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OBS > Chapter 6 > Flashcards

Chapter 6 Flashcards

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1
Q

Managericial Decision Making definition

A

The process by which managers respond to opportunities and threats by analysing options and making determinations about specific organisational goals and courses of action

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2
Q

Decision making in response to opportunities occurs when:

A

Decision making in response to opportunities occurs when managers search for ways to improve organisational performance to benefit customers, employees, and other stakeholder groups

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3
Q

Decision making in response to threats occurs when

A

Decision making in response to threats occurs when events inside or outside the organisation adversely affect organisational performance, and managers search for ways to increase performance

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4
Q

Programmed Decision Making

A

– is a routine, virtually automatic process.

Programmed decisions: have been made so many times in the past that managers have developed rules/guidelines to be applied

There is no need to make new judgements; can rely on established decision rules

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5
Q

Nonprogrammed Decision Making

A

– required for nonroutine decisions

Nonprogrammed decisions: made in response to unusual or novel opportunities and threats

No ready-made decision rules to apply to situation

More prone to error

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6
Q

How do managers make decisions in the absence of decision rules?

A
  • Intuition
  • Reasoned judgements
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7
Q

Intuition

A
  • feelings, beliefs, and hunches that come readily to mind
  • require little effort and information gathering
  • result in on-the-spot decisions
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8
Q

Reasoned judgements

A
  • Require time and effort
  • result from careful information gathering and the generation and evaluation of alternatives

“Exercising” one’s judgement is a more rational process than “going with” one’s intuition

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9
Q

The Classical Model

Decision Making Theories

A

A prescriptive approach to decision making - specifies how decisions should be made

Assumes managers have access to all information and that the decision maker can identify and evaluate the alternatives and consequences rationally

  • Result - Optimum decision:
    The most appropriate decision possible in light of what they believe to be the most desirable consequences for the organisation
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10
Q

The process of the Classical Model

A
  1. List all the alternatives
  2. Rank each alternative
  3. Select the best alternative
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11
Q

The Administrative Model

Decision Making Theories

A

Explains that decision making is inherently uncertain and risky;

managers make satisfactory decisions, rather than optimum decisions

Based on concepts:
1. Bounded rationality
1. Incomplete information
1. Satisficing

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12
Q

Bounded Rationality

The Administrative Model

A

Human decision making capabilities are bounded by cognitive limitations - limitations in ability to interpret, process, and act on information

Bounded Rationality:
* Situation in which the number of alternatives and amount of information is so great that it is difficult to evaluate it all before making a decision

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13
Q

Incomplete Information

The Administrative Model

A

Information is incomplete because the full range of decision making alternatives and consequences are uncertain.

Because of:
* Risk and uncertainty
* Ambiguous Information
* Time constraints and information costs

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14
Q

Why is information incomplete?

Risk and Uncertainty

The Administrative Model: Incomplete Information

A

Risk
* present when managers know the possible outcomes of a particular course of action and assign probabilities to them

Uncertainty
* when the probabilities of outcomes cannot be determined and future outcomes are unknown - managers are working blind

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15
Q

Why is information incomplete?

Ambiguous Information

The Administrative Model: Incomplete Information

A

The meaning of the information is unclear; many interpretations

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16
Q

Why is information incomplete?

Time constraints and information costs

The Administrative Model: Incomplete Information

A

Managers have neither the time or the money to search and evaluate all potential alternatives and consequences

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17
Q

Satisficing

The Administrative Model

A

It’s better to satisfice:
* Searching for and choosing an acceptable or satisfactory response, rather than trying to make an optimum decision

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18
Q

The Decision-Making Process

A
  1. Recognise the need for a decision
  2. Generate alternatives
  3. Assess alternatives
  4. Choose among alternatives
  5. Implement alternative
  6. Learn from feedback
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19
Q

1.Recognize the need for a decision

The Decision Making Process: step 1

A

Stimuli spark the realisation that a decision must be made
- they become apparent because changes in the organisational environment result in new kinds of opportunities and threats

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20
Q

2.Generate Alternatives

The Decision Making Process: step 2

A

A manager must generate a set of feasible alternative courses of action in response to the opportunity/threat

Managers often make bad decisions if they do not properly generate and consider different alternatives

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21
Q

3.Asses Alternatives

The Decision Making Process: step 3

Study These Flashcards
A

Define the opportunity or threat exactly and then specify the criteria that should influence the selection of alternatives

Criteria:
1. Legality
1. Ethicalness
1. Economic feasibility
1. Practicality

Managers often make bad decisions when they fail to specify the criteria

22
Q

4.Choosing among alternatives

The Decision Making Process: step 4

Study These Flashcards
A

Rank various alternatives and make a decision:

Managers must be sure all the information available is brought to bear on the problem at hand

23
Q

5.Implement the chosen alternative

The Decision Making Process: Step 5

Study These Flashcards
A

Determine the best course of action to implement the alternative;
after which, many subsequent and related decisions must be made

24
Q

6.Learn from feedback

The Decision Making Process: Step 6

Study These Flashcards
A

Conduct a retrospective analysis to learn from past successes/failures

Managers who do not evaluate the results of their decision do no learn from experience; likely to make the same mistakes

25
Learn from feedback: The Evaluation process | The Decision Making Process: Step 6
1. Compare what actually happened to what was expected 1. Explore why any expectations were not met 1. Derive guidelines that will help in future decision making
26
Decision Biases
Cognitions or mental behaviours that prejudice decision quality in a significant number of people and their decisions | Cognitive or judgement biases ## Footnote Can be viewed as deviations from rational decision making
27
Cognitive biases
All decision makers are subject to bounded rationality; they use heuristics
28
# Cognitive biases: Heuristics
Rules of thumb that simplify the decision making process by helping to make sense of complex, uncertain, and ambiguous information. The use of heuristics can lead to systematic errors - errors that people make repeatedly and that result in poor decision making | Cognitive biases are caused by systematic errors
29
The sources of bias that can adversely affect the way managers make decisions:
1. Prior Hypothesis 1. Representativeness 1. Illusion of control 1. Escalating commitment
30
Prior Hypothesis Bias | sources of bias
Tendency to make decisions based on strong prior beliefs, even when evidence shows those beliefs are wrong ## Footnote decision makers seek and use information consistent with their beliefs and ignore information contradictory to them
31
Representativeness Bias | sources of bias
The tendency to inappropriately generalise from a small sample or even from a single vivid case or episode
32
Illusion of Control Bias | sources of bias
Tendency to overestimate ones ability to control activities and events
33
Escalating Commitment Bias | sources of bias
Tendency to commit more resources to the project even if they receive feedback that the project is failling
34
Advantages of Group Decision Making
1. Choices of alternatives are less likely to fall victim to biases and errors 2. Able to use combined skills, competencies, and knowledge of group members 3. Can process more information and correct errors 4. In the implementation phase: all managers affected by the decisions agree to cooperate 5. When a group of managers makes a decision, the probability of successful implementation increases
35
Disadvantages of Group Decision Making
1. Groups take longer to make decisions 2. Can be difficult to get managers to agree 3. Groupthink
36
Groupthink | Disadvantages of Group Decision Making
A pattern of faulty and biased decision making that occurs in groups whose *members strive for agreement* at the expense of accurately assessing information | Not objective ## Footnote Discourages individuals from raising issues
37
How to improve decision making:
* Devil's Advocacy * Dialectical Inquiry * Diversity among Decision Makers | Counteract groupthink and cognitive biases
38
Devil's Advocacy | How to improve decision making:
Critical analysis of a preferred alternative to determine its strengths and weaknesses before it is implemented. ## Footnote Devil's advocate critiques and challenges the chosen alternative
39
Dialectical Inquiry | How to improve decision making:
Critical analysis of two preferred alternatives in order to find the best alternative ## Footnote involves more time
40
Organisational Learning
The process through which managers seek to improve employees' desires and ability to understand and manage the organisation and its task environment ## Footnote so employees can make decisions that continuously raise organisational effectiveness
41
A learning organisation
An organisation in which managers try to maximise the ability of individuals and groups to think and behave creatively; and thus, maximise the potential for organisational learning
42
Creativity
Ability to discover original and novel ideas that lead to feasible alternative courses of action ## Footnote Important in organisational learning
43
How to Create a Learning Organisation
**1. Develop personal mastery** * Empower employees to experiment, create, and explore what they want **2. Build complex, challenging mental models** * Employees must develop sophisticated ways of thinking that challenge them to find new ways of performing a task - to deepen understanding **3. Promote team learning** * Promote group creativity. Team learning is more important than individual learning **4. Build shared vision** * Shared vision - common mental model that members use to frame problems/opportunities **5. Encourage systems thinking** * Recognise the effects of one level of learning on another. Learning needs to happen at each level.
44
Promoting Individual Creativity
* Employees need the opportunity and freedom to generate new ideas * Give constructive feedback * Reward creativity
45
Promoting Group Creativity
* Brainstorming * Nominal group technique * Delphi technique
46
Brainstorming | Group decision-making techniques
Managers meet face-to-face to generate and debate a wide variety of alternatives ## Footnote * Production blocking: when group members cannot simultaneously understand, create and remember alternatives
47
Nominal Group Technique | Group decision-making techniques
More structured way of generating alternatives in writing. Members write down their ideas and solutions, and they are read out | Avoid production blocking
48
Delphi Technique | Group decision-making techniques
Not face to face, uses a questionnaire
49
Intrapreneur
Works inside an organisation and notices opportunities to develop new/improved products or better ways to make them | Engage in entrepreneurial activity, but did not start their own business
50
# How to promote organisational learning and Intrapreneurship Product champion
Encourage **Product Champion** * A manger who takes ownership of a project, provides leadership and vision, to take the product from idea to the final customer ## Footnote use skunkworks to strengthen feeling of ownership
51
# How to promote organisational learning and Intrapreneurship Skunkworks
A group of intrapreneurs who are seperated from the normal operation of an organisation to encourage them to devote all their attention to developing new products
52
# How to promote organisational learning and Intrapreneurship Rewards for innovation
Link performance to rewards - bonuses, shares, promotions etc.

OBS (8 decks)

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