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Managerial Decision Making  157

CHAPTER 9

MANAGERIAL DECISION MAKING

CHAPTER OUTLINE

How Do You Make Decisions?
I. Types of Decisions and Problems
A. Programmed and Nonprogrammed Decisions
B. Facing Certainty and Uncertainty
II. Decision-Making Models
A. The Ideal, Rational Model
B. How Managers Actually Make Decisions
C. The Political Model
New Manager Self-Test: Making Important Decisions
III. Decision-Making Steps
A. Recognition of Decision Requirement
B. Diagnosis and Analysis of Causes
C. Development of Alternatives
D. Selection of the Desired Alternative
E. Implementation of the Chosen Alternative
F. Evaluation and Feedback
IV. Personal Decision Framework
V. Why Do Managers Make Bad Decisions?
VI. Innovative Decision Making
A. Start with Brainstorming
B. Use Hard Evidence
C. Engage in Rigorous Debate
D. Avoid Groupthink
E. Know When to Bail
F. Do a Postmortem

ANNOTATED LEARNING OBJECTIVES
After studying this chapter, students should be able to:

1. Explain why decision making is an important component of good management.

Every organization grows, prospers, or fails as a result of decisions made by its managers.
Managers are often referred to as decision makers. Good decision making is a vital part of good
management. Decisions determine how the organization solves its problems, allocates resources,
and accomplishes its objectives. Decision making is not easy. It must be done amid
ever-changing factors, unclear information, and conflicting points of view. Plans and strategies

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158  Chapter 9

are arrived at through decision making. The better the decision making, the better the strategic
planning.

2. Compare and contrast programmed and nonprogrammed decisions, and describe the
decision characteristics of certainty and uncertainty.

Programmed decisions involve situations that have occurred often enough to enable decision
rules to be developed and applied in the future. Once managers formulate decision rules,
subordinates and others can make the decision, freeing managers for other tasks.

Nonprogrammed decisions are made in response to situations that are unique, are poorly defined
and largely unstructured, and have important consequences for the organization. Many
nonprogrammed decisions involve strategic planning because uncertainty is great and decisions
are complex.

Every decision situation can be organized on a scale according to the availability of information
and the possibility of failure. Certainty means that all the information the decision maker needs
is fully available. However, few decisions are certain in the real world. Most contain some
uncertainty. Uncertainty means that managers know which goals they wish to achieve, but
information about alternatives and future events is incomplete.

3. Describe the ideal, rational model of decision making to the political model of decision
making.

The classical model of decision making is considered to be normative, which means it defines
how a decision maker should make decisions. It is based on rational economic assumptions and
manager beliefs about what ideal decision making should be. It does not describe how managers
actually make decisions so much as it provides guidelines on how to reach an ideal outcome for
the organization. The classical model is most valuable when applied to programmed decisions
and to decisions characterized by certainty or risk because information is available and
probabilities can be calculated. The classical model is often associated with high performance
for organizations in stable environments.

The political model of decision making is useful for making nonprogrammed decisions when
conditions are uncertain, information is limited, and managers may disagree about what goals to
pursue or what course of action to take. The political model closely resembles the real
environment in which most managers and decision makers operate. Managers often engage in
coalition building for making complex organizational decisions. Coalition building is the
process of forming alliances among managers. The inability of managers to build coalitions
often makes it difficult or impossible for managers to get their decisions implemented. This
model is associated with high performance in unstable environments in which decisions must be
made rapidly and under more difficult conditions.

4. Explain the process by which managers actually make decisions in the real world.

2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part .
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for
classroom use.
.

and explain the biases that frequently cause managers to make bad decisions. The administrative model is considered to be descriptive. and regardless the manager follows the classical. These six steps are:  recognition of decision requirement. in whole or in part . and  evaluation and feedback. six steps typically are associated with effective decision-making processes. Managerial Decision Making  159 The administrative model describes how managers actually make decisions such as those characterized by nonprogrammed decisions.  diagnosis and analysis of causes. political. Managers with an analytical style like to consider complex solutions based on as much data as they can gather. uncertainty.  selection of desired alternative. People frequently look for information that supports their existing instinct or point of view and avoid information that contradicts it. Seeing what you want to see. Intuition based on past practice and experience is often used in this model to make decisions. copied or duplicated. clear-cut solutions to problems. and ambiguity. Most bad decisions are errors in judgment that originate in the human mind’s limited capacity and in the natural biases managers display during decision making. People don’t like to make mistakes.  implementation of chosen alternative. Justifying past decisions. People who tend toward a conceptual style also like to consider a broad amount of information. Awareness of the following six biases can help managers make more enlightened choices: Being influenced by initial impressions. . All Rights Reserved. affecting where they look for information as well as how they interpret the information they find. Giving too much weight to the past can lead to poor forecasts and misguided decisions. © 2014 Cengage Learning. 5. or posted to a publicly accessible website. Whether a decision is programmed or nonprogrammed.. 7. The mind often gives disproportionate weight to the first information it receives when considering decisions. It assumes that managers do not have the time or resources to make the optimal decision and therefore will be satisfied with the first decision that meets the minimal criteria. The directive style is used by people who prefer simple. May not be scanned. 6. Identify the biases that frequently cause managers to make bad decisions. so they continue to support a flawed decision in an effort to justify or correct the past. Summarize the six steps used in managerial decision making. Past events and trends also act as anchors. These initial impressions act as an anchor to subsequent thoughts and judgments. or administrative model of decision making. The application of the administrative model has been associated with high performance in unstable environments in which decisions must be made rapidly and under more difficult conditions.  development of alternatives. Describe four personal decision styles used by managers. The behavioral style is characterized by having a deep concern for others as individuals.

All Rights Reserved. Groupthink refers to the tendency of people in groups to suppress contrary opinions. Brainstorming uses a face-to-face interactive group to spontaneously suggest a broad range of alternatives for decision making. seeking and examining evidence with rigor. in whole or in part . Avoiding groupthink helps groups make better decisions. It can also create a broader understanding of issues and alternatives. Explain innovative techniques for decision making. 2016 Cengage Learning. May not be scanned. One of the best known techniques for rapidly generating creative alternatives is brainstorming. and engaging in point-counterpoint by giving two subgroups competing responsibilities. Good managers recognize that constructive conflict based on different points of view can focus a problem. or posted to a publicly accessible website. Most people overestimate their ability to predict uncertain outcomes. the desire for harmony outweighs concerns over decision quality. Managers make better decision when—to the extent possible— they take emotions out of the decision-making process. including brainstorming. and improve broader decision quality. and stimulate creative thinking. Managers need to know when to bail. Before making a decision. Managers might block or distort negative information because they don’t want to be responsible for a bad decision. clarify ideas. . all ideas are acceptable no matter how crazy they seem. Escalating commitment means that organizations often continue to invest time and money in a solution despite strong evidence that it is not appropriate to do so. Overconfidence. and making informed and intelligent decisions based on the best available facts and evidence. dig for additional information.e. When people slip into groupthink. Some disagreement and conflict is much healthier than blind agreement. Managers may base decisions on what has worked in the past and fail to explore new options. i. or might not accept that their decision is wrong.160  Chapter 9 Perpetuating the status quo. Two common ways to accomplish this are having a devil’s advocate to challenge the group’s assumptions and assertions. or investigate new technologies. they must be able to discern when to pull the plug on something that isn’t working. except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. . An important key to better decision making under conditions of uncertainty is to encourage a rigorous debate of the issue at hand. The goal is to generate as many ideas as possible. Evidence-based decision making is founded on a commitment to examining potential biases. copied or duplicated. Group members emphasize maintaining unity rather than realistically challenging problems and alternatives. managers have unrealistic expectations of their ability to understand the risk and make the right choice. and after-action reviews. Being influenced by emotions. The keys to effective brainstorming are that people can build on one another’s ideas. and criticism and evaluation are not allowed.. 8. evidence- based management.

© 2014 Cengage Learning. Decision making involves effort both before and after the actual choice. which they bring to management positions. copied or duplicated. and ambiguity. 2. decisive. diversity of viewpoints. and interactions with others as they move up the hierarchy. managers have all the information necessary for making decisions. what didn’t. LECTURE OUTLINE HOW DO YOU MAKE DECISIONS? Most of us make decisions automatically and without realizing that people have diverse decision- making behaviors.S. One difference between programmed and nonprogrammed decisions relates to the degree of certainty or uncertainty that managers deal with in making the decision. I. Facing Uncertainty and Ambiguity Exhibit 9. Managerial Decision Making  161 To improve decision making people review the results of their decisions. in whole or in part . Nonprogrammed decisions often involve strategic planning because uncertainty is great and decisions are complex. Army. command-oriented behavior and gradually move toward more openness. In a perfect world. This exercise helps students determine whether they typically make decisions more like new managers or more like senior managers. TYPES OF DECISIONS AND PROBLEMS A decision is a choice made from available alternatives. poorly defined. All Rights Reserved. They often start out with a more directive. The four positions on the scale are certainty. 2. . Programmed and Nonprogrammed Decisions 1. subordinates and others can make decisions freeing managers for other tasks. Once managers formulate decision rules. Every decision situation can be organized on a scale according to the availability of information and the possibility of failure.1 1. New managers typically use a different decision behavior than seasoned executives. A technique adopted from the U. or posted to a publicly accessible website. uncertainty. May not be scanned. the after-action review is a disciplined procedure whereby managers review the results of decisions to evaluate what worked. they learn valuable lessons for how to do things better in the future. and likely to have important consequences for the organization. In reality. largely unstructured. risk. Decision making is the process of identifying problems and opportunities and then resolving them. and how to do things better. B. Nonprogrammed decisions are made in response to situations that are unique. A. Programmed decisions involve situations that have occurred often enough to enable decision rules to be developed and applied in the future. some things are unknowable and some decisions will fail.

c. High ambiguous circumstances can create a wicked decision problem. copied or duplicated. or the political decision making model. May not be scanned. DECISION-MAKING MODELS Exhibit 9. rapidly changing circumstances. Many decisions made under uncertainty do not produce the desired results. How might decision making differ for a risky versus an ambiguous situation? NOTES________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ II. Most contain risk or uncertainty. A. d. or future interest rates. Ambiguity means that the goals to be achieved or the problem to be solved is unclear. Rational Model 2016 Cengage Learning. All Rights Reserved. b. fuzzy information. The choice of model used depends on the manager’s personal preference. alternatives are difficult to define. except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. The future outcomes associated with each alternative are subject to failure. production costs. but information about alternatives and future outcomes is incomplete. Managers have a difficult time coming to grips with the issues and must conjure up reasonable scenarios in the absence of clear information. the administrative. and information about outcomes is unavailable. in whole or in part . and the degree of uncertainty associated with the decision. Risk means a decision has clear-cut objectives and good information available. however. are difficult to analyze and predict. The Ideal. enough information is available to allow the probability of a successful outcome for each alternative to be estimated. volume.162  Chapter 9 a. . whether the decision is programmed or nonprogrammed. Uncertainty means managers know which goals they wish to achieve.2 Decisions are usually made using the classical. or posted to a publicly accessible website. Discussion Question #3: Explain the difference between risk and ambiguity. Factors that may affect a decision. Managers may have to come up with creative approaches to alternatives and use personal judgment to determine which alternative is best. Certainty means that all the information the decision maker needs is fully available. but managers face uncertainty every day. with conflicts over goals and decision alternatives. Few decisions are certain in the real world. such as price. and unclear linkages among decision elements. Ambiguity is by far the most difficult decision situation. .

. All Rights Reserved. Herbert A. Rather than pursue all alternatives. It works best when applied to programmed decisions and to decisions characterized by uncertainty or risk because relevant information is available and probabilities can be calculated. The decision maker strives for conditions of certainty. defining how a decision maker should make decisions. and providing guidelines for reaching an ideal outcome for the organization. order preferences. Because managers do not have the time or cognitive ability to process complete information about complex decisions. Simon proposed two concepts instrumental in shaping the administrative model: bounded rationality and satisficing. copied or duplicated. Managerial Decision Making  163 1. and make the decision to maximize goals. The classical model represents an “ideal” model of decision making that is often unattainable by real people in real organizations. The administrative model is considered to be descriptive. The decision maker operates to accomplish goals that are known and agreed upon. 3. on the amount of information they can process in making a decision. managers © 2014 Cengage Learning. The four assumptions include: a. meaning that it describes how managers actually make decisions rather than how they should make them. Discussion Question #8: List some possible advantages and disadvantages to using computer technology for managerial decision making. How Managers Actually Make Decisions 1. The classical model of decision making is based on assumptions that managers should make logical decisions that will be in the organization’s best economic interests. Bounded rationality means people have limits. in whole or in part . d. gathering complete information. b. c. evaluate alternatives. they must satisfice. 2. c. b. or boundaries. Bounded Rationality and Satisficing a. The classical model is normative. or posted to a publicly accessible website. May not be scanned. Criteria for evaluating alternatives are known. The value of the classical model has been to help decision makers be more rational. Satisficing means that decision makers choose the first solution alternative that satisfies minimal decision criteria. The decision maker is rational and uses logic to assign values. NOTES________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ B.

the right decision often comes quickly and effortlessly. . According to the administrative model:  Decision goals often are vague. The decision maker cannot justify the time and expense of obtaining complete information. b. Intuition is another aspect of administrative decision making. they are confined to a simplistic view of the problem that does not capture the complexity of real events. and resource constraints. Intuition begins with recognition. Intuition represents a quick apprehension of a decision situation based on past experience but without conscious thought.164  Chapter 9 will opt for the first solution that appears to solve the problem. when people build a depth of experience and knowledge in a particular area.  Rational procedures are not always used. information is limited. Quasirationality. copied or duplicated. Research on the validity of intuition in decision making is inconclusive. conflicting. or posted to a publicly accessible website. Intuitive decision making is not arbitrary or irrational because it is based on years of practice and hands-on experience. All Rights Reserved. 2. and lack consensus among managers. and when they are. May not be scanned. c. evidence-based approach? NOTES________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ C. except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. This model is for nonprogrammed decisions when conditions are uncertain. applying intuition only under the right circumstances and in the right way. The Political Model 1. and there is disagreement about the goals to pursue or the 2016 Cengage Learning. a new trend in decision making. Intuition a.  Managers’ searches for alternatives are limited because of human.  Most managers settle for a satisficing rather than a maximizing solution. means combining intuitive and analytical thought Discussion Question #9: Can intuition and evidence-based decision making coexist as valid approaches within an organization? How might managers combine their intuition with a rational. . data-driven. in whole or in part . suggesting that managers should take a cautious approach to it. d. information.

or mental capacity to identify all dimensions of the problem and process all relevant information. 2. and values. Recent research has found rational. a. Coalition building is the process of forming alliances among managers. They think about a time when they made an important career decision or made a large purchase or investment. They decide to what extent does each of the terms describes how they reached the final decision. . The inability of managers to build coalitions often makes it difficult or impossible for them to get their decisions implemented. Discussion Question #5: What opportunities and potential problems are posed by the formation of more than one coalition within an organization. resources. Discussion Question #4: Analyze three decisions you made over the past six months. Managers often engage in coalition building for making complex organizational decisions. Which of these were programmed and which were nonprogrammed? Which model—the classical. classical procedures to be associated with high performance for organizations in stable environments. Administrative and political decision-making procedures and intuition have been associated with high performance in unstable environments when decisions must be made rapidly. d. Information is ambiguous and incomplete. c. in whole or in part . Managers do not have time. b. or political—best describes the approach you took to making each decision? NOTES________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ III. administrative. DECISION-MAKING STEPS Exhibit 9. The political model closely resembles the real environment in which most managers and decision makers operate. or posted to a publicly accessible website.3 © 2014 Cengage Learning. goals. May not be scanned. each one advocating a different direction or alternative? What steps can you take as a manager to make sure that dueling coalitions result in constructive discussion rather than dissension? NOTES_______________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ NEW MANAGER SELF-TEST: MAKING IMPORTANT DECISIONS This exercise helps student learn how they make important personal decisions. Managers engage in the push and pull of debate to decide goals and discuss alternatives. Managerial Decision Making  165 action to take. copied or duplicated. The political model begins with four basic assumptions. A coalition is an informal alliance among managers who support a specific goal. Organizations are made up of groups with diverse interests. All Rights Reserved.

May not be scanned. Diagnosis and Analysis of Causes 1. B. 2. To whom did it occur? f. All Rights Reserved. Studies recommend that managers ask a series of questions to specify underlying causes. Managers confront a decision requirement in the form of either a problem or an opportunity. . 2. in whole or in part . Recognition of Decision Requirement 1. An opportunity exists when managers see potential accomplishments that exceed current goals. How did it occur? e. copied or duplicated. and regardless of whether the manager follows the classical. A problem occurs when organizational accomplishment is less than established goals. Awareness of a problem or opportunity is the first step in the decision-making sequence and requires surveillance of the internal and external environment for issues that merit executive attention. 2016 Cengage Learning.166  Chapter 9 Whether a decision is programmed or nonprogrammed. What result came from which activity? 3. Some aspect of performance is unsatisfactory. including: a. six steps typically are associated with effective decision-making processes. These six steps are: A. Recognizing decision requirements is difficult because it often means integrating information in novel ways. Managers make a big mistake if they jump right into generating alternatives without first exploring the cause of the problem more deeply. Diagnosis is the step in which managers analyze the underlying causal factors associated with the decision situation. . What is the interconnectedness of events? h. Where did it occur? d. except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. What is the state of disequilibrium affecting us? b. or posted to a publicly accessible website. political or administrative model of decision making. The 5 Whys is a question-asking method used to explore the root cause underlying a particular problem. What is the urgency of the situation? g. When did it occur? c.

Selection of the Desired Alternative 1. 2. 2. feasible alternatives are often available within the organization’s rules and procedures. May not be scanned. administrative. copied or duplicated. never-ending process. Feedback provides decision makers with information that can start a new decision cycle. The manager tries to select the choice with the least amount of risk and uncertainty. 2. Discussion Question #1: Aaron Alexis. Development of Alternatives 1. F. By learning from decision mistakes. had a history of mental instability. decision makers gather information or feedback to determine how well the decision was implemented and whether it achieved its goals. Risk propensity is the willingness to undertake risk with the opportunity of gaining an increased payoff. .C. and persuasive abilities to ensure that the chosen alternative is carried out. the former Navy reservist who went on a shooting rampage in September 2013 and killed 12 people at the Washington Navy Yard in Washington D. Evaluation and Feedback 1. but he was carrying a valid security clearance. How would you suggest managers make decisions for issuing or revoking security clearances to prevent this kind of catastrophe? © 2014 Cengage Learning. 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. Making choices also depends on managers’ personality factors and willingness to accept risk and uncertainty. Nonprogrammed decisions require developing new courses of action that will meet the needs of the company. The success of the chosen alternative depends on whether or not it is translated into action. D. All Rights Reserved. or posted to a publicly accessible website. For a programmed decision. Implementation of Chosen Alternative Exhibit 9. and leadership skills must be used to see that the decision is carried out.4 1. Managerial Decision Making  167 C. in whole or in part . Sometimes an alternative never becomes reality because managers lack resources or energy needed to make things happen. managers can turn problems into opportunities. In the evaluation step. The next step is to develop possible alternative solutions that will respond to the needs of the situation and correct the underlying causes. 2. The implementation stage involves the use of managerial. Feedback is important because decision making is a continuous.. Communication. E. Once the problem or opportunity has been recognized and analyzed. motivation. decision makers begin to consider taking action.

. The most effective managers are able to shift among styles as needed to meet the situation. copied or duplicated. PERSONAL DECISION FRAMEWORK Exhibit 9. Awareness of the following six biases can help managers make more enlightened choices:  Being influenced by initial impressions. . Most bad decisions are errors in judgment that originate in the human mind’s limited capacity and in the natural biases managers display during decision making.  The directive style is used by people who prefer simple. Past events and trends also act as anchors. May not be scanned. Research has identified four major decision styles. All Rights Reserved. but managers can increase their percentage of good decisions by understanding some of the factors that cause people to make bad ones. The mind often gives disproportionate weight to the first information it receives when considering decisions. Discussion Question #10: What do you think is your dominant decision style? Is your style compatible with group techniques such as brainstorming and engaging in rigorous debate? Discuss. managers like to consider complex solutions based on as much data as they can gather. WHY DO MANAGERS MAKE BAD DECISIONS? Even the best manager will make mistakes. These initial impressions act as an anchor to subsequent thoughts and judgments. Most managers have a dominant decision style. in whole or in part .168  Chapter 9 NOTES________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ IV.  The behavioral style is characterized by having a deep concern for others as individuals.  People who tend toward a conceptual style also like to consider a broad amount of information. Giving too much weight to the past can lead to poor forecasts and misguided decisions.5 Not all managers make decisions in the same way.  With an analytical style. except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. clear-cut solutions to problems. or posted to a publicly accessible website. NOTES________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ V. Personal decision style refers to differences between people with respect to how they perceive problems and make decisions. 2016 Cengage Learning. These differences can be explained by the concept of personal decision styles.

and criticism and evaluation are not allowed. Before making a decision.  Overconfidence. Use Hard Evidence © 2014 Cengage Learning. . Managers may base decisions on what has worked in the past and fail to explore new options. People frequently look for information that supports their existing instinct or point of view and avoid information that contradicts it. All Rights Reserved. The goal is to generate as many ideas as possible. or posted to a publicly accessible website. so they continue to support a flawed decision in an effort to justify or correct the past. B. Electronic brainstorming. May not be scanned. People don’t like to make mistakes. all ideas are acceptable no matter how crazy they seem. Managerial Decision Making  169  Justifying past decisions.  Seeing what you want to see. affecting where they look for information as well as how they interpret the information they find. called brainwriting. Recent studies show that electronic brainstorming generates about 40 percent more ideas than individual brainstorming alone and 25 to 200 percent more than groups. Brainstorming uses a face-to-face group to spontaneously suggest a broad range of alternatives for decision making.  Perpetuating the status quo. The keys to effective brainstorming are that people can build on one another’s ideas. One of the best known techniques for rapidly generating creative alternatives is brainstorming. copied or duplicated.  Being influenced by emotions. INNOVATIVE DECISION MAKING A. how might you resist the urge to choose a decision alternative based on the idea that it might correct or validate a previous decision? NOTES_______________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ VI. Most people overestimate their ability to predict uncertain outcomes. Managers make better decision when—to the extent possible—they take emotions out of the decision-making process. dig for additional information. 2. Start with Brainstorming 1. or investigate new technologies. brings people together in an interactive group over a computer network. Discussion Question #6: Can you think of a bad decision from your own school or work experience or from the recent business or political news that was made in an effort to correct or justify a past decision? As a new manager. managers have unrealistic expectations of their ability to understand the risk and make the right choice. in whole or in part .

There are several ways to stimulate rigorous debate. Avoid Groupthink 1. When people slip into groupthink. Some disagreement and conflict is much healthier than blind agreement. clarify ideas. past assumptions. Good managers recognize that constructive conflict based on different points of view can focus a problem. One way is by ensuring diversity in terms of age and gender. functional area of expertise. in whole or in part . Some groups assign a devil’s advocate. hierarchical level. May not be scanned. d. Group members emphasize maintaining unity rather than realistically challenging problems and alternatives. b. and improve broader decision quality. . Evidence-based decision making means a commitment to make more informed and intelligent decisions based on the best available facts and evidence. copied or duplicated. or posted to a publicly accessible website. Another approach is to have group members develop as many alternatives as they can as quickly as they can. Engage in Rigorous Debate An important key to better decision making under conditions of uncertainty is to encourage a rigorous debate of the issue at hand. E. except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. The two groups then develop and exchange proposals and discuss the various options until they arrive at a common set of understandings and recommendations.170  Chapter 9 1. and experience with the business. A voiding groupthink helps groups make better decisions. Know When to Bail 2016 Cengage Learning. a. D. the desire for harmony outweighs concerns over decision quality. Groupthink refers to the tendency of people in groups to suppress contrary opinions. . or intuitions and seek and exam the evidence with rigor. Another approach is technique called point-counterpoint. 2. and stimulate creative thinking. C. Managers should be alert to potential biases. thus making careful and thoughtful decision. 2. All Rights Reserved. Using evidence can help take emotion out of decision-making process. c. preventing managers relying on faulty assumptions or point of view. a technique in which two subgroups assigned competing points of view. who has the role of challenging the assumptions and assertions made by the group. It can also create a broader understanding of issues and alternatives.

and so on. Army to encourage examination of the evidence and continuous learning is the after-action review. in whole or in part . Managers might block or distort negative information because they don’t want to be responsible for a bad decision. copied or duplicated. 2. . May not be scanned.. they tried to copy the successful approach of rivals rather than charting their own course. Aaron Alexis. In a fast-paced environment. what didn’t. A technique many companies have adopted from the U. 3. What techniques would you recommend Gap managers use to improve the quality of their decisions? NOTES_______________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Answers To End Of Chapter Discussion Questions 1. 2. The first step is recognition of decision requirement. a once. After implementing the decision. The manager must determine if there truly is a problem with the security clearance measures.. managers meet to evaluate what worked. and how to do things better. Discussions with others and. Do a Postmortem 1. it also teaches a person to know when to pull the plug on something that isn’t working. a disciplined procedure whereby managers invest time to review the results of decision on a regular basis and learn from them. Many problems are solved by trial and error. are reported to have made a series of decisions that hurt the company: they expanded so rapidly that the chain lost touch with customers. or posted to a publicly accessible website. Managerial Decision Making  171 1.’ reviewing every move to improve the next one.S. All Rights Reserved. good manager encourages risk taking and learning from mistakes. they cut quality to reduce costs. reviewing © 2014 Cengage Learning. Escalating commitment means that organizations often continue to invest time and money in a solution despite strong evidence that it is not appropriate to do so. A similar technique was applied by managers at Lenovo called fu pan. Discussion Question #2: Managers at Gap Inc. had a history of mental instability.popular retail chain. managers need to reflect and learn from every decision they make. they shifted from one fashion approach to another as each failed to appeal to customers. but he was carrying a valid security clearance. if warranted. the former Navy reservist who went on a shooting rampage in September 2013 and killed 12 people at the Washington Navy Yard in Washington D. which means “replaying the chess board.C. or might not accept that their decision is wrong. F. How would you suggest managers make decisions for issuing or revoking security clearances to prevent this kind of catastrophe? Students should apply the decision-making steps to solve this problem. To improve decision making.

and a continuous stream of problems and opportunities.. They must make decisions to perform the basic functions of planning. As a result. Engage in rigorous debate d. After an alternative has been chosen. Do a postmortem 3. Use hard evidence c. Managerial decision making ultimately determines how well the organization solves its problems. managers make decisions every day—and hence are often referred to as decision makers. Avoid groupthink e. Explain the difference between risk and ambiguity. However. May not be scanned. Managers at Gap Inc. 172  Chapter 9 the security clearance policies to help make this determination. the development of alternatives to eliminate the cause should be developed. What techniques would you recommend Gap managers use to improve the quality of their decisions? Decision making is especially important to effectiveness because it underlies all manager activity. They make decisions about virtually every aspect of an organization including its strategy. except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Start with brainstorming b. control systems.. After an appropriate time evaluation of the alternative should be made and feedback provided. Some of the techniques that the managers of Gap can use to improve the quality of their decisions may include: a. copied or duplicated. the future outcome of each alternative is not known for certain. the chosen alternative should be implemented. All Rights Reserved. further discussions with experts in the field should be carried out. and controlling. 2. If needed. and human resources. and outcomes cannot be predicted. How might decision making differ for a risky versus an ambiguous situation? Risk means that the decision maker has most of the necessary information. alternatives are difficult to find. although the probability of outcomes can be calculated. competing demands. allocates resources. motivating. Managers do not agree on the objectives to be achieved by the decision. Ambiguity means the almost complete absence of information pertaining to a decision. they shifted from one fashion approach to another as each failed to appeal to customers.popular retail chain. which is the source of risk. Testing may reveal this. the next step is the diagnosis and analysis of the causes of the poor security clearance policies. Managers are faced with limited resources. in whole or in part . organizing. Once the cause has been determined. innovations. and accomplishes its objectives. and alternatives can be identified. structure. 2016 Cengage Learning. If a problem does indeed exist. The selection of desired alternatives is the next step during which the risk must be considered and the pros and cons of each alternative must be weighed. . or posted to a publicly accessible website. Know when to bail f. . are reported to have made a series of decisions that hurt the company: they expanded so rapidly that the chain lost touch with customers. a once. The objectives of the decision are clear-cut. and so on. they cut quality to reduce costs. they tried to copy the successful approach of rivals rather than charting their own course.

there are significant opportunities for constructive dialogue and enhanced decision making. relevant managers should immediately begin working to bring the two (or more) coalitions together to work out a plan both can accept. in whole or in part . 5. Managerial Decision Making  173 Decision-making approaches differ considerably for each situation. unique. Under ambiguity. or posted to a publicly accessible website. Decisions under ambiguity are more difficult. even though they have poor information and will be wrong a substantial percentage of the time. The managers’ responsibility is to obtain the available information and run necessary computations in order to predict outcomes and select the best alternative. copied or duplicated. Although the student may already be studying for the chosen career field. An example of a programmed decision might be where to go to lunch or where to park the car. They must rely on personal judgment and experience to define alternatives and to anticipate possible outcomes of each alternative. or political—best describes the approach you took to making each decision? A programmed decision would refer to a situation that has occurred often enough so that a student can use past experience and similar decision rules over and over again. 4. This may initially mean working with the coalitions individually to find common ground that can later be emphasized in trying to work out an agreement. but only if the coalitions are able to come together and work toward a direction or alternative that both coalitions can support. . a decision that the student may have made after taking aptitude tests and investigating a number of career choices. but they should be able to explain why they believe a particular model best describes their approach. each one advocating a different direction or alternatives? What steps can you take as a manager to make sure that dueling coalitions result in constructive discussion rather than dissension? When more than one coalition forms within an organization. Programmed decisions are considered routine. with each advocating a different direction or alternative. What opportunities and potential problems are posed by the formation of more than one coalition within an organization. All Rights Reserved. will determine their answers to the last part of this question. and largely unstructured decision situation that requires a student to search for possible alternatives and information and to make a decision that has not been made previously. If dueling coalitions develop over a single issue. If that does not happen. whether the decision was correct still may not be perfectly clear. The situation could devolve into widespread backbiting and undermining of coworkers. For decisions under risk. administrative. a rational. which would lead to substantial performance and morale problems in the organization. Analyze three decisions you made over the past six months. In these cases managers do not have sufficient information to perform computations. Which of these were programmed and which were nonprogrammed? Which model—the classical. the potential exists for serious fractures to develop among managers. A nonprogrammed decision could be the choice of a major field of study. calculative approach is preferred. managers have to take a chance and push ahead with decisions. May not be scanned. and the decision-making processes they used. The specific decisions students choose. Once some © 2014 Cengage Learning. A nonprogrammed decision would refer to a novel.

Experts advise that most catastrophes in organizations result from a series of small problems or mistakes. except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. the individual coalitions can be brought together to work out a direction or alternative that both (all) coalitions can accept.e. A new. how might you apply this understanding to help your organization avoid making major mistakes? Finding ways to compensate for inexperience in decision making is critical to identifying the alternative most likely to succeed. May not be scanned. which is difficult for people to do. 2016 Cengage Learning. how might you resist the urge to choose a decision alternative based on the idea that it might correct or validate a previous decision? Students’ descriptions of past bad decisions will obviously vary. Mentors have substantial wisdom that they can share with new managers to help them “learn the ropes”. entry-level managers can seek advice from a variety of coworkers as part of their decision-making process. and reliability of information to improve managerial decision making. A mentor can serve as a sounding board for the new manager. However. managers can then move on to make decisions based on the facts at hand rather than in an attempt to correct or validate previous decisions. They can also try to research the many facets of the decision at hand. 8. or posted to a publicly accessible website. copied or duplicated. offering suggestions for improvement of an idea or explaining why the idea should be dismissed altogether. it will be important for them to avoid making decisions based on the idea that they might correct or validate previous decisions. One of the best ways to meet the challenge of inexperience is to find someone in the organization who has substantial experience in the company and the industry who is willing to serve as a mentor. entry-level manager who fails to do so will soon be marginalized or even fired as a result of making too many poor decisions. Advantages of using computers in making managerial decisions would be increased accuracy. Can you think of a bad decision from your own school or work experience or from the recent business or political news that was made in an effort to correct or justify a past decision? As a new manager. Such a person simply does not have the requisite knowledge or wisdom to sort out the complex issues involved in many managerial decisions.. to specifically raise the question of whether the current decision is being made to justify some previous decision that was in error. All Rights Reserved. 174  Chapter 9 common ground is identified. 6. . in whole or in part . List some possible advantages and disadvantages to using computer technology for managerial decision making. As new managers. once this acknowledgment is made. including collecting information on how such decisions have been handled in the past. This might be accomplished by first acknowledging that the original decision was a mistake. Another way to avoid making this mistake might be to have someone in the decision-making process tasked with challenging the assumptions related to the current decision. 7. including learning the ropes of decision making. . timeliness. As a new entry-level manager. New. i.

They search for the best possible decision based on the information available. and consider the effect of a given decision upon them. When time is of the essence. Managers using a conceptual style consider many broad alternatives. People who prefer the directive style generally are efficient and rational and prefer to rely on existing rules or procedures for making decisions. These students may be more comfortable in highly technical jobs where large volumes of data can be gathered and applied to the decision-making process. Managerial Decision Making  175 A disadvantage of using computers in managerial decision making is that inputting the wrong data produces incorrect information that will be used in substantial managerial decisions. minimizes risks and improves decision making when combining intuition with a rational approach. These individuals carefully consider alternatives and often base their decisions on objective. data-driven. and like to solve problems creatively. Students’ responses will. What do you think is your dominant decision style? Is your style compatible with group techniques such as brainstorming and engaging in rigorous debate? Discuss. in turn. rely on information from both people and systems. intuition can be a valid predictor of decision making. Can intuition and evidence-based decision making coexist as valid approaches within an organization? How might managers combine their intuition with a rational. and attempts to improve decision making based on more complete data. evidence-based approach? Intuition or a “gut” feeling. evaluation of alternatives. clear-cut solutions to problems. This. however. demonstrate an understanding of the various decision styles. These students may be more comfortable with jobs in which the work is fairly regimented and where most decisions will be programmed decisions. However. be very different. This approach. rational data from management control systems and other sources. May not be scanned. The behavioral style is often the style adopted by managers having a deep concern for others as individuals. in whole or in part . understand their feelings about the problem. Intuition can be combined with a rational decision-making approach to improve decision making. People who tend toward a conceptual style also like to consider a broad amount of information. especially where it is forthcoming from experience. when utilized. They should. can be useful in management decision making. or posted to a publicly accessible website. People © 2014 Cengage Learning. All Rights Reserved. People with an analytical style like to consider complex solutions based on as much data as they can gather. A rational approach is developing a decision-making style that is based on more complete data. they are more socially oriented than those with an analytical style and like to talk to others about the problem and possible alternatives for solving it. alternative options. develops criteria. These students may be more comfortable in jobs that involve many nonprogrammed decisions that require strong conceptual skills. The directive style is used by people who prefer simple. Managers who use this style often make decisions quickly because they do not like to deal with a lot of information and may consider only one or two alternatives. of course. copied or duplicated. Individuals can use intuition to become more creative and risk taking in making decisions. 9. Managers using this style like to talk to people one-on-one. . 10.

clear-cut solutions to problems. People who tend toward a conceptual style also like to consider a broad amount of information. . People with an analytical style like to consider complex solutions based on as much data as they can gather. and consider the effect of a given decision on them. May not be scanned. The behavioral style is often the style adopted by managers having a deep concern for others as individuals. in whole or in part . Managers using this style like to talk to people one-on-one. one is encouraged to review decision-making styles in the chapter. copied or duplicated. understand their feelings about the problem. However. conceptual. or posted to a publicly accessible website. analytical. except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. All Rights Reserved. . A suggestion would be to discuss the four decision-making styles: directive. A new approach to decision making known as outcome-directed thinking focuses on future outcomes and possibilities rather than on the causes of the problem. and like to solve problems creatively. they are more socially oriented than those with an analytical style and like to talk to others about the problem and possible alternatives for solving it. Managers using a conceptual style consider many broad alternatives. 2016 Cengage Learning. Apply Your Skills: Small Group Breakout A New Approach to Making Decisions Managers are typically effective at focusing on problems and diagnosing what is wrong and how to fix it when they have to make a decision. more participative organizations where employees are heavily involved in decision making and are empowered to generate innovative solutions. These students may be more comfortable in flatter. Managers who use this style often make decisions quickly because they do not like to deal with a lot of information and may consider only one or two alternatives. Personal decision style refers to differences among people with respect to how they perceive problems and make decisions. People who prefer the directive style generally are efficient and rational and prefer to rely on existing rules or procedures for making decisions. rational data from management control systems and other sources. These individuals carefully consider alternatives and often base their decisions on objective. The directive style is used by people who prefer simple.176  Chapter 9 with a behavioral style usually are concerned with the personal development of others and may make decisions that help others achieve their goals. People with a behavioral style usually are concerned with the personal development of others and may make decisions that help others achieve their goals. rely on information from both people and systems. and behavioral. Apply Your Skills: Experiential Exercise What’s Your Personal Decision Style? Student responses will vary regarding their own decision-making style. For additional information. They search for the best possible decision based on the information available.

2. students should share their answers to the questions in small groups. Let it slide. All Rights Reserved. If the alcohol abuse continues. Apply Your Skills: Case for Critical Analysis The Office 1. Let Carpenter know that you care about what he’s going through. in whole or in part . which is considered to be descriptive. Give Carpenter a month’s notice and terminate. It seems obvious that John Mitchell settled for a satisficing rather than a maximizing solution for the problem. What mistakes do you think John Mitchell made with the way he solved the problem of limited office space? Explain. and you’ll avoid any further problems associated with his emotional difficulties and his possible alcohol problem. copied or duplicated. Missing the New York appointment is Carpenter’s first big mistake. and you believe that he should be given a chance to get himself back on track. It is important to recognize that Andrew can have a future with this organization if he seeks help. Alcoholism is not an uncommon disease. May not be scanned. If the alcohol abuse continues. Option 1 is not the course of action to take. however. Managerial Decision Making  177 This exercise asks students to think of problems they have in their lives at the present time and write a brief summary of the problems. Option 2 is not desirable. require him to attend a treatment program or find another job. and it can be treated. meaning that it describes how managers actually make © 2014 Cengage Learning. His approach to decision making is based on the administrative model. This is probably the best course of action. Andrew needs support and help. but insist that he take a short paid leave and get counseling to deal with his emotional difficulties and evaluate the seriousness of his problems with alcohol. . so he probably won’t have any trouble finding a new job. require him to attend a treatment program or find another job. Finally. then answer four questions provided in the text. He is beginning to develop a pattern of behavior. but cannot continue his present pattern of behavior. There should be an employee assistance program to permit Andrew to get help and external counseling. He says he is getting things under control. Care must be taken and concerns expressed to Andrew. He’s known as a good consultant. the urgency of this matter is the important factor. Apply Your Skills: Ethical Dilemma The No-Show Consultant 1. Acceptable behavior is an important requirement of this job. or posted to a publicly accessible website. 3.

Engage in rigorous debate d. Avoid groupthink e. which means it defines how a decision maker should make decisions. The four assumptions of this model include: a. The decision maker strives for conditions of certainty. they must satisfice. He did not consider it important to consult the matter with Acklen to pursue other possible alternatives. The classical model is most valuable when applied to programmed decisions and to decisions characterized by certainty or risk because information is available and probabilities can be calculated. 2. Start with brainstorming b. in spite of which he ignored all the factors and the complete information regarding the issue. Bounded rationality means people have limits. Use hard evidence c. or boundaries. What are Krista Acklen’s options for responding to Mitchell’s decision? What should she do now? Why? Following are the possible ways in which Krista Acklen can respond to Mitchell’s decision: a. . The concept of bounded rationality and satisficing shapes this model. or posted to a publicly accessible website. c. b. All Rights Reserved. What approach would you have used if you were Mitchell? Why? The classical model of decision making would have been a better approach for Mitchell. d. . gathering complete information. Rather than pursue all alternatives. This model is considered to be normative. May not be scanned. The classical model is often associated with high performance for organizations in stable environments. copied or duplicated. It is based on rational economic assumptions and manager beliefs about what ideal decision making should be. Because managers do not have the time or cognitive ability to process complete information about complex decisions.178  Chapter 9 decisions rather than how they should make them. The decision maker cannot justify the time and expense of obtaining complete information. Know when to bail f. order preferences. evaluate alternatives. Criteria for evaluating alternatives are known. and make the decision to maximize goals. Mitchell knew his decision would affect Acklen and her staff. Satisficing means that decision makers choose the first solution alternative that satisfies minimal decision criteria. The decision maker is rational and uses logic to assign values. It does not describe how managers actually make decisions so much as it provides guidelines on how to reach an ideal outcome for the organization. on the amount of information they can process in making a decision. The decision maker operates to accomplish goals that are known and agreed upon. 3. in whole or in part . Do a postmortem 2016 Cengage Learning. managers will opt for the first solution that appears to solve the problem. except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

She has to make assumptions from which to forge a decision. quasirationality which combines intuitive and analytical thought. or future interest rates. a limited amount of information on which to base decisions. She has a person in London who helps her build her brand and others in whom she can confide when she has to make tough financial decisions. and sizes based on her personal ideas and past experience. Factors such as price. She is participating in a trend to bring manufacturing home. Fogerty knows which goals she wishes to achieve. copied or duplicated. However. On the Job Video Case Answers Mi Ola Swimwear: Managerial Decision Making 1. even though it will be wrong if the assumptions are incorrect. May not be scanned. She satisfices by choosing the alternative that satisfies minimal decision criteria. and criticism and evaluation are not allowed. The keys to effective brainstorming are that people can build on one another’s ideas. . fabrics. would you want to develop an advisory board? Mi Ola. she operates in an atmosphere of bounded rationality. All Rights Reserved. manufacture. As per the administrative mode. Since many problems have no clear-cut solution. production costs. 2. which means “My Way” is a business that requires decision making in an atmosphere of uncertainty. Managerial Decision Making  179 One of the best known techniques for rapidly generating creative alternatives is brainstorming. all ideas are acceptable no matter how crazy they seem. she selects the colors. After listening to this entrepreneur’s perspective on decision making. judgment. Quasirationality is seen in Fogerty’s decision to manufacture her products in the United States. intuition. she made the decision to design. For example. she makes financial decisions aggressively by analyzing all the information available. volume. and experience. This decision is a combination of rationality and intuition. Faced with uncertainty. in whole or in part . or posted to a publicly accessible website. how would you categorize her decision-making style? Include at least two examples that support your choice. When she designs swimsuits. Brainstorming uses a face-to-face interactive group to spontaneously suggest a broad range of alternatives for decision making. Although she says that at some point she may look into offshoring. Fogerty relies on creativity. © 2014 Cengage Learning. Fogerty also relies heavily on intuition. Fogerty uses a new trend in decision making. These advisors provide expertise that help ease the stress of making tough decisions. The goal is to generate as many ideas as possible. but information about alternatives and future events is incomplete. she turns to her advisory board to provide moral support when problems arise. which possibly could also be the best option for Acklen to pursue now in order to come up with a solution. are difficult to analyze and predict. and sell her swimwear in the United States. What role does an advisory board play in this business owner’s approach to decision making? If you were a business owner. the “Made in America” movement.

2016 Cengage Learning. or posted to a publicly accessible website. she can spot a trend and get her products to market quickly. . Customer feedback is an important part of this entrepreneur’s decision-making process. she can maintain or adjust the design. The mission of Mi Ola is to have swimsuits that are “sexy and stay on. Social media is an integral part of the feedback process. Feedback is the part of monitoring that assesses whether a new decision needs to be made. She asks them to show her what they like and dislike about the swimsuits.180  Chapter 9 3. each providing modest improvement. She also receives feedback from the surfers about competing products. copied or duplicated. All Rights Reserved. Feedback provides Fogerty with information that can precipitate a new decision cycle. Fogerty gets customer feedback by talking to the surfers in Costa Rica. Referring to the innovative decision-making techniques described at the end of the chapter.” If she receives feedback about the fit of the swimsuit. except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. . This helps Fogerty make decisions that will hopefully lead to an increase in market share. Fogerty realizes that she can’t wait too long to try new styles and fabrics because all aspects of the fashion industry change quickly. how would you categorize “getting feedback”? Why is feedback valuable in decision making? Feedback is important because decision making is an ongoing process. May not be scanned. Fogerty relies heavily on Facebook to provide her with customer feedback about Mi Ola. This gives her a competitive advantage. By finding out what surfers want. in whole or in part . Many problems are solved by trying several alternatives.