Summary of Chapter 6

Decision Making :

The Essence of The Manager's Job

How do managers make decisions?
Managers at all levels and in all areas of organizatins make decisions.
Decision: A choice from two or more alternatives.

Decision Making Process:
It is a Comprehensive process consisting of eight steps, which are as follow:
Step1: Identifying a Problem:
(A discrepancy between an existing & a desired state of affairs)
Problem identifications is subjective.Effectively identifying problems in not simple or trivial.
Managers can be better at it if they understand the three characteristics of problems:

• being aware of them
• being under pressure to act.
• & having the resources needed to take action.

Step 2: Identifying decision criteria:
Criteria that defines what is relevant in a decision.
Step3: Allocating weights to criteria:
A simple approach to weight the criteria is to give the most important criterion a weight of 10 & then assign weights to the rest using that standard.
Step4: Developing Alternatives:
This is the step where a decision maker wants to be creative in coming up with possible alternatives.
Step5: Analyzing Alternatives:
Once the alternatives have been inedtified, a decision maker must analyze each one.
Step6: Selecting an Alternative:
The sixth step is choosing the best alternative from among those considered.
Step7: Implementing the Alternative:
This Step is concerned with putting the decision into action by conveyin the decision to those affected by it and getting their commitment to it. Another thing managers also may need to do during the implementation process is to reassess the envrionment for any changes.
Step8:Evaluating Decision Effectiveness:
The last step in decision-making process involves evaluating the outcome or result of the decision to see if the problem has been resolved.
How are decisions made?
Rational Decision Making :
Decision making behavior where choices are consistent and value-maximizing within specified contraints,problem is clear and unambiguous, the decision maker's goal is clear and specific, and the decision maker knows all possible alternatives.
Bounded rationality:
Decision making behavior that's rational, but limited by an individual's ability to process information.
Decision making may be strongly influenced by organizaton's culture, internal politics, power considerations, and escalation of commitment.
Intutive decision making:
Making decisions on the basis of experience, feelings, and accumulated judgment.
What Types of Problems & Decisions do managers face?
There are two types of problems.

• Structured Problems
• Unstructured Problems

Structured Problesms:

Straightforward, familiar, and easily defined problems.

Programmed decision:A repetitive decision that can be handled by a routine approach.

• Procedure
• Rule
• Policy

Unstructured Problems:

Problems that are new or unusual and for which information is ambiguous or incomplete.

Nonprogrammed Decisions:A unique decision that requires a custom-made solution.

Under What Conditions Do Managers Make Decisions?

There are three conditions managers may face as they make decisions:

• Certanity
• Risk
• Uncertainty

How will decision making style affect a Manager's Decision Making?

Manager decision making styles differ along two dimensions:

The first is an individual's way of thinking.

The other dimension describes an individual's tolerance for ambiguity.

1. Directive Style:Low tolerance for ambiguity and rational way of thinking.
2. Analytic Style:High tolerance for ambiguity and rational way of thinking.
3. Conceptual Style:High tolerance for ambiguity and intuitive way of thinking.
4. Behavioral Style: Low tolerance for ambiguity and intuitive way of thinking.

What Biases and Error Affect Decision Making?

• Overconfidence
• Anchoring effect
• Confirmation
• Sunk Costs
• Representation
• Self-serving
• Immediate gratification
• Selective perception
• Framing
• Availablilty
• Randomness
• Hindsight

What Do Mangers Need to Know About Making Decisions in Today's World?

They Should

• Understand cultural differences
• Know when its's time to call it quits
• Use an efffective decision making process
• Develop highly reliable organizations.

Questions

Q1. Decision making process where the problem is clear and unambiguous and all possible alternatives are known is called

a- Rationality

b- Bounded rationality

c- Intuition

d- None

Q2. How many types of problems are there which managers do face?

a- 2

b-4

c-3

d-5

Q3. A decision making style characterized by a high tolerance for ambiguity and an intutive way of thinking is

a- Directive Style

b- Analytic Style

c- Conceptual Style

d- Behavioral Style

Q4 A guide line for making decisions is known as

a- Procedure

b-Policy

c- Rule

d- Risk

Q5. Decision making process consists of _____steps:

a-2

b-4

c-8

d-12

Q6. A situation in which a manager can make accurate decisions because all out comes are known is

a- Satisficing

b- Risk

c- Uncertainty

d- Certainty