• University of Houston, Downtown

• MGT 3301

Chapter 6 Decision making is the process of identifying problems and opportunities and then resolving them. Decision making involves efforts both before and after the actual choice. Decision is a choice made from available alternatives. Programmed decisions are made in response to recurring organizational problems. The decision to reorder paper and other office supplies when inventories drop to a certain level is a programmed decision.  Recurring problems  Apply rule (decision rule) Once managers apply the decision rule, subordinates can make the decision, freeing managers for other tasks. Nonprogrammed decisions are made in response to situations that are unique, are poorly defined and largely unconstructed, and have important consequences for the organization. Perhaps one of the greatest nonprogrammed decisions of all time was Boeing’s decision to build the 707 during World War II.  Uncertainty is great  Decisions are complex  Unique situations  Poorly defined  Unconstructed  Important consequences Certainty and Uncertainty are the difference between programmed and non-programmed decisions  Certainty means that all the information the decision maker needs is fully available. Managers have information on operating conditions, resource costs, or constraints and each course of action and possible outcome.  Risk means that a decision has clear cut goals and that good information is available, but the future outcomes associated with each alternative are subject to some chance of loss or failure.  Uncertainty means that managers know which goals they wish to achieve, but information about alternatives and future events is incomplete. Factors that may affect a decision, such as price, production, costs, volume, or future interest rates, are difficult to analyze or predict. Ambiguity is by far the most difficult decision situation. Ambiguity means that the goals to be achieved or the problem to be solved is unclear, alternatives are difficult to define, and information about outcomes is unavailable.  A highly ambiguous situation can create what is sometimes called wicked decision problem.  Wicked decisions are associated with conflicts over goals and decision alternatives, rapidly changing circumstances, fuzzy information, unclear links among decision elements, and the inability to evaluate whether a proposed solution will work.  There is often no right answer. Six Steps in the Managerial decision making process. Brainstorming uses a face-to-face interactive group to spontaneously suggest as many ideas as possible for problem solving. Electronic brainstorming brings people together over a computer network. Evidence-based decision making means a commitment to make more informed and intelligent decisions based on the best available facts and evidence. It means being alert to potential biases and seeking and examining the evidence with rigor. Engage in rigorous debate  Constructive conflict based on divergent points of view can bring problems into focus, clarify people’s ideas, stimulate creative thinking, limit the role of bias, create broader understanding of issues and alternatives, and improve decision quality.  Devil’s advocate is a person who is assigned the role of challenging the assumptions and assertions made by the group to prevent premature consensus.  Point-counterpoint is a group decision-making technique that breaks people into subgroups and assigns them to express competing points of view regarding the decision. Groupthink refers to the tendency of people in groups to suppress contrary opinions. When people slip into groupthink, the desire for harmony outweighs concerns ov