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Flashcards in Chapter 9 Deck (26):
1

Decision Making

The act of choosing one alternative from among a set of alternatives.

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Decision-Making Process

Recognizing and defining the decision situation.
Identifying alternatives.
Choosing the best alternatives.
Putting the alternative into practice.

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Types of Decisions

Programmed Decisions
Non programmed Decisions

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Programmed Decisions

A decision that is a fairly structured decision or recurs with some frequency or both.
Ex: Starting your car in the morning.

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Non Programmed Decisions

A decision that is relatively unstructured and occurs much less often than a programmed decision.
Ex. Choosing a vacation destination

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Decision Making Conditions

Certainty
Risk
Uncertainty

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Decision Making Under Certainty

A condition in which the decision maker know with reasonable certainty what the alternatives are and what conditions are associated with each alternative.

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Decision Making Under Risk

The availability of each alternative and its potential payoffs and costs are all associated with risks.

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Decision Making Under Uncertainty

A condition in which the decision maker does not know all the alternatives, the risks associated with each, or the consequences of each alternative.

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Factor that Prevent Rationality

Lack of Consensus
Unclear Means-end Relations
Noisy Environment

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Lack of consensus

There must be a general agreement of the definition of problems, decisions and decision-making goals at the beginning.

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Unclear Means-end Relations

It is impossible to generate an exhaustive list of alternatives then select the most promising.

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Noisy Environment

The link between outcome and actions is hard to predict.

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Behavioral Aspects of Decision Making

Bounded Rationality
Satisficing
Coalition
Intuition
Escalation of Commitment
Risk Propensity (risk tendency)
Ethics and Decision Making

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Bounded Rationality

The concept that decision makers are limited by their values and unconscious reflexes, skills, and habits.

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Satisficing

The tendency to search for alternatives only until one is found that meets some minimum standard of sufficiency to resolve the problem.

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Coalition

A political force in decision making which consists of an informal alliance of individuals or groups formed to achieve a goal.

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Intuition

An innate belief about something without conscious consideration

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Escalation of Commitment

A decision maker is staying with a decision even when it appears to be wrong.

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Risk Propensity (Risk Tendency)

The extent to which a decision maker is willing to gamble when making a decision.

21

Ethics and Decision Making

Individual ethics combine with the organization's ethics to create managerial ethics.
Components of managerial ethics
-Relationships of the firms to employees
-Employees to firm
-Firm to other economic agents

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Forms of Group Decision Making

Interacting groups or teams
Delphi groups
Nominal groups

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Interacting Groups or teams

Are the most common form or decision-making which consists of an existing group or newly formed team interacting and then making a decision.

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Delphi Groups

Are sometimes used for developing a consensus or expert opinion from a panel of experts who individually contribute through a moderator.

25

Nominal Groups

Area structured technique designed to generate creative and innovative ideas through the individual contributions of alternatives that are narrowed down through a series of rank-ordering of the alternatives to reach a decision.

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Ways managers can promote the effectiveness of group and team decision making

Being aware of the pros and cons of having a group or team make a decision.
Setting deadlines for when decisions must be made.
Avoid problems with dominance by managing group membership.
Have each group member individually critically evaluate all alternatives.
As a manager, do not make your position known too early.
Appoint a group member to be a "devil's advocate."
Hold a follow-up meeting to recheck the decision.