Chapter 10 MGT

Chapter 10 MGT - Chapter 10 The Decision Making Process...

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Chapter 10 The Decision Making Process Programmed decision: simple, routine matter for which a manger has an establish decision rule Non-programmed decision: a new, complex decision that requires a creative solution 1. Recognize the problem and the need for a decision 2. Identify the objective of the deciions 3. Gather and evaluate data and diagnose the situation 4. List and evaluate alternatives 5. Select the best course of action 6. Implement the decision 7. Gather feedback 8. Follow up Models of Decision Making The success of any organization depends on manages’ abilities to make effective decisions: - It is a timely decision that meets a desired objective and is acceptable to those individuals affected by it Rational Model Rationality: a logical, step-by-step approach to decision making, with thorough analysis of alternatives and their consequences. The rational model has the following important assumptions: 1. The outcome will be completely rational 2. The decision maker has a consistent system of preferences, which is used to choose the best alternative. 3. The decision maker is aware of all the possible alternatives. 4. The decision maker can calculate the probability of success for each alternative The rational model is unrealistic. There are time constraints and limits the human knowledge and information processing capabilities. Therefore, it is an ideal that managers strive for in making decisions
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Bounded Rationality Model Bounded rationality: Simon’s model that suggests that there are limits to how rational a decision maker can actually be. There are four assumptions 1. Managers select the first alternative that is satisfactory. 2. Managers recognize that their conception of the world is simple 3. Managers are comfortable making decisions without determining all the alternatives. 4. Managers make decisions by rules of thumb or heuristics Satisfice: to select the first alternative that is “good enough,” because the costs in time and effort are too great to optimize. Heuristics: shortcuts in decision making that save mental activity - Availability heuristics: individuals tend to make decisions based on the frequency, probability, or likelihood of an event based on how easily they can remember it - Gambler’s fallacy: decision of probability are based on similarity of occurrence to others. Garbage Can Model It is a theory that contends that decisions in an organization are random and unsystematic. Problems, solutions, participants, and choice opportunities are floating around randomly. If the four factors happen to connect, a decision is made. Decision Making and Risk Risk and the Manager Risk aversion: the tendency to choose options that entail fewer risks and less uncertainty Escalation of Commitment It is the tendency to continue to support a failing course of action. -
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This note was uploaded on 08/30/2011 for the course MGT 3305 taught by Professor Reed during the Fall '08 term at Baylor.

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Chapter 10 MGT - Chapter 10 The Decision Making Process...

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