Decision Making and the essential of control Flashcards
Decision making
making choices among alternative courses of action
why is decision making important
it increases your effectiveness at work.
Questions to ask to find out if decisions are ethical
- is this decision fair
- will i feel better or worse afterwards
- does it break org. rules?
- does it break laws?
- how would i feel if its on the news
Decision Types
Programmed decisions (habitual) –> have autoamted response (decision rule)
non programmed decisions (iunique)
Decision making categories
Strategic decisions (set the course of the org)
tactical decision (how thigns are done)
operational decisions (everyday decisions in business)
Decision making models
Rational decision making model
bounded rationality decision making model
intuitive decision making model
creative decision making model
Rational decision making model
series of steps that decision makers take to maximize the quality of their outcome.
- identify the problem
- establish decision criteria
- weigh criteria
- generate alternatives for options
- evaluate alternatives against criteria
- choose best alternative
- implement decision
- evaluate the decision
Analysis paralysis
availability of too much information, more and more time is then spent on gathering information and thinking about it and no decision is made.
Bounded Rationality model
recognizes the limitations. According to this models you limit your options to amanageable set and choose best alternative without conductivng a heavy serarch for alternatives.
Important approach is the tenency to satisfice – accept the first solution that meets your criteria.
intuitive decision making
Arraive at decisions without conscious reasoning.
This works well if you have training, experience and knowledge, and have a idea of how well a solution may work.
Creative decision making
New imaginative ideas.
5 Steps.:
- problem identification
- immersion (think about problem consciously and gather info)
- incubation (set problem aside. work on problem unconsciously)
- illuminiation (insight moment)
- verification and application (verify feasibility and implement it)
Dimensions of creativity
Fluency
Flexibility
Originality
Faulty decision making
potential cahllenges lie in several biases and traps
Overconfidence bias
onverestimate the ability to predict future events.
hindsight bias
mistakes seem obvious when looking back in time. a problem when judging someone elses ideas.
anchoring
tendency for individuals to rely too heavily on single pieces of information
framing bias
tendency of decision makers to be influenced by the way that a situation or problem is presented. (be aware to not make a disadvantageous dicision because of how its framed)
escalation of commitment
“you have already invested in a sinking ship” so now you have to stay on it or invest even more.
group decision making
has some advantages also some disadvantages
is slower than individual decision making since all members need to express their thoughts and ideas, it can lead to groupthink (not critizie teams favorable ideas) and social loathing (do less work in a team). Also the group is rarely better than its best member.
positive aspects are a wieder range of experience, diverse background which lead to more and maybe better ideas than otherwise. Also discussion etcn leads to more insights and more errors could be found. but its also more fun and in the end everybody is commited because the group invested in it. for groupthink, groups should have a devils advocate (rotating) every meeting!!
Decision making methods
Nominal Group Technique (anon write down ideas, gather ideas until all shared, discussion where each member tells his thoughts to the anon ideas, finall ya voting for fav idea
delphi technique: series of questionaires to find a decision
Majority rule: rule of majority
Consensus: reach consensus
Group decision support systems : like knowledge management
Decision trees
premortem technique
plan a project and outline a plan.
ask all team members to see the project fail and write all reasons down.
ESSENTIALS OF CONTROL
ESSENTIALS OF CONTROL
organisational control has 2 functions
help managers determine wheter or why their strategy is achieving the desired results
early warning system incases when you get off track.
what is organisational control
process by which an org. influences its subunits and members to behave in ways that lead to the attainment of organizational goals and objectives.
4 steps of org. control
- establish standards
- measure performance
- compare
- take corrective action
Controls come at a cost
financial
damage to culture and reputation
decrease responsiveness
botched implementation (controls are misunderstood or interfering and making even more problems)
benefits of org. control
improved cost and productivity control
improved quality control
opportunity recognition
better ability to manage uncertainty and complexity
better ability to decentralize decision making
Examples of controls
Cost can be controlled using budgets
productivity can be controlled by comparing how much each person can control
quality can be controlled as response time/ accuracy, / by measuring!
levels of control
Strategic : Big picture
Operational : Execution
strategic: make sure ship is going into the right direction
Operation: make sure ship is in good condition
Types of controls
Proactivity: adresses what we can do ahead of time to help our plan suceed. (feedforward control)
concurrent control( monitoring and adjusting ongoing activities and processes)
feedback controls (gather information about completed activity, evaluate and learn for future)
outcome controls: little performance measures available , no coordination with other business units
behavioral control: direct evaluation of managerial and employee decision making (not of results!)
controls can take 2 forms
Financial controls
non financial controls
Financial controls
balance sheet
income / profit and loss
cash flow statement
non financial controls
controls where nonfinancial perfomrance outcomes are measured
its important because these are likely to affect profitability in a long run
examples of nonfinacial controls
employee satisfaction employeee turnover new products launched customer satisfaction brand power number of defects product returns capacity utilization quality of purcahsed inputs new patents number of emplyoees with phd ...
CAREFULL
nonfinacncial controls should just “add “ to the financial controls and not substitute them !!!
other mistakes
not using nonfinancial controls
controls not linked to strategy
failling to validate links
For instance, (1) good employee recruiting leads to (2)
satisfied employees, which leads to (3) an employee base that creates value, which leads to (4) satisfied customers,
which leads to (5) profitable customer buying patterns, which lead to (6) good profitability. Yikes!
faililing to set appropriate performance tqargets
measurement failure
LEAN control
popular business control and improvement methodology !
system of nonfinancial controls used to improve product and service quality and decrease waste!
principe is to use less of resources (spance, inventory, workers.. ) to produce comparable output!
Avoid MUDA = WASTE!
7 wastes of lean
defects overproduction transportation waiting inventory motion overprocessing
5 core pricniples of lean
define value from the customers perspective
describe the value stream fro each product or service
create flow in each value stream
produce at the pace of actual customer demand (reduce lead time and increase flexibility)
strive to continously improve all business operations
Balanced scorecard
originally introduced to integrate financial and non financial controls in a way that provided a balanced understanding.
evolved into a strategic performance management tool.
what is a balanced scorecard
control system that tnraslates an organizations vision, mission and strategy into specific quantifiable goals and monitors the performance in terms of achieving this goals.
