decision making Flashcards
Decision Making
The process by which managers respond to opportunities
and threats that confront them by analyzing options and
making determinations about specific organizational goals
and courses of action
A decision is needed because
there is a discrepancy between an existing and a desired state of affairs.
A systematic, step-by-step process for making decisions
Identify and Verify the problem
Develop an understanding of the problem
Generate alternatives
Evaluate alternatives
Choose an alternative
Implement the plan
Control: measure and adjust
Programmed Decision
One that recurs often enough for a decision rule to be developed
Decision Rule
A statement that tells a decision-maker which alternative to choose based on the characteristics of the decision situation
Non-programmed Decision
One that recurs infrequently and for which there is no previously established decision rule
Problem Solving
A special form of non-programmed decision-making in which the issue is unique—it requires developing and evaluating alternatives
types of decisions
programmed decision
problem solving
programmed decision
decision rule
Rational Model for Nonprogrammed Decision Making
A prescriptive model of decision making that assumes the decision maker can identify and evaluate all possible alternatives and their consequences and rationally choose the most appropriate course of action.
Administrative Model
A descriptive model approach to decision making that explains why decision making is inherently uncertain and risky and why managers can rarely make decisions in the manner prescribed by the classical model
Ambiguous information
Information whose meaning is not clear allowing it to be interpreted in multiple or conflicting ways
Condition of Certainty
Outcomes of each alternative are known
information condition types
Condition of Certainty
Condition of Risk
Condition of Uncertainty
Condition of Ambiguity
Condition of Risk
Certainty of an outcome is unknown but there is only enough
information to estimate probabilities of various outcomes
Condition of Uncertainty
There is insufficient information to estimate the probability
of possible outcomes
Condition of Ambiguity
Neither the problem nor the alternatives are clear.
Reason for Decision:
Survival
Necessity
Standard Requirement
Comfort or Cosmetic
Perceived Duty
Decision Strategies types
prospector, analyzer, defender, reactor
Prospector
pioneer, risk taker, first mover, leader
Analyzer
observes prospectors and moves when they
feel the decision has been shown to be correct and
the time is right
Defender
Decisions are made only in defense
Reactor
Decisions are a last option process that occurs
due to some other event
Hybrid Approach
Managers use a combination of the Rational and
Administrative approaches to make decisions
Creativity
The ability to generate new ideas or to conceive of new perspectives on existing ideas
Entrepreneurs
Individuals who notice opportunities and take the
responsibility for mobilizing the resources necessary
to produce new and improved goods and services.
Intrapreneurs
Individuals (managers, scientists, or researchers) who
work inside an existing organization and notice an
opportunity for product improvements and are responsible
for managing the product development process.
Intuition
feelings, beliefs, and hunches that come readily to mind
Reasoned judgment
decisions that take time and effort to make and result from careful information gathering, generation of alternatives, and evaluation of alternatives
Sub-Optimizing
Knowingly accepting less than the best possible outcome
to avoid unintended negative effects on other aspects of
the organization
Satisficing
Is examining alternatives only until a solution that meets
minimal requirements is found
Escalating Commitment
Committing considerable resources to a project and then
committing more, even if evidence shows the project is
failing
Prior Hypothesis Bias
Allowing strong prior beliefs about a relationship between
variables to influence decisions based on these beliefs even
when evidence shows they are wrong
Representativeness
The decision maker incorrectly generalizes a decision from
a small sample or a single episode
Illusion of Control
The tendency to overestimate one’s own ability to control
activities and events
Prospect Theory
Argues that when people make decisions under a
condition of risk they are more motivated to avoid
losses than they are to seek gains
Agency Theory
Occurs when one person or entity (agent) is able to make decisions on behalf of, or that impact, another person or entity (principal)
Social Identity Theory
This theory states that a person’s sense of who they are is based on their group membership(s). Therefore, their decisions are based on the expectations, norms, values and standard operating procedures of the group.
Individual Participation
The degree to which employees should be involved
in the decision making process
Benefits of Participation
Incorporates more diverse knowledge, experience,
perspectives and skill sets
Delphi Nominal Group Technique
Written approach to creative problem solving.
Group leader writes a statement of the problem to which managers respond Questionnaire is sent to managers to generate solutions Team of managers summarizes the responses and results are sent back to the participants Process is repeated until a consensus is reached
