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MAN1006: Introduction to Management

Lecture 7: Managerial Decision Making and Information Technology

Oswy GayleWednesday October 8, 2008

University of Technology, Jamaica

School of Business Administration

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What have you been learning so for?

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1. Decision Characteristics2. What is a decision? What is decision

making? and two define (2) categories of decisions

3. Three (3) Types of Decision-making Models

4. Six Steps Managers Take in Making Important Decisions

5. Participative Decision Making6. Techniques for Improving Decision

Making in Today’s Organizations

Objectives of Session

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Every organization grows, prospers, or fails as a result of decisions by its managers. Managers are often referred to as decision makers.

Good decision-making is a vital part of good management.

Decision Making in Organizations

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Decisions determine how the organization solves its problems, allocates resources, and accomplishes its objectives.

Decision-making is not easy

The better the decision making, the better the strategic planning

Decision Making in Organizations

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What is a Decision? and what is Decision Making?

Decision = a choice made from available alternatives

Decision Making = the process of identifying problems and opportunities and resolving them

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Two (2) Categories of Decisions Programmed Decisions

Situations occurred often enough to enable decision rules to be developed and applied in the future

Made in response to recurring organizational problems

Nonprogrammed Decisions – in response to unique, poorly defined and largely unstructured, and have important consequences to the organization

Ethical Dilemma: The No-Show Consultant

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Decisions and Decision Making

Many decisions that managers deal with every day involve at least some degree of uncertainty and require nonprogrammed decision making May be difficult to make Made amid changing factors Information may be unclear May have to deal with conflicting points of view

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Certainty, Risk, Uncertainty, Ambiguity

● Certainty● all the information the decision maker needs is fully available

● Risk● decision has clear-cut goals● good information is available● future outcomes associated with each alternative are subject to chance

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Certainty, Risk, Uncertainty, Ambiguity

● Uncertainty● managers know which goals they wish to

achieve● information about alternatives and future

events is incomplete● managers may have to come up with

creative approaches to alternatives● Ambiguity

● by far the most difficult decision situation● goals to be achieved or the problem to be

solved is unclear● alternatives are difficult to define● information about outcomes is unavailable

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Conditions that Affect the Possibility of Decision Failure

OrganizationalProblem

ProblemSolution

Low HighPossibility of Failure

Certainty Risk Uncertainty Ambiguity

ProgrammedDecisions

NonprogrammedDecisions

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Selecting a Decision Making Model

Depends on the manager’s personal preference

Whether the decision is programmed or non-programmed

Extent to which the decision is characterized by risk, uncertainty, or ambiguity

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Three Decision-Making Models

Classical Model Administrative Model

Political Model

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Classical Model

Assumptions Decision maker operates to accomplish goals

that are known and agreed upon Decision maker strives for condition of

certainty – gathers complete information Criteria for evaluating alternatives are known Decision maker is rational and uses logicNormative = describes how a manager should and

provides guidelines for reaching an ideal decision

Logical decision in the organization’s best economic interests

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Administrative Model

Two concepts are instrumental in shaping the administrative model

● Bounded rationality: people have limits or boundaries on how rational they can be

● Satisficing: means that decision makers choose the first solution alternative that satisfies minimal decision criteria

How nonprogrammed decisions are made--uncertainty/ambiguity

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Administrative Model● Managers actually make decisions in difficult

situations characterized by non-programmed decisions, uncertainty, and ambiguity

● Decision goals often are vague, conflicting and lack consensus among managers;

● Rational procedures are not always used● Managers’ searches for alternatives are limited● Managers settle for a satisficing rather than a maximizing

solution● intuition, looks to past experience

● Descriptive = how managers actually make decisions--not how they should

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Political Model – closely resembles the real world

● Closely resembles the real environment in which most managers and decision makers operate

● Useful in making non-programmed decisions● Decisions are complex● Disagreement and conflict over problems and

solutions are normal● Coalition = informal alliance among

manages who support a specific goal

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Characteristics of Classical, Political, and Administrative Decision Making Models

Classical Model Administrative Model Political Model

Clear-cut problem and goals Vague problem and goals Pluralistic; conflicting goals

Condition of certainty Condition of uncertainty Condition of uncertainty/ambiguity

Full information about Limited information about Inconsistent viewpoints; ambiguous

alternatives and their outcomes Alternatives and their outcomes information

Rational choice by individual Satisficing choice for resolving Bargaining and discussion among

for maximizing outcomes problem using intuition coalition members

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Six Steps in the ManagerialDecision-Making Process

Evaluationand

Feedback

Diagnosisand Analysis

of Causes

Recognition ofDecision

Requirement

Development ofAlternatives

Selection ofDesired

Alternative

Implementationof ChosenAlternative

Decision-MakingProcess

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Six Steps in the ManagerialDecision-Making Process1. Recognition of Decision Requirement2. Diagnosis and Analysis of Causes 3. Development of Alternatives 4. Selection of Desired Alternative 5. Implementation of Chosen

Alternative 6. Evaluation and Feedback

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Diagnosis and Analysis of Causes Diagnosis = analyze underlying

causal factors associated with the decision situation

Managers make a mistake if they jump into generating alternatives without first exploring the cause of the problem more deeply

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Underlying Causes - Kepner /Tregoe

What is the state of disequilibrium affecting us? When did it occur? Where did it occur? How did it occur? To whom did it occur? What is the urgency of the problem? What is the interconnectedness of events? What result came from which activity?

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Development of Alternatives

Develop Alternatives solutions that will respond to the needs of the situation and correct the underlyning cause

For a programmed decision, feasible alternatives are often available within the organization’s rules and procedures

Nonprogrammed decisions require developing new courses of action that will meet the needs of the company

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Selection of Desired Alternatives The best alternative is one in which the

solution best fits the firm’s overall goals and values and achieves the desired results using the fewest resources

Risk Propensity = willingness to undertake risk with the opportunity of gaining an increased payoff

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Implementation

The implementation of a chosen alternative involves the use of managerial, administrative, and persuasive abilities to cause the decision to be carried out.

The success of the chosen alternative depends on whether or not it is translated into action.

Implementation = using managerial, administrative, and persuasive abilities to translate the chosen alternative into action

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Evaluation decision makers gather information

or feedback to answer the following: How well was the decision implemented? Did the decision achieve its goals?

Feedback is important because decision-making is a continuous, never-ending process.

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Decision Styles Differences among people with respect to

how they perceive problems and make decisions

Not all managers make decisions the same Directive style Analytical style Conceptual style Behavioral style

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Personal Decision Framework

Situation:· Programmed/non-

programmed· Classical, administrative,

political· Decision steps

Decision Choice:·Best Solution to Problem

Personal Decision Style:·Directive·Analytical·Conceptual·Behavioral

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Directive Style People who prefer simple, clear-cut

solutions to problems Make decisions quickly May consider only one or two

alternatives Efficient and rational Prefer rules or procedures

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Analytical Style Complex solutions based on as

much data as they can gather Carefully consider alternatives Base decision on objective, rational

data from management control systems and other sources

Search for best possible decision based on information available

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Conceptual Style Consider a broad amount of information More socially oriented than analytical style Like to talk to others about the problem

and possible solutions Consider many broad alternatives Relay on information from people and

systems Solve problems creatively

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Behavioral Style Have a deep concern for others as individuals Like to talk to people one-on-one Understand their feelings about the problem and

the effect of a given decision upon them Concerned with the personal development of

others May make decisions to help others achieve their

goals

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Participation in Decision Making

Helps gauge the appropriate amount of participation for subordinates in process

● Leader Participation Styles Five levels of subordinate participation in

decision making ranging from highly autocratic to highly democratic

Vroom-Jago Model

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Leader participation styles Decide: the leader decides alone Consult Individually: presenting the problem to

subordinates individually for their suggestions and then making the decision.

Consult Group: sharing the problem with subordinates as a group, collectively obtaining their ideas and suggestions, then making the decision

Facilitate: sharing the problem with subordinates and acting as a facilitator to help the group arrive at a decision

Delegate: delegating the problem and permitting the group to make the decision within prescribed limits.

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Participation in Decision MakingDiagnostic Questions Decision participation depends on

the responses to seven diagnostic questions about

● the problem ● the required level of decision quality ● the importance of having subordinates

commit to the decision

Vroom-Jago Model

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Seven Leader Diagnostic Questions

How significant is the decision? How important is subordinate commitment? What is the level of the leader’s expertise? If the leader were to make the decision alone at

what level would subordinates be committed to the decision?

What level is the subordinate’s support for the team or organization’s objectives?

What is the member’s level of knowledge or expertise relative to the problem?

How skilled or committed are group members to working together? (Team Competence)

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Read up on Selecting a Decision Making Style

Information Technology

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New Decision

Approaches for Turbulent

TimesLearn, Don’t Punish

Know When to Bail

Practice the Five Whys

Engage in Rigorous Debate

Brainstorming

New Decision Approaches for Turbulent Times