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Week 6

The document discusses decision making processes including analyzing rational decision making, developing alternatives while considering limiting factors, evaluating and selecting alternatives, and the differences between programmed and non-programmed decisions. It also covers heuristics, quantitative and qualitative factors, creativity and innovation in decision making.

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vydhrithi6
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26 views

Week 6

The document discusses decision making processes including analyzing rational decision making, developing alternatives while considering limiting factors, evaluating and selecting alternatives, and the differences between programmed and non-programmed decisions. It also covers heuristics, quantitative and qualitative factors, creativity and innovation in decision making.

Uploaded by

vydhrithi6
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Decision Making

Chapter 6
• LO 1 Analyze decision making as a rational process
• LO 2 Develop alternative courses of action with
consideration of the limiting factor
• LO 3 Evaluate alternatives and select a course of action
from among them
Learning
• LO 4 Differentiate between programmed and non-
Objectives programmed decisions
• LO 5 Understand the differences between decisions
made under conditions of certainty, uncertainty, and risk
• LO 6 Recognize the importance of creativity and
innovation in managing
Decision-making is defined as the selection of a course of action
from among alternatives; it is at the core of planning.

Decision
• Premising
making • Identifying alternatives
• Evaluating alternatives based on the goal sought
• Choosing alternative
The
Importance • Rationality in Decision Making

and • 10-10-10 Decision Making


• consider the immediate, mid and long-term consequences i.e. reflect on
Limitations of the consequences in 10 minutes time, 10 months, and 10 years.

• Limited, or “Bounded,” Rationality


Rational • Satisficing: Picking a course of action that is satisfactory or good enough
under the circumstances
Decision
Making
Development • Principle of the limiting factor

of Alternatives
and the • By recognizing and overcoming factors that stand
critically in the way of a goal, the best alternative
Limiting Factor course of action can be selected.
• Sometimes when there seem to be too many alternatives to
choose from, managers rely on their own decision rules. These
decision rules are called heuristics, and they allow complex
judgments to be made more simply. [Mental shortcuts]
• Why?
• Attribute substitution (substituting a complex question with a simple one)
• Effort reduction

Heuristics in • Fast and frugal


• Types
Decision • The availability heuristic can be described as the tendency to consider
events that they can remember with greater facilitation as more likely to
Making occur than events that are more difficult to recall. E.g., asking someone
whether they believe they are more likely to get bitten by a shark attack or
die in a drowning incident.
• Scarcity is a principle in heuristics in which we view things that are scarce
or less available to us as inherently more valuable. E.g., Sign saying
“limited supply only
• The most common example of the gaze heuristic is the process humans go
through to estimate where a ball will land. We don’t do all the calculations
to understand trajectory and angle.
• Bias
Quantitative • Quantitative factors are factors that can be
measured in numerical terms.
and Qualitative • Qualitative, or intangible, factors are factors
Factors that are difficult to measure numerically.

Evaluation
Marginal • Marginal analysis is comparing the additional
of Analysis
revenue and the additional cost arising from
increasing output.

Alternatives
Cost-
• Cost-effectiveness analysis seeks the best
Effectiveness ratio of benefit and cost.
Analysis
Selecting an Alternative:
Three Approaches

• Experience and intuition

• Experimentation

• Research and Analysis

Bases for selecting from among alternative courses of action


Programmed and Non-programmed
Decisions
• Programmed decisions are used for
structured or routine work.

• Non-programmed decisions are used


for unstructured, novel, and ill-defined
situations of a nonrecurring nature.
Decision Making under
Certainty, Uncertainty,
and Risk

• Virtually all decisions are made in an


environment of at least some uncertainty.
However, the degree will vary from relative
certainty to great uncertainty.
Creativity
and
Innovation
Creativity is the ability to develop Innovation is the use or
new ideas that are relevant to the commercialization of creative ideas
issue. or inventions
Four phases of the creative process:
Unconscious scanning, intuition,
The Creative Process insight, and logical formulation or
verification.

Brainstorming

Limitations of Traditional Group Discussion

The Creative Manager

Invention and Innovation

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