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Transcript of Decision Making, Learning, Creativity, and Entrepreneurship chapter seven McGraw-Hill/Irwin...
Decision Making, Learning,
Creativity, and Entrepreneurship
chapter seven
McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
1. Understand the nature of managerial decision making, differentiate between programmed and non-programmed decisions, and explain why non-programmed decision making is a complex, uncertain process.
2. Describe the six steps that managers should take to make the best decisions and explain how cognitive biases can lead managers to make poor decisions.
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Learning Objectives
3. Identify the advantages and disadvantages of group decision making, and describe techniques that can improve it.
4. Explain the role that organizational learning and creativity play in helping managers to improve their decisions.
5. Describe how managers can encourage and promote entrepreneurship to create a learning organization and differentiate between entrepreneurs and intrapreneurs
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The Nature of Managerial Decision Making
• 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.
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The Nature of Managerial Decision Making
• Decisions in response to opportunities– occurs when managers
respond to ways to improve organizational performance to benefit customers, employees, and other stakeholder groups
• Decisions in response to threats– events inside or outside
the organization are adversely affecting organizational performance
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Decision Making
• Programmed Decision– Routine, virtually automatic process
• Decisions have been made so many times in the past that managers have developed rules or guidelines to be applied when certain situations inevitably occur
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Decision Making
• Non-Programmed Decisions– Nonroutine decision making that occurs in
response to unusual, unpredictable opportunities and threats
• Rules do not exist because the situation is unexpected or uncertain and managers lack the information they would need to develop rules to cover it.
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Decision Making
• Intuition – feelings, beliefs, and
hunches that come readily to mind, require little effort and information gathering and result in on-the-spot decisions
• Reasoned judgment – decisions that take time
and effort to make and result from careful information gathering, generation of alternatives, and evaluation of alternatives
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The Classical Model
• Classical Model of 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.
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The Classical Model
• Optimum decision– The most appropriate decision in light of what
managers believe to be the most desirable future consequences for their organization.
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The Administrative Model
• Administrative Model– An approach to decision making that explains why
decision making is inherently uncertain and risky and why managers usually make satisfactory rather than optimum decisions.
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The Administrative Model
• Bounded rationality– Cognitive limitations that
constrain one’s ability to interpret, process, and act on information.
• Incomplete information– Because of risk and
uncertainty, ambiguity, and time constraints
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Causes of Incomplete Information
• Risk– The degree of probability that the possible
outcomes of a particular course of action will occur.
• Uncertainty– the probabilities of alternative outcomes cannot
be determined and future outcomes are unknown
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Causes of Incomplete Information
• Ambiguous Information– Information that can be
interpreted in multiple and often conflicting ways.
7-16Figure 7.3
Young Woman or Old Woman
Causes of Incomplete Information
• Time constraints and information costs– managers have neither the time nor money to
search for all possible alternatives and evaluate potential consequences
• Satisficing– Searching for and choosing an acceptable, or
satisfactory response to problems and opportunities, rather than trying to make the best decision
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