Chapter 12- Decision- Making Flashcards Preview

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Contextualise decision-making in terms of the management process

Answer: While performing the fundamental functions of managing(Planning, Organising, Leading and Controlling) managers are faced with opportunities and threats that need to be addressed and problems that need to be solved.


Explain relationships between

Problem Solving
Decision Making

Managers perceive a difference between what is actually happening and what they had planned to happen.

Problem Solving
The process of taking corrective action.

Decision Making
Process of choosing between various courses of action.


Compare the various decision making conditions


Under conditions of CERTAINTY all available options, benefits and costs associated are known.

Making a decision under risk- is when the manager does not know the outcome of each alternative in advance but can assign a probability to each.

Making a decision under UNCERTAINTY- This is when a manager does not know the available options, the probability of their occurrence or their potential benefits.


Rational Decision Making Model

Optimising: When the decision-maker makes high-risk decisions in conditions of uncertainty they should select the best possible solution to a problem.

Satisficing: The decision maker selects the first possible solution to a problem that meets minimal criteria in low risk environments.


The decision-making process

Stage 1 - Recognise

Stage 2 - Set Goals and Criteria

Stage 3 - Generate alternative courses of action

Stage 4 - Evaluate alternative courses of action

Stage 5 - Select the best option

Stage 6 - Implement the chosen option

Stage 7 - Conduct Follow up evaluation


Bounded Rationality model

The decision maker selects the first option that meets minimal criteria


Advantages of Group Decision Making

Variety of skills and specialised knowledge that improves quality of decision making.

Considering conflicting views between members may lead to improvement of decision making.

Different beliefs and values of group members can be transmitted and aligned.

May lead to Improved commitment

Participation in problem solving and decision making may improve morale and motivation of employees

Participation in group decision making may improve peoples ability to work effectively and efficiently.


Disadvantages of Group Decision Making

More time consuming

More likely to chose first possible option.

An individual may dominate the groups decision making and nullify the group decision

May inhibit creativity and lead to conformity.


Techniques for improving Group decision making


-Normally used by lower management
- A technique used to break group norms and conformity by stimulating creativity and generating as many ideas from group members as possible without evaluation of others. No criticism allowed.

Nominal Group Technique

-Normally used by middle management
- This technique restricts discussion or interpersonal communication during the decision making process by allowing member to operate independently although all of them being physically present.

Appropriate for when groups are affected by dominant person or conformity.

Delphi Technique:

Decisions are made by experts in different geographical areas.

Uses a series of confidential questionnaires to refine a solution.


GDSS- Group Decision Support Systems

Computer supported group decision making system. Blends the nominal technique with sophisticated computer technology.

Electronic meetings can be about 55% faster than traditional meetings.


Decision making tools for conditions of CERTAINTY

Linear Programming
- Tool for optimally allocating scarce resources to maximise benefits an minimise losses.

Queuing Theory
- Achieving optimal balance between the cost of increasing service to amount of time individuals, machines or materials must wait for service.


Decision making tools for conditions of RISK and UNCERTAINTY

Probability analysis
- Pay-off matrices and decision trees.

Pay off Matrix
- Calculating possible pay off from using different courses of action.

Decision Tree
- Graphic illustration of the various solutions available to solve a problem.

Break Even Analysis
- Selecting the best option by calculating the volume of sales that will eventually result in a profit.

- imitating real life conditions to evaluate possible outcomes using a model

Capital Budgeting
- Technique used to evaluate alternative investments.