in the decision-making process are: (1) identify and define the
problem; (2) generate and evaluate alternatives; (4) decide on the preferred
course of action; (4) implement the decision; (5) evaluate the results;
conduct ethics double-check in all steps.
• A cost-benefit analysis compares the expected costs of a decision alternative
with its expected results.
• In the classical model, an optimizing decision chooses the absolute best
solution from a known set of alternatives.
• In the behavioral model, cognitive limitations lead to satisficing decisions
that choose the first satisfactory alternative to come to attention.
• The ethics of a decision can be checked on the criteria of utility, rights,
justice, and caring, as well as by asking the spotlight questions.


1. Do the steps in the decision-making process
have to be followed in order?
2. Do you see any problems or pitfalls for
managers using the behavioral decision model?
3. Is use of the spotlight questions sufficient to
ensure an ethical decision?

Be Sure You Can…for 4.2

• list the steps in the decision-making process
• apply these steps to a sample decision-making
situation
• explain cost-benefit analysis
• compare and contrast the classical and behavioral
decision models
• illustrate optimizing and satisficing in your personal
decision-making experiences
• list and explain the criteria for evaluating the ethics
of a decision
• list three questions for double-checking the ethics
of a decision
ISSUES IN DECISION MAKING 4.3

• Creativity can be unlocked and encouraged for
better decision making.
• Group decision making has both advantages and
disadvantages.
• Judgmental heuristics and other biases and traps
may cause decision-making errors.
• Managers must be prepared for crisis decision
making.

ISSUES IN MANAGERIAL DECISION MAKING 4.3
Creativity Drives Better Decision Making
• Creativity – generating a novel idea or unique

approach
• Big-C creativity occurs when extraordinary things are done
by exceptional people.
• Little-C creativity occurs when average people come up
with unique ways to deal with daily events and situations.

Personal Factors Drive Creativity

Personal creativity drivers
• Task expertise is expanding an existing skill
• Task motivation is the drive to work hard
• Creativity skills include imagination, intuition, holistic
processing, right-brain characteristics

Team Decision Making

Advantages Disadvantages
More information available—Members Social pressures to conform—Some
offer information, expertise, and members may “go along” because they
viewpoints for problem solving. feel intimidated.
More alternatives considered—Members Domination by a few—A small coalition
generate and consider more alternative of members may dominate discussion
courses of action. and decision making.
Increased understanding—Members gain Time delays—It takes time for many
understanding and are more likely to people to make decisions together.
accept decisions.
Greater commitment—Members gain
commitment to work hard and support
decisions.

Decision Making Errors

• Heuristics simplify decision making when time or information
are scarce. Examples include a “rule of thumb” or “trial and
error.”
• Availability Heuristic occurs when people use information
“readily available” as a basis for assessing a current event or
situation.
• Representative Heuristic occurs when people assess the
likelihood of something occurring based on its similarity to a
stereotyped set of occurrences.
• Anchoring and Adjustment Heuristic involves making decisions
based on adjustments to a previously existing value, or starting
point.


• Framing Error - solving a problem in the context
perceived for example, positive or negative
• Confirmation Error – only pay attention to information
that confirms the decision that has been made
• Escalating Commitment – adding resources to a course
of action even if it’s not working


How to avoid the escalation trap:
• Set advance limits on your involvement and
commitment to a particular course of action; stick
with these limits.
• Make your own decisions; don’t follow the lead of
others, since they are also prone to escalation.
• Carefully determine just why you are continuing a
course of action; if there are insufficient reasons to
continue, don’t.
• Remind yourself of the costs of a course of action;
consider saving these costs as a reason to discontinue.

Decision Making in a Crisis

• Crisis – unexpected situations that can lead to
disaster if not handled quickly
• Crisis management programs train managers

in decision making and establish plans to
handle emergencies

ISSUES IN MANAGERIAL DEICISION MAKING 4.3
Decision Making in a Crisis
Six Rules for Crisis Decision Making

1. Figure out what is going on.
2. Remember that speed matters.
3. Remember that slow counts, too.
4. Respect the danger of the unfamiliar
5. Value the skeptic
6. Be ready to “fight fire with fire”


Rapid Review:
• Creativity in decision making can be enhanced by the personal creativity
drivers of individual creativity skills, task expertise, and motivation.
• Group decisions offer the potential advantages of more information,
greater understanding, and expanded commitments; a major
disadvantage is that they are often time consuming.
• Judgmental heuristics such as availability, anchoring and adjustment, and
representativeness can bias decisions by oversimplifying the situation.
• Framing errors influence decisions by placing them in either a negative or
a positive situational context; confirmation error focuses attention only
on information that supports a decision.
• Escalating commitment occurs when one sticks with a course of action
even though evidence indicates that it is not working.
• A crisis problem occurs unexpectedly and can lead to disaster if managers
fail to handle it quickly and properly.


1. How can you avoid being hurt by the anchoring
and adjustment heuristic in your annual pay
raises?
2. What are some real-world examples of how
escalating commitment is affecting decision -
making in business, government, or people’s
personal affairs?
3. Is it really possible to turn a crisis into an
opportunity, and, if so, how?

Be Sure You Can…for Takeaway 4.3

• identify personal factors that can be developed or
used to drive greater creativity in decision making.
• list potential advantages and disadvantages of group
decision making.
• explain the availability, representativeness, and
anchoring and adjustment heuristics.
• illustrate framing error and continuation error in
decision making.
• explain and give an example of escalating
commitment.
• describe what managers can do to prepare for crisis
decisions.
Copyright
Copyright © 2018 John Wiley & Sons, Inc.
All rights reserved. Reproduction or translation of this work beyond that permitted in
Section 117 of the 1976 United States Act without the express written permission of the
copyright owner is unlawful. Request for further information should be addressed to the
Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up
copies for his/her own use only and not for distribution or resale. The Publisher assumes
no responsibility for errors, omissions, or damages, caused by the use of these programs
or from the use of the information contained herein.

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Exploring Management

John Schermerhorn, Jr. and Daniel G. Bachrach

Managers as Decision Makers

Copyright ©2018 John Wiley & Sons, Inc. 2

• What are the five steps in the decision-making

• What are current issues in managerial decision

Copyright ©2018 John Wiley & Sons, Inc. 3

Takeaway 4.1 – answers to come

Managers Use Competencies to Solve

Copyright ©2018 John Wiley & Sons, Inc. 5

Figure 4.1 In What Ways Do

Problems Pose Threats and Opportunities

Copyright ©2018 John Wiley & Sons, Inc. 7

Problem Solving Approaches

• Problem solvers – react to problems as they occur

• Problem seekers – proactive in anticipating threats

Copyright ©2018 John Wiley & Sons, Inc. 8

Copyright ©2018 John Wiley & Sons, Inc. 9

Approaches to Problem Solving

Copyright ©2018 John John

Problem Solving Approaches

Problem Solving Environments

Figure 4.2 What Are the Differences Between Certain,

Copyright ©2018 John Wiley & Sons, Inc. 12

Study Guide for Takeaway 4.1

Copyright ©2018 John Wiley & Sons, Inc. 13

Study Guide for Takeaway 4.1

Copyright ©2018 John Wiley & Sons, Inc. 14

Be Sure You Can…for Takeaway 4.1

Takeaway 4.2 – answers to come

Copyright ©2018 John Wiley & Sons, Inc. 16

Steps in the Decision Making Process

Figure 4.3 What Are Five Steps in the Decision-Making Process?

Copyright ©2018 John Wiley & Sons, Inc. 17

Step 1 – Identify and Define the

• Common mistakes include

Copyright ©2018 John Wiley & Sons, Inc. 18

Step 2 – Generate And Evaluate

Copyright ©2018 John Wiley & Sons, Inc. 19

Step 3 – Decide on a Preferred Course

Copyright ©2018 John Wiley & Sons, Inc. 20

Step 3 – Decide on a Preferred Course

FIGURE 4.4 How Does the Classical Model of Managerial Decision

Step 4 – Implement the Decision

Copyright ©2018 John Wiley & Sons, Inc. 22

Step 5 – Evaluate Results

Copyright ©2018 John Wiley & Sons, Inc. 23

Ethical Reasoning is Important

Caring Is the decision consistent with my responsibilities to

Copyright ©2018 John Wiley & Sons, Inc. 24

Ethical Reasoning is Important

Copyright ©2018 John Wiley & Sons, Inc. 25

Study Guide for Takeaway 4.2

Copyright ©2018 John Wiley & Sons, Inc. 26

Study Guide for Takeaway 4.2

Copyright ©2018 John Wiley & Sons, Inc. 27

Be Sure You Can…for 4.2

Takeaway 4.3 – answers to come

Copyright ©2018 John Wiley & Sons, Inc. 29

Creativity Drives Better Decision Making

• Creativity – generating a novel idea or unique

Copyright ©2018 John Wiley & Sons, Inc. 30

Personal Factors Drive Creativity