Chapter 7 Flashcards
a choice made from alternatives
decision
the process of identifying and choosing alternative courses of action
decision making
the problem solving process
- intelligence (collect info about problem)
- design (think about courses of action)
- choice (pick most viable course of action)
- implementation (follow through)
- monitoring (see how it worked)
decision making that is analytical but slow to act; managers are logical decision makers who strive to make the optimal decision and always act in organization’s best interests; managers strive for certainty to achieve maximum benefit
rational decision making
emotional decision making that is impulsive and often guided by habits; managers are human beings making decisions in a risky or uncertain environment; they often find it difficult to make optional decisions
nonrational decision making
phenomenon that people with greater knowledge and expertise often find it difficult to see things from a less-informed person’s point of view
curse of knowledge
four steps in the rational decision-making process
- identify the problem or opportunity
- generate alternatives
- evaluate alternatives and pick the one with the maximum benefit
- implement the solution and evaluate it
assumptions of rational decision-making process
- goals are well-established and the problem is well-defined and unambiguous
- decision maker is rational and uses logic
- decision maker does not face time or cost constraints
- decision maker operates in an environment of perfect info
- decision maker knows all criteria
- preferences are clear, constant and stable
- decision maker knows all consequences of alternatives
- final choice maximizes benefits
drawbacks of rational decision making model
- almost impossible in the real world
- most decisions too complex
- organizations face time and money constraints
- managers have diff cognitive capacities, values and skills
- managers often face risk, uncertainty, imperfect info, and info overload
- managers often face conflicting goals
decision-making model that explains how managers actually make decisions; assumes that decision making is nearly always uncertain and risky
nonrational models of decision making
also known as a behavioral model, this model explains that managers seek alternatives until they find one that is satisfactory, not optimal
satisficing model; first proposed by economist Herbert Simon
person who believed that managers’ ability to act logically was bound by many restrictions, such as complexity, time and money constraints, imperfect info, etc.
Herbert Simon
shortcuts or “rules of thumb” often used by managers because of time constraints
judgmental heuristics
making a choice without the use of conscious thought or logical interference
intuition
model used by managers when they make decisions based on “gut feelings”
intuition model
