CHAPTER6 Flashcards
(18 cards)
Decision-making can be defined as
a process of choosing the
best course of action from all the available alternatives. It can
also be defined as an act of choosing between two or more
courses of action.
WHAT TYPE OF DECISIONS DOES
• Top management
• Middle management
• First-line managers
MAKE
Strategic decisions • Top management
Tactical decisions • Middle management
Operational decisions • First-line managers
Factors affecting decision-making
–Personal issues: Perception varies according to the
perceiver, the object, and the situation.
–Organisational issues: These include policies, procedures,
hierarchy, and organisational politics.
–Environmental issues: All the external factors that affect
the organisation.
Type of decision :1]Routine
2]Adaptive
3]Adaptive
WHAT IS THE Condition under which decision is. made
1] Certainty
2]Risk
2]Uncertainty and/or ambiguity
explain the factors influencing decisions
Personal experience – experienced managers make
decisions with more openness, diverse viewpoints,
and interactions with other.
• Decision-making styles – managers do not make
decisions in the same way.
• Biases – some common errors or biases when making
decisions are as follows: immediate gratification, anchoring
effect, selective perception, confirmation, framing,
availability, representation, self-serving, hindsight, and
overconfidence.
• Structure and culture of an organisation – influence
how and when information is communicated, and it also
determines who gets involved in which decisions.
Decision-making styles
Individual decision-making styles
Influence the way managers make decisions
• Directive style
• Analytic style
• Conceptual style
• Behavioural style
Group decision making styles
• Autocratic group decisionmaking
• Democratic group decisionmaking
• Collective group decisionmaking
• Consensus group decisionmaking
Directive style
Managers that have this style regard structure as
very important.
• Such managers take charge of a situation, make
quick decisions and expect those “under” them to
carry out those decisions immediately, with no
questions asked.
• Style is aggressive and expects immediate results.
• They are also excellent verbal communicators.
• On the negative side, with this type of style
managers act quickly and often without all the
facts.
Analytical style
An analytical decision-maker enjoys solving
problems and puzzles.
• Such a person is innovative and uses lots of
information to make decisions after considering all
alternative courses of action.
• He or she is adaptable and can function well even under
challenging situations.
• On the negative side – managers with this style of decisionmaking are slow and take a lot of time because they want to
use direct observation, data, and facts.
• They also tend to want to control every aspect of the
process.
Conceptual style
Prefer to have a large amount of information
available.
• Tend to look at problems from an artistic angle and
they may ask the people involved for their inputs.
• Look for solutions that are outside the box.
• They are achievement oriented.
• On the negative side, a conceptual style decisionmaker may take some risks in decision-making.
Autocratic group decision-making
Leader takes complete control and ownership of
the decision – completely responsible.
• The autocratic leader does not ask for suggestions
or ideas from the team – base decisions on his or
her own internal information and perception of the
situation.
• Maybe the best type of decision-making in an
emergency situation, but can result in less-thandesired effort from employees.
• Morale of employees may be low – not part of
decision and leader may lose credibility
Democratic group decision-making
Democratic group decision-making involves
participation of employees.
• The leader gives up the ownership and control of a
decision and allows the group to vote for the best
course of action – majority vote will decide.
• The disadvantage of this style – lack of individual
responsibility.
• It opens up the possibility that someone will deny
responsibility for the outcome, because he or she
voted against the group’s decision.
Collective group decision-making
• The leader involves the members of the organisation or
group in the decision-making process, but he or she will
make the final decision alone.
• The leader encourages group members to participate by
giving their ideas, perceptions, knowledge and information.
• Leader is in complete control of the final decision and is
completely responsible for the decision and the results.
• The advantage of this style is the involvement and
participation of the group.
• The disadvantage is that this can be a very slow decision making process.
Consensus group decision-making
The leader gives up complete control of the decision.
• The whole group is totally involved and invested in the
decision and there is no individual responsibility for the
leader.
• Everyone must agree and reach consensus on the decision.
• If group members cannot reach total agreement, the
decision becomes democratic – they vote for the best
course of action.
• Involving everyone completely fosters strong group
commitment.
• It is a very slow process.
Decision-making models
Classical Model
ADMINISTRATIVE MODEL
POLITICAL MODEL
Classical Model
Also known as Rational Model
Based on rational economic assumptions and the manager’s beliefs about what an ideal decision should be.
ASSUMPTION:
Decision-makers know the problem and the goals, as well as the alternatives to solve the problem, and the outcomes of these alternatives are known.
Six step decisionmaking process
The rational decision-making process
Step 1: Identify, diagnose, and analyse the problem
• Difference between desired and actual state
• Determine the underlying causes or factors leading to the problem or opportunity
Step 2: Set the goals and decision criteria
• Goals: Results that a manager wants to achieve
• Decision criteria: Standards used to guide judgments
Step 3: Search, evaluate, and select the best course of action
• Take longer than all the other steps
• Use qualitative or quantitative methods to evaluate
the alternatives –
• Quantitative methods are used to calculate the
weighted average of each option.
Step 4: Implement the decision
• Follow up and ensure that the results are
satisfactory
• Feedback
Step 5: Compare the actual and planned outcomes, objectives, or goals
• Constant change
• Corrective action if it is needed
Step 6: Respond to divergences from the desired outcome
• Constant change
• Corrective action if it is needed
Administrative model
This model puts emphasis on two key concepts
-Bounded rationality
refers to the limits and boundaries that managers have when it comes to rationality, due to the complexity of the organisation and decision, the external environment, limited time, resources, and information.
-Satisfy
Due to these reasons, managers tend to select a good enough goal or course of action that satisfies minimal decision criteria and they do not try to optimise, but
rather, satisfy
Managers using this model during decision-making engage in:
• Limited search for the best course of action.
• Misinterpreted or insufficient information when making a decision.
• Use their intuition when making decisions.
Political model
Closest to real life decision-making
Involves interaction with other managers and subordinates
Taking environmental factors and other events into consideration
Coalition building - Forming an informal alliance with other managers with similar
goals, values, and interests that may lead to faster decisionmaking, as a consensus is developed without too many formal
meetings and discussions.
