Decision-Making Skills

1. Decision-Making Skills 1 Chapter 4

2. Learning Objectives • Explain the difference between decision making and problem solving. • Compare and contrast intuitive and rational approaches to decision making. • Explain the decision maker’s environment and the conditions for making a decision. • Explain timing and participation as they relate to the decision-making process. • Identify methods for creative decision making. • Discuss management information systems.

3. Making Decisions • All managers are decision makers • Not all decision makers are managers • Pervades all basic management functions • Manager’s decision process • Most of the time

4. Decision Making Versus Problem Solving • Term confusion • Decision making • Various alternatives • Problem solving • Appropriate responses • Problem solving involves decision making • Decisions solve or avoid problems

5. The Intuitive Approach to Decision Making • Hunches and intuition • Problems can occur • George Odiorne’s emotional attachments • Leads to poor decisions • Odiorne offers two suggestions: • Become aware of biases • Seek independent opinions

6. Rational Approaches to Decision Making The Optimizing Approach • The rational or scientific approach • 6 steps • Final decision

7. Limitations of the Optimizing Approach • “Economic person” • Based on 4 assumptions: • People have clearly defined criteria • People have knowledge • People have the ability • People have self-discipline • Due to limitations, most decisions still involve some judgment

8. The Satisficing Approach • Herbert Simon – Principle of bounded rationality • Definite limits • The decision model • 4 assumptions • Optimizing • Satisficing • Level of Aspiration

9. The Decision Maker’s Environment • Higher-level = More flexibility • Influences • Patterns of authority • Purpose of organization • Formal and informal structure • Superiors and subordinates • Successful managers must develop an appreciation of different forces

10. Conditions for Making Decisions • Depends on what happens later Certainty • Situation of Certainty Risk • Situation of risk • Precise Probabilities • Expected value analysis

11. Conditions for Making Decisions Uncertainty • Situation of uncertainty • No knowledge of probabilities • One of several approaches can be taken • Maximax approach • Maximin approach • Risk-averting approach

12. Timing the Decision • Need must be recognized • Quick decisions • Poor decisions • Never acting • Other types • Knowing when to make a decision is complicated

13. Participation in Decision Making • Involving others • Pertinent questions Group or Team Decision Making • Better than single person • Takes longer • Superior for two reasons • Less responsible • More “polar”

14. Barriers to Effective Decision Making • Four basic barriers • Complacency • Defensive avoidance • Panic • Deciding to decide • Overall effectiveness • Barriers must be dealt with

15. Making Creative Decisions The Creative Process • Creativity • Innovation • Five-step process • Preparation • Concentration • Incubation • Illumination • Verification

16. Establishing a Creative Environment • Single most important influencing factor • Manger sets tone • People-based management skills • A manager must: • Instill trust • Develop communication • Seek talent • Reward • Allow flexibility

17. Tools to Foster Creativity • Several Techniques • Alex F. Osborn – Brainstorming • Four basic rules • William J. J. Gordon – Gordon Technique • Key Word • Brainwriting • No discussion

18. A Model for Creative Decision Making • Emphasis on new ideas • 6 stages • Recognition • Fact Finding • Problem Finding • Idea Finding • Solution Finding • Acceptance finding

19. Management Information Systems • MISs • Information provided • Data Processing • Transaction-processing systems