ch.9 mgmt Mangerial Decision Making

Created by DarinHarada 

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decision

a choice made from available alternatives.

decision making

the process of identifying problems and opportunities and then resolving them.

programmed decision

a decision made in response to s=a situation that has occurred often enough to enable decision rules to be developed and applied in the future.

nonprogrammed decision

a decision made in response to a situation that is unique, is poorly defined and largely unstructured, and has important consequences for the organization.

certainty

means that all the information the decision maker needs is fully available. ex info on operating conditions, resource costs or constraints, and each course of action and possible outcomes.

risk

means that a decision has clear-cut goals and that good information is available, but the future outcomes associated with each alternative are subject to chance. but there is enough info to allow the probability of a successful outcome for each outcome to be estimated. ex stat analysis

uncertainty

means that managers know which goals they wish to achieve, but information about alternatives and future events is incomplete. don't have enough info to be clear about alt. or to estimate their risk. Managers have to be creative to come up with best alt.

ambiguity

is by far the most difficult decision situation. ambiguity means that goals to be achieved or the problem to be solved is unclear, alt. are difficult to define, and information about outcomes are unavailable. aka wicked decision problem. ex ford firestone tires

classic model

decision making is based on economic assumptions. These assumptions are 1. decision maker operates to accomplish goals that are known and agreed upon. problems are precisely formulated and defined. 2.the decision maker strives for conditions or certainty, gathering complete information. all alt. and the potential results of each are calculated. 3.criteria for evaluating alt. are known. the decision maker selects the alt. that will maximize the economic return to the organization. 4. decision maker is rational and uses logic to assign values, order preferences, evaluate alt., and make the decision that will maximize the attainment of organizational goals.

normative (classical)

which it defines how a decision maker should make decisions. it does not describe how managers actually act so much as it provides guidelines on how to reach and ideal outcome for the organization.

the value of the classical model

it enables the ability to help decision makers be more rational. it is the ideal model of decision making that is often unattainable by real people in real organization.

administrative model

a decision-making model that describes how managers actually make decisions in situations characterized by nonprogrammed decisions, uncertainty, and ambiguity. based on the work of Herbert A. Simon and proposed two concepts bounded rationality and satisficing.

boundary rationality

means that people have limits, or boundaries, on how rational they can be. org. complex managers only have the time and ability to process only a limited amount of info with which to make decisions.

satisficing

means that the decision makers choose the 1st solution alternatives that satisfies minimal decision criteria.

administrative model assumptions

1. decision goals often are vague, conflicting, and lack consensus among managers. managers often unaware of problems or opportuntities that exist in the organization. 2. rational procedures are not always used, and, when they are, they are confined to a simplisitc view of the problem that does not capture the complexity of real organizational events. 3. managers' searches for alternatives are limited b/c of human, info, and resource constraints. 4. most managers settle for a satisficing rather than a maximizing solution, partly b/c they have limited info and partly b/c they have only vague criteria for what constitutes a maximizing solution.

intuition

represents a quick apprehension of a decision situation based on past experience but without conscious thought

political model

third model of decision making is useful for making nonprogrammed decisions when conditions are uncertain, info is limited, managers may disagree about what goals to pursue or what course of action to take. Must reach agreement. political model closely resembles the real environment in which most managers and decision makers operate.

political model assumptions

1. organization are made up of groups with diverse interests, goals, and values. managers disagree about prblem priorities and may not understand or share the goals and interests of other managers. 2.info is ambiguous and incomplete, the attempt to be rational is limited by the complexity of many problems as well as personal and organizational constraints. 3. managers do not have the time, resources, or mental capacity to identify all dimensions of the problem and process all revelant info. managers talk to each other and exchange viewpoints to gather info and reduce ambiguity. 4. managers engage in the push and pull debate to decide goals and discuss alternatives. decisions are the result of bargaining and discussion among coalition members.

descriptive

an approach that describes how managers actually make decisions rather than how they should.

coalition

is an informal alliance among managers who support a specific goal.

Six steps in the Managerial decision making process

1. Recognition of the decision requirements 2. Diagnosis and analysis of causes. 3. Development of Alternatives 4. Selection of Alt. 5.Implementation of Chosen Alt. 6. Evaluation and feedback.

diagnosis

the step in decision-making process in which managers analyze underlying causal factors associated with the decision situation.

risk propensity

the willingness to undertake risk with the opportunity of gaining an increased profit.

Implementation phase

the use of managerial, administrative, and persuasive abilities to make sure chosen alt. is carried out.

escalating commitment

continuing to invest time and resources in a failing decision.

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