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Principles Of Management > Chapter 3 > Flashcards

Chapter 3 Flashcards

1
Q

CHARACTERISTICS OF MANAGERIAL DECISIONS

Reasons managers avoid taking action

A
  1. Managers can’t be sure how much time, energy, or trouble lies ahead once they start working on a challenge.
  2. Getting involved is risky; tackling a problem but failing to solve it successfully can hurt a manager’s track record
  3. Because problems can be so perplexing, it is easier to procrastinate or to get busy with less demanding activities
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1
Q

CHARACTERISTICS OF MANAGERIAL DECISIONS

Characteristics of managerial decisions that contribute to their difficulty and pressure.

A
  • Lack of structure : for most decisions, there is no automatic procedure to follow which leaves decision makers uncertain about how to proceed
  • Risk
  • Uncertainty
  • Conflict
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2
Q

CHARACTERISTICS OF MANAGERIAL DECISIONS

programmed decisions

A
  • decisions encountered and made before, having objectively correct answers, and solvable by using simple rules, policies, or numerical computations
  • if you face a programmed decision, a clear procedure or structure exists for arriving at the right decision.
  • Problem :
    • frequent, repetitive, routine
    • much certainty regarding cause-and-effect relationships
  • Procedure :
    • dependence of policies, rules, and definite procedures
  • Examples
    • Business firm :
      • periodic reorders of inventory
    • University :
      • necessary grade point average for good academic standing
    • Health care :
      • procedure for admitting patients
    • Government :
      • merit system for promotion of state employees
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3
Q

CHARACTERISTICS OF MANAGERIAL DECISIONS

certainty

A
  • the state that exists when decision makers have accurate and comprehensive information
  • occurs when you have all the information you need and can predict precisely the consequences of your actions
  • managers are expressing their preference for certainty when they are not satisfied hearing about what might have happened or may happen and insist on hearing what did or will happen
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3
Q

CHARACTERISTICS OF MANAGERIAL DECISIONS

nonprogrammed decisions

A
  • new, novel, complex decisions having no proven answers
  • they have a variety of possible solutions, all of which have merits and drawbacks
  • decision maker must create or impose a method for making the decision; there is no predetermined structure on which to rely
  • Problem :
    • novel, unconstructed
    • much uncertainty regarding cause-and-effect relationships
  • Procedure :
    • necessity for creativity, intuition, tolerance for ambiguity, creative problem solving
  • Examples :
    • Business firm :
      • diversification into new products and markets
    • University :
      • construction of new classroom facilities
    • Health care :
      • purchase of experimental equipment
    • Government :
      • reorganization of state government agencies
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5
Q

CHARACTERISTICS OF MANAGERIAL DECISIONS

uncertainty

A
  • the state that exists when decision makers have insufficient information
  • decision makers may have strong opinions - they may feel sure of themselves - but they are still operating under conditions of uncertainty if they lack pertinent information and cannot estimate accurately the likelihood of different results of their actions.
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6
Q

CHARACTERISTICS OF MANAGERIAL DECISIONS

conflict

A
  • opposing pressures from different sources, occurring in the level of psychological conflict or conflict between individuals or groups
  • occurs at two levels :
    1. Individual decisions makers experience psychological conflict when several options are attractive or when none of the options is attractive
    2. Conflict arises between people
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6
Q

CHARACTERISTICS OF MANAGERIAL DECISIONS

risk

A
  • the state that exists when the probability of success is less than 100 percent and losses may occur
  • managers accept the fact that decisions have consequences entailing risk, but they do everything they can to anticipate the risk, minimize it, and control it,
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7
Q

THE PHASES OF DECISION MAKING

Six phases of decision-making process

A
  1. Identify and diagnose the problem
  2. Generate alternative solutions
  3. Evaluate alternatives
  4. Make the choice
  5. Implement the decision
  6. Evaluate the decision
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8
Q

THE PHASES OF DECISION MAKING

1. Identifying and diagnosing the problem

A
  • Typically a manager realizes some discrepancy between the current state and a desired state
  • such discrepancies may be detected by comparing current performance against :
    1. Past performance
    2. The current performance of other organizations or units
    3. Future expected performance as determined by plans and forecasts
  • decision maker must dig in deeper and attempt to diagnose the situation; asking why, of yourself and others, is essential to understanding the real problem
  • Questions useful to ask during this phase :
    • Is there a difference between what is actually happening and what should be happening?
    • How can you describe the deviation as specifically as possible?
    • What is/are the cause(s) of the deviation?
    • What specific goals should be met?
    • Which of these goals are absolutely critical to the success of the decision?
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9
Q

THE PHASES OF DECISION MAKING

2. Generating alternative solutions

A
  • links problem diagnosis to the development of alternative courses of action aimed at solving the problem
  • managers generate at least some alternative solutions based on past experiences.
  • solutions range from ready-made to custom-made
  • often, many more alternative are available than managers realize
  • managers sometimes assume that cutting prices in response to a competitor’s price cuts is their only option, but it is not
  • alternatives include emphasizing consumer risks to low-priced products, building awareness of your products’ features and overall quality, and communications your cost advantage to your competitors so they realize that they can’t win a price war.
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11
Q

THE PHASES OF DECISION MAKING

ready-made solutions

A
  • ideas that have been seen or tried before or follow the advice of others who have faced similar problems
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12
Q

THE PHASES OF DECISION MAKING

custom-made solutions

A
  • new, creative solutions designed specifically for the problem
  • potentially, custom-made solutions can be devised for any challenge
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13
Q

THE PHASES OF DECISION MAKING

contingency plans

A
  • alternative courses of action that can be implemented based on how the future unfolds
  • for example, during an economic crisis when it is unclear when a recovery might begin and how strong it will be or what shape it will take, the range of potential outcomes is very large and many companies will not survive.
  • firms should consider at least four scenarios :
    1. A most optimistic scenario in which trade and capital flows resume, further recession is averted, globalization stays on course, and developed and emerging economies continue to integrate as confidence rebounds quickly.
    2. A battered-but-resilient scenario in which the recession continues for a long period, recovery is slow, confidence is shaken but does rebound, and globalization slowly gets back on course.
    3. Stalled globalization, in which the global recession is significant, the intensity varies greatly from nation to nation (for example, with the United States and China proving resilient), but the integration of the world’s economies stalls and growth is slow.
    4. A long freeze, in which the recession lasts more than five years, economies everywhere stagnate, and globalization goes into reverse.
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13
Q

THE PHASES OF DECISION MAKING

3. Evaluating alternatives

A
  • involves determining the value or adequacy of the alternatives that were generated
  • fundamental to this process is to predict the consequences that will occur if the various options are put into effect.
  • managers should consider several types of consequences, including quantifiable measures of success such as lower costs, higher sales, lower employee turnover, and higher profits.
  • an important technological change affecting the analysis of alternatives is the ability to collect and analyze big data (massive amounts of data that exceed the capabilities of a traditional computer database)
  • businesses today can gather details about internet usage, consumer behavior, and employee skills and activities
  • computer technology enables organizations of all sizes to store the data, search it for patterns and trends, and analyze the information to identify alternatives that previously would have gone unnoticed
  • evaluation that would have relied heavily on intuition or experience now can be data-driven, for example, companies are now using big data to make more effective decisions about pay
  • to evaluate alternatives, refer to your original goals, defined in the first phase
  • results cannot be forecast with perfect accuracy, but sometimes decision makers can build in safeguards against an uncertain future by considering the consequences of several scenarios (contingency plans)
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14
Q

THE PHASES OF DECISION MAKING

4. Making the choice

A
  • once you have considered the possible consequences of your options, it is time to make your decision.
  • quantitatively inclined people can easily tweak the assumptions behind every scenario in countless ways.
  • but the temptation can lead to paralysis by analysis - indecisiveness caused by too much analysis rather than the assertive decision making that can help an organization seize new opportunities or thwart challenges
  • important concepts as you make your decision : maximizing, satisficing, and optimizing
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15
Q

THE PHASES OF DECISION MAKING

maximizing

A
  • a decision realizing the best possible outcome
  • realizes the greatest positive consequences and the fewest negative consequences, maximizing results in the greatest benefit at the lowest cost, with the largest expected total return
  • requires searching thoroughly for a complete range of alternatives, carefully assessing each alternative, comparing one to another, and then choosing or creating the very best
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16
Q

THE PHASES OF DECISION MAKING

satisficing

A
  • choosing an option that is acceptable, although not necessarily the best or perfect
  • when you satisfice, you compare your choice against your goal, not against other options
  • satisficing means that a search for alternatives stops after you find one that is okay
  • you do not expend the time or energy to gather more information
  • instead you make the expedient decision based on readily available information
  • sometimes result of laziness, other times there are no other options because time is short, information is unavailable, or other constraints make maximizing impossible or when consequences are not huge
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17
Q

THE PHASES OF DECISION MAKING

optimizing

A
  • achieving the best possible balance among several goals
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18
Q

THE PHASES OF DECISION MAKING

5. Implementing the decision

A
  • decision making process does not end once a choice is made
  • chosen alternative must be implemented , sometimes people involved in making the choice must put it into effect, at other times, they delegate the responsibility for implementation to others, such as when top management team changes a policy or operating procedure and has operational managers carry out the change
  • sometimes people make decisions but don’t take action
  • adequate planning steps :
    1. Determine how things will look when the decision is fully operational.
    2. Chronologically order, perhaps with a flow diagram, the steps necessary to achieve a fully operational system.
    3. List the resources and activities required to implement each step.
    4. Estimate the time needed for each step.
    5. Assign responsibility for each step to specific individuals.
  • decision makers should assume that things will not go smoothly during implementation
  • it is useful to take a little extra time to identify potential problems and identify potential opportunities associated with implementation then you can take actions to prevent problems and be ready to seize unexpected opportunities
  • useful questions :
    • What problems could this action cause?
    • What can we do to prevent the problems?
    • What unintended benefits or opportunities could arise?
    • How can we make sure they happen?
    • How can we be ready to act when the opportunities come?
20
Q

THE PHASES OF DECISION MAKING

6. Evaluating the decision

A
  • involves collecting information on how well the decision is working
  • quantifiable goals can be set before the solution to the problem is implemented
  • objective data can be gathered to determine its success or failure accurately
  • feedback that suggests the decision is working implies that the decision should be continued and perhaps applied elsewhere in the organization
  • negative feedback means either :
    1. Implementation will require more time, resource, effort, or thought
    2. The decision was a bad one
  • if the decision appears inappropriate, it’s back to the drawing board
  • then the process cycles back to the first phase : (re)defining the problem.
  • decision process starts anew, preferably with more information, new suggestions, and an approach that attempts to eliminate the mistakes made the first time around
21
Q

THE BEST DECISION

vigilance

A
  • a process in which a decision maker carefully executes all stages of decision making, including making provisions for implementation and evaluation
22
Q

BARRIERS TO EFFECTIVE DECISION MAKING

illusion of control

A
  • people’s belief that they can influence events even when they have no control over what will happen
  • gambling is one example; some people believe that they have the skill to beat the odds, even though most of the time they cannot
  • in business, such overconfidence can lead to failure because decision makers ignore risks and fail to evaluate the odds of success objectively
  • in addition, managers may believe they can do no wrong or hold a general optimism about the future that can lead them to believe they are immune to risk and failure
  • managers may overrate the value of their experience; they may believe that a previous project met its goals because of their decisions, so they can succeed by doing everything the same way on the next project
23
Q

BARRIERS TO EFFECTIVE DECISION MAKING

framing effects

A
  • a decision bias influenced by the way in which a problem or decision alternative is phrased or presented and how these subjective influences can override objective facts
  • managers may be quick to frame a problem as being similar problems they have already handled, so they don’t search for new alternatives
24
Q

BARRIERS TO EFFECTIVE DECISION MAKING

discounting the future

A
  • a bias weighing short-term costs and benefits more heavily than longer-teem costs and benefits
  • the avoidance of short-term costs or the seeking of short-term rewards results in negative long-term consequences.
  • partly explains governmental budget deficits, environmental destruction, and decaying urban infrastructure
24
Q

DECISION MAKING IN GROUPS

Pros and cons of using a group to make decisions

A

Potential advantages :

  • larger pool of information
  • more perspectives and approaches
  • intellectual stimulation
  • people understand the decision
  • people are committed to the decision
  • Potential disadvantages :
    • one person dominates
    • satisficing
    • groupthink
    • goal displacement
25
Q

DECISION MAKING IN GROUPS

Five potential advantages of using a group for decision making

A
  1. More information is available when several people are making the decision. If one person doesn’t have all the facts or the pertinent expertise, another member might.
  2. A greater number of perspectives on the issues, or different approaches to solving the problem, are available. The problem may be new to one group member but fairly familiar to another. Or the group may need to consider other viewpoints - financial, legal, marketing, human resources, and so on - to achieve an optimal solution.
  3. Group discussion provides an opportunity for intellectual stimulation. It can get people thinking and unleash their creativity to a far greater extent than would be possible with individual decision making.
  4. People who participate in a group discussion are more likely to understand why the decision was made. They will have heard the relevant arguments both for the chosen alternative and against the rejected alternatives.
  5. Group discussion typically leads to a higher level of commitment to the decision. Buying into the proposed solution translates into high motivation to ensure that it is executed well.
25
Q

DECISION MAKING IN GROUPS

Four potential problems so using a group for decision making.

A
  1. Sometimes one group member dominates the discussion. When this occurs - such as when a strong leader makes his or her preferences clear - the result is the same as it would be if the dominant individual made the decision alone. Individual dominance has two disadvantages. First, the dominant person does not necessarily have the most valid opinions - and may even have the most unsound ideas. Second, even if that person’s preference leads to a good decision, convening as a group will have been a waste of everyone else’s time.
  2. Satisficing is more likely with groups. Most people don’t like meetings and will do what they can do to end them. This may include criticizing members who want to continue exploring new and better alternatives. The result is satisficing rather than an optimizing or maximizing decision.
  3. Pressure to avoid disagreement can lead to a phenomenon called groupthink. Groupthink occurs when people choose not to disagree or raise objections because they don’t want to break up a positive team spirit. Some groups want to think as one, tolerate no dissension, and strive to remain cordial. Such groups are overconfident, complacent, and perhaps too willing to take risks. Pressure to go along with the group’s solution stifles creativity and the other behaviors characteristic of vigilant decision making.
  4. Goal displacement often occurs in groups. The goal of group members should be to come up with the best possible solution to the problem. But when goal displacement occurs, new goals emerge to replace the original ones. It is common for two or more group members to have different opinions and present their conflicting cases. Attempts at rational persuasion become heated disagreement. Winning the argument becomes the new goal. Saving face and defeating the other person’s idea become more important than solving the problem.
27
Q

DECISION MAKING IN GROUPS

goal displacement

A
  • a decision-making group loses sight of its original goal and a new, less important goal emerges
27
Q

DECISION MAKING IN GROUPS

groupthink

A
  • a phenomenon that occurs in decision making when group members avoid disagreement as they strive for consensus
28
Q

MANAGING GROUP DECISION MAKING

Three requirements of group decision making

A
  • An appropriate leadership style :
    • avoid domination
    • encourage input
    • avoid groupthink and satisficing
    • remember goals
  • The constructive use of disagreement and conflict :
    • air legitimate difference
    • stay task-related
    • be impersonal
    • play devil’s advocate
  • Enhancement of creativity :
    • brainstorm
    • avoid criticizing
    • exhaust ideas
    • combine ideas
29
Q

MANAGING GROUP DECISION MAKING

cognitive conflict

A
  • issue-based differences in perspectives or judgements

- can air legitimate difference of opinion and develop better ideas and problem solutions.

30
Q

MANAGING GROUP DECISION MAKING

affective conflict

A
  • emotional disagreement directed toward other people
  • is likely to be destructive to the group because it can lead to anger, bitterness, goal displacement, and lower-quality decisions
31
Q

MANAGING GROUP DECISION MAKING

devil’s advocate

A
  • a person who has the job of criticizing ideas to ensure that their downsides are fully explored
  • requiring people to point out problems can lessen inhibitions about disagreeing and make the conflict less personal and emotional
32
Q

MANAGING GROUP DECISION MAKING

dialectic

A
  • a structured debate comparing two conflicting courses of action
  • structured debates between plans and counter plans can be useful prior to making a strategic decisions.
33
Q

MANAGING GROUP DECISION MAKING

brainstorming

A
  • a process in which group members generate as many ideas about a problem as they can; criticism is withheld until all ideas have been proposed
  • sometimes though, people can be inhibited and anxious, they conform to others’ ideas, they set low standards, and they engage in noncreative behaviors including cocktail party type conversations, complimenting one another, repeating ideas, telling stories - that are nice but don’t promote creativity
34
Q

ORGANIZATIONAL DECISION MAKING

bounded rationality

A
  • a less-than-perfect form of rationality in which decision makers cannot be perfectly rational because decisions are complex and complete information is unavailable or cannot be fully processedl
  • decision makers cannot be truly rational because :
    1. They have imperfect, incomplete information about alternatives and consequences
    2. The problems they face are so complex
    3. Human beings simply cannot process all information to which they are exposed
    4. There is not enough time to process all relevant information fully
    5. People, including managers within the same firm, have conflicting goals
35
Q

ORGANIZATIONAL DECISION MAKING

coalitional model

A
  • model of organizational decision making in which groups with differing perspectives use power and negotiation to influence decisions
  • becomes political as groups of individuals band together and try to collectively influence the decision
36
Q

ORGANIZATIONAL DECISION MAKING

incremental model

A
  • model of organizational decision making in which major solutions arise through a series of smaller decisions
  • occurs when decision makers make small decisions, take little steps, move cautiously, and move in piecemeal fashion toward a bigger solution
37
Q

ORGANIZATIONAL DECISION MAKING

garbage can model

A
  • model of organizational decision making depicting a chaotic process and seemingly random decisions
  • occurs when people aren’t sure if their goals, or disagree about their goals, and likewise are unsure of or in disagreement about what to do,
  • situation occurs because some problems are so complex that they are not well understood and because decision makers move in and out of the decision process because they have so many other things to attend to as well
37
Q

ORGANIZATIONAL DECISION MAKING

Effective plan for crisis management

A
  1. Strategic actions such as integrating crisis management (CM) into strategic planning and official policies
  2. Technical and structural actions such as creating a CM team and dedicating a budget to CM
  3. Evaluation and diagnostic actions such as conducting audits of threats and liabilities and establishing tracking systems for early warning signals
  4. Communication actions such as providing training for dealing with the media, local communities, and police and government officials
  5. Psychological and cultural actions such as showing a strong too management commitment to CM and providing training and psychological support services regarding the human and emotional impacts of crises.
38
Q

REVIEW

Describe the kinds of decisions you will face as a manager.

A
  • Most important managerial decisions are ill-structured and characterized by uncertainty, risk, and conflict.
  • Yet managers are expected to make rational decisions in the face of these challenges.
39
Q

REVIEW

Summarize the steps in making “rational” decisions.

A
  • The ideal decision-making process involves six phases :
    1. The first, identifying and diagnosing the problem (or opportunity), requires recognizing a discrepancy between the current state and a desired stars and then delving below surface symptoms to uncover the underlying causes of the problem.
    2. The second phase, generating alternative solutions, requires adopting ready-made or designing custom-made solutions.
    3. The third, evaluating alternatives, means predicting the consequences of different alternatives, sometimes through building scenarios of the future.
    4. Fourth, a solution is chosen; the solution might maximize, satisfice, or optimize.
    5. Fifth, people implement the decision; this phase requires more careful planning than it often receives.
    6. Finally managers should evaluate how well the decision is working . This means gathering objective, valid information about the impact the decision is having. If the evidence suggests the problem is not getting solved, either a better decision or a better implementation plan must be developed.
40
Q

REVIEW

Recognize the pitfalls you should avoid when making decisions.

A
  • Situational and human limitations lead most decisive makers to satisfice rather than maximize.
  • Psychological biases, time pressures, and the social realities of organizational life may prevent rational execution of the six decision-making stages.
  • But vigilance and an understanding of how to manage decision-making groups and organizational constraints will improve the process and result in better decisions.
41
Q

REVIEW

Evaluate the pros and cons of using a group to make decisions.

A
  • Advantages of using groups include more information, perspectives, and approaches brought to bear on problem solving; intellectual stimulation; greater understanding by all of the final decision; and higher commitment to the decision once it is made.
  • Potential dangers of disadvantages of using groups include individual domination of discussions, satisficing, groupthink, and goal displacement.
42
Q

REVIEW

Identify procedures to use in leading a decision-making group.

A
  • Effective leaders in decision-making teams avoid dominating the discussion; encourage people’s input; avoid groupthink and satisficing; and stay focused on the group’s goals.
  • They encourage constructive conflict via devil’s advocacy and the dialectic, posing opposite sides of an issue or solutions to a problem.
  • They also encourage creativity through a variety of techniques.
44
Q

REVIEW

Explain how to encourage creative decisions.

A
  • When creative ideas are needed, leaders should set a good example by being creative themselves.
  • They should recognize the almost infinite little opportunities for creativity and have confidence in their own creative abilities.
  • They can inspire creativity in others by pushing for creative freedom, rewarding creativity, and not punishing creative failures.
  • They should encourage interaction with customers, stimulate discussion, and protect people from managers who might squelch the creative process.
  • Brainstorming is one of the most popular techniques for generating creative ideas.
46
Q

REVIEW

Discuss the processes by which decisions are made in organizations.

A
  • Decision making in organizations is often a highly complex process.
  • Individuals and groups are constrained by a variety of factors and constituencies.
  • In practice, decision makers are boundedly rational rather than purely rational.
  • Some decisions are made on an incremental basis.
  • Coalitions form to represent different preferences.
  • The process is often chaotic, as depicted in the garbage can model.
  • Politics can also enter the process, decisions are negotiated, and crises come and go.
48
Q

REVIEW

Describe how to make decisions in a crisis.

A
  • Crisis conditions make sound, effective decision making more difficult.
  • However, it is possible for crises to be managed well.
  • A strategy for crisis management can be developed beforehand, and the mechanisms readied, so that if crises do arise, decision makers are prepared.

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