Chapter 6: Managerial Decision Making Flashcards
a choice made from available alternatives.
decision
the process of identifying problems and opportunities and then resolving them.
decision making
T or F: Decision making involves effort both before and after the actual choice
True
Management decisions typically fall into one of two categories:
- Programmed decisions
- Non-programmed decisions
What type of decisions involve situations that have occurred often enough to enable decision rules to be developed and applied in the future; they are made in response to recurring organizational problems?
Programmed decisions
What type of decisions are made in response to situations that are unique, are poorly defined and largely unstructured, and have important consequences for the organization?
non-programmed decisions
T or F: Managers in every industry face nonprogrammed decisions every day.
True
Larry’s company has decided to no longer lease office space and instead have all employees work from home. Larry needs to make a (programmed/non-programmed) decision as he figures out how the newly dispersed workforce can cost-effectively order office supplies.
non-programmed
T or F: Whereas programmed decisions can be made in situations involving certainty, many situations that managers deal with every day involve at least some degree of uncertainty and require nonprogrammed decision making.
True
What are the 4 conditions that affect the possibility of failure? Rank them going from a low possibility of failure to a high possibility of failure.
- Certainty
- Risk
- Uncertainty
- Ambiguous
If the possibility of failure is (low/high), you are most likely going to make a programmed decision. If the possibility of failure is (low/high), you are most likely going to make a non-programmed decision.
low; high
means that all the information the decision maker needs is fully available.
certainty
means that a decision has clear-cut goals and good information is available, but future outcomes associated with each alternative are subject to some chance of loss or failure.
risk
means that managers know which goals they wish to achieve, but information about alternatives and future events is incomplete.
uncertainty
means that the goals to be achieved or the problem to be solved is unclear, alternatives are difficult to define, and information about outcomes is unavailable; by far the most difficult decision situation
ambiguity
A highly ambiguous situation can create what is sometimes called a _______ ________ problem. These decisions are associated with conflicts over goals and decision alternatives, rapidly changing circumstances, fuzzy information, unclear links among decision elements, and the inability to evaluate whether a proposed solution will work.
wicked decision
T or F: For wicked problems, there often is no “right” answer. Managers have a difficult time coming to grips with the issues and must conjure up reasonable scenarios in the absence of clear information.
True
What are the 3 types of decision making models (the approach managers use to make decisions usually falls into one of three types)?
- Classical model
- Administrative model
- Political model
The decision making model that managers decide to use depends on what 3 things?
- the manager’s personal preference
- whether the decision is programmed or nonprogrammed
- the degree of uncertainty associated with the decision.
What model of decision making is based on rational economic assumptions and managers’ beliefs about what ideal decision making should be.
classical model
The classical model of decision making is considered to be _______, which means that it defines how a decision maker SHOULD make decisions.
normative
T or F: The ideal, rational approach of the classical model is often unattainable by real people in real organizations, but the model has value because it helps decision makers be more rational and not rely entirely on personal preference in making decisions.
True
The classical model is most useful when applied to _________ decisions and to decisions characterized by ______ or ______ because relevant information is available and probabilities can be calculated.
programmed; certainty; risk
Which of the following conditions most favors use of the classical model of decision making? →
a. A large amount of data stored in a computer system that can be used to support quantitative decision techniques.
b. A high degree of complexity concerning the resources available, possible options, and desired outcomes.
c. Differences of opinion among managers about which course of action to take.
d. A limited amount of time in which to collect information or analyze it.
a. A large amount of data stored in a computer system that can be used to support quantitative decision techniques.
What model of decision making considered to be descriptive, meaning that it describes how managers ACTUALLY make decisions in complex situations.
administrative model
The administrative model would be best used for making decisions if the decisions are _________, and the decisions are characterized by _______ or _________.
non-programmed; uncertainty; ambiguity
means that people have limits, or boundaries, on how rational they can be.
bounded rationality
means that decision makers choose the first solution alternative that satisfies minimal decision criteria.
satisficing
represents a quick apprehension of a decision situation based on past experience but without conscious thought.
intuition
T or F: Intuitive decision making is arbitrary and irrational.
False; it is NOT arbitrary or irrational (because it is based on years of practice and hands-on experience)
a new trend in decision making which means combining intuitive and analytical thought.
quasi-rationality
The political model is useful for making __________ decisions when conditions are ______, information is ______, and there are manager ______ about what goals to pursue or what course of action to take.
non-programmed; uncertain; limited; conflict
an informal alliance among managers who support a specific goal.
coalition
the process of forming alliances among managers.
coalition building
What decision making model does this describe?
- Organizations are made up of groups with diverse interests, goals, and values.
- Information is ambiguous and incomplete.
- Managers don’t have the time, resources, or mental capacity to identify all dimensions of the problem.
- Managers engage in the push and pull of debate to decide goals and discuss alternatives.
Political model
Describe the types of goals and problems there are in each of the Decision Making Models:
- Classical: clear-cut problems and goals
- Administrative: vague problem and goals
- Political: pluralistic; conflicting goals
Describe the conditions (certainty, uncertainty, ambiguous type stuff) there are in each of the Decision Making Models:
- Classical: condition of certainty
- Administrative: condition of uncertainty
- Political: condition of uncertainty or ambiguity
Describe the type of information there is in each of the Decision Making Models:
- Classical: full information about alternatives and their outcomes
- Administrative: limited information about alternatives and their outcomes
- Political: inconsistent viewpoints; ambiguous information
Match each of these to which decision making model they describe:
1. Satisficing choice for resolving problem using intuition
2. Rational choice by individual for maximizing outcomes
3. Bargaining and discussion among coalition members
- Administrative
- Classical
- Political
Whether a decision is programmed or nonprogrammed, and regardless of whether managers choose the classical, administrative, or political model of decision making, six steps typically are associated with effective decision processes.
What are the 6 steps in the managerial decision-making process?
- Recognition of Decision Requirement
- Diagnosis and Analysis of Causes
- Development of Alternatives
- Selection of Desired Alternative
- Implementation of Chosen Alternative
- Evaluation and Feedback
Managers confront a decision requirement in the form of either a _______ or an ________.
problem; opportunity
occurs when organizational accomplishment is less than established goals. Some aspect of performance is unsatisfactory.
problem
exists when managers see a potential accomplishment that exceeds specified current goals. Managers see the possibility of enhancing performance beyond current levels.
opportunity
What step in the managerial decision making process requires analysis of the internal and external environment?
Recognition of Decision Requirement
Bob is a manager at the NY Times who has lost 5 of his employees during the last year. Now he has to make a decision about how to retain the employees on his team. Having recently taken a class on decision making, Bob decides to follow the six-step process for deciding what to do. What problem is Bob most likely to face during the recognition of decision requirement step in the decision-making process?
a. Considering only “tried and true” solutions without creating new possibilities.
b. Not being aware enough of things going on around him to see where problems and opportunities exist.
c. Not having the time to take all of the steps outlined in his plan.
d. Satisficing, or choosing the first solution that works, not the best solution.
b. Not being aware enough of things going on around him to see where problems and opportunities exist.
the step in the decision-making process in which managers analyze underlying causal factors associated with the decision situation.
Diagnosis
a question-asking method used to explore the root cause underlying a particular problem
The 5 Whys
The first why in “The 5 Whys” generally produces a _________ explanation and each subsequent why probes ________ into the causes of the problem and potential solutions.
superficial; deeper
During the diagnosis step of the decision-making process, managers might _______ to uncover the root cause of a problem.
a. Evaluate a decision
b. Develop alternatives
c. Select an alternative
d. Use the 5 Whys Method
d. Use the 5 Whys Method
T or F: limiting the search for alternatives is a primary cause of decision failure in organizations.
True
The best alternative solution is the one that best fits the ______ goals and values of the organization and achieves the desired results using the _______ resources.
overall; fewest
In the third step, Development of Alternatives, in the decision-making process:
- For a _________ decision, feasible alternatives are easy to identify.
- __________ decisions require developing new courses of action that will meet the company’s needs.
programmed; non-programmed
the willingness to undertake risk with the opportunity of gaining an increased payoff.
risk propensity
Which step in the decision making process involves the use of managerial, administrative, and persuasive abilities to ensure that the chosen alternative is carried out?
implementation stage
Which step in the decision making process is where decision makers gather information that tells them how well the decision was implemented and whether it was effective in achieving its goals?
evaluation and feedback
significant differences in the ways in which individual managers may approach problems and make decisions concerning them.
decision styles
What are the 4 major decision styles?
- Directive
- Analytical
- Conceptual
- Behavioral
Which decision style does this describe:
- *used by people who prefer simple, clear-cut solutions to problems.
- managers often make decisions quickly because they don’t like to deal with a lot of information and may consider only one or two alternatives.
- people generally are efficient and rational and prefer to rely on existing rules or procedures for making decisions.
directive style
Which decision style does this describe:
- *used by managers who like to consider complex situations based on as much data as they can gather.
- carefully consider alternatives and often base their decisions on objective, rational data from management control systems and other sources.
- search for the best possible decision based on the information available.
analytical style
Which decision style does this describe:
- *used by people who like to consider a broad amount of information but are more socially oriented than those with an analytical style and like to talk to others about the problem and possible alternatives for solving it.
- rely on information from both people and systems
- like to solve problems creatively.
conceptual style
Which decision style does this describe:
- *often adopted by managers who have a deep concern for others as individuals and involves one-on-one discussions.
- usually are concerned with the personal development of others and may make decisions that help others achieve their goals.
behavioral style
T or F: The best managers are able to shift between decision styles as needed to meet the situation.
True
What are the 6 reasons why managers make bad choices?
- Being influenced by initial impressions (anchoring bias)
- Justifying past decisions (sunk cost effect)
- Seeing what you want to see (confirmation bias)
- Perpetuating the status quo
- Being influenced by emotions
- Being overconfident
occurs when we allow initial impressions, statistics, and estimates to act as anchors to our subsequent thoughts and judgements.
anchoring bias
managers who often stick with a decision because they’ve invested a lot of resources in it, even though they’d be better off cutting their losses and moving on.
sunk cost effect
when a manager puts too much value on evidence that is consistent with a favored belief or viewpoint and discounts evidence that contradicts it.
confirmation bias
Which reason of why managers make bad decisions does this describe:
Managers may base decisions on what has worked in the past and may fail to explore new options, dig for additional information, or investigate new technologies.
Perpetuating the status quo
uses a face-to-face interactive group to spontaneously suggest as many ideas as possible for solving a problem.
Brainstorming
brings people together in an interactive group over a computer network.
Electronic brainstorming
Using ______ ______ can help take emotion out of the decision-making process, keep people from relying on faulty assumptions, and help to limit confirmation bias
hard evidence
a commitment to make more informed and intelligent decisions based on the best available facts and evidence.
Evidence-based decision making
What are the 6 innovative decision making tools?
- Use brainstorming
- Use hard evidence
- Engage in rigorous debate
- Avoid groupthink
- Know when to bail
- Do a postmortem
the tendency of people in groups to suppress contrary opinions
groupthink
managers and organizations often continue to invest time and money in a solution even when there is strong evidence that it is not appropriate.
Escalating commitment
a disciplined procedure whereby managers invest time in reviewing the results of decisions on a regular basis and learn from them.
After-action review
