Agenda Logistics Reminder: Quiz 2 closes on 9/30 at 11:59 EST Introduction to Decision Making Last part of planning process
Major Questions You Should Be Able to Answer 7.1 How do people know when they’re being logical or illogical? 7.2 How can I improve my decision making using evidence-based management and business analytics? 7.3 How do I decide to decide? 7.4 What guidelines can I follow to be sure that decisions I make are not just lawful but ethical? 7.5 Trying to be rational isn’t always easy. What are the barriers? 7.6 How do I work with others to make things happen?
What is Decision Making? Decision Choice made from available alternatives Decision Making Process of identifying problems and opportunities then resolving them Choosing the appropriate course of action Why is Decision Making Important Every organization grows, prospers or fails as result of decisions made by managers
Decision Making as a Component of Problem Solving Intelligence Design Choice Implementation Monitoring Problem solving Decisio n making
Decision Making in the Real World Why decision making is difficult Two Systems of Decision Making Rational, analytical and slow to act Emotional, impulsive and prone to form/follow habits Curse of Knowledge (Better)informed people find it harder to think about problems from the perspective of lesser-informed people
Decisions in the Management Functions
Two Approaches of Decision Making Rational ( Classical Model) Assumes managers will make a logical decisions that will be in the best interest of the organization • Non-Rational Assumes that decision making is nearly always uncertain and risky, making it difficult for managers to make optimal decisions
Rational Model Rational economic assumptions drive decisions Operates to accomplish established goals, problem is defined Decision maker strives for information and certainty, alternatives evaluated Criteria for evaluating alternatives is known; select alternative with maximum benefit Decision maker is rationale and uses logic
Rational Decision Making Figure 7.1
Hindrances to Perfectly Rational Decision Making Complexity Time and Money Differential cognitive capacity, values, skills, etc. Imperfect information Information overload Different priorities Conflicting goals
Rational Decision Making Model Main Assumptions Complete Information, no uncertainty All alternative courses of actions and consequences are known Logical, unemotional analysis Rank order alternatives Best decision for the organization Choose course of action that will most benefit the organization Drawbacks Unrealistic view of the world Condition of Certainty Full Information Rational Choice for ranking/choosing alternatives
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