Chapter 2 Summary

Chapter 2
Decision making a choice from two or more alternatives.
Decision making process

1. Identify the problem
2. identified decision making criteria
3. Allocating weights to the criteria
4. developing alternatives
5. analyzing alternatives
6. implementing the alternative
7. evaluating decision effectiveness
Step 1: Identify a Problem

– Problem – an obstacle that makes it difficult to achieve a
desired goal or purpose.
Determine the Root Cause(s) of the Problem
1. 5-Whys Technique.
2. Fishbone Diagram.
3. Mind Mapping
5 Whys Example
• The problem is that your customer, is “unhappy”.
•Why is customer unhappy? Because we didn't deliver our
services when we said we would.
•Why were we unable to meet customer expectations? The
job took much longer than we thought it would.
•Why did it take so much longer? Because we
underestimated the complexity of the job.
•Why did we underestimate the complexity of the job?
Because we made a quick estimate of the time needed to
complete it and didn't list the individual stages needed to
complete the project.
•Why didn't we do this? Because we were running behind
on other projects. We clearly need to review our time
estimation and specification procedures.
3.Mind Mapping Process
1. Start in the center with an image of the topic.

2. Connect your main branches to the central image and
connect your second-and third-level branches to the first
and second levels, etc.
3. Use one key word per line.
4. The lines should be connected, starting from the central
image.
5. The central lines are thicker, organic and thinner as they
radiate out from the center.
6. Make your branches Curved rather than straight-lined
7. Use multiple colors throughout the mind map, for visual
stimulation
• Step 2: Identify Decision Criteria
–Decision criteria are factors that are important (relevant)
to resolving the problem.
• Step 3: Allocate Weights to the Criteria
–If the relevant criteria aren’t equally important, the
decision maker must weight the items in order to give
them the correct priority in the decision.
• Step 4: Develop Alternatives
–List viable alternatives that could resolve the problem
• Step 5: Analyze Alternatives
–Appraising each alternative’s strengths and weaknesses.
–An alternative’s appraisal is based on its ability to resolve
the issues related to the criteria and criteria weight.
• Step 6: Select an Alternative
• Choosing the best alternative
– The alternative with the highest total weight is chosen.
• Step 7: Implement the Alternative
• Step 8: Evaluate Decision Effectiveness
– How effectively was the problem resolved by
outcomes resulting from the chosen alternatives?
– If the problem was not resolved, what went wrong?
MAKING DECISIONS: RATIONALITY

• Rational Decision-Making – describes choices that
are logical and consistent while maximizing value.
Objective & Logical
• Assumptions of Rationality
– The decision maker would be fully objective and logical
– The problem faced would be clear and unambiguous
– The decision maker would have a clear goal and know all
possible alternatives and select the alternative that
maximizes achieving that goal
• Bounded Rationality –decision-making that’s rational,
but limited (bounded) by an individual’s ability to
process information.
• Satisfice– accepting solutions that are “good enough.”
• Escalation of commitment – an increased
commitment to a previous decision despite evidence it
The role of intuition:
• Intuitive decision making
– Making decisions on the basis of experience, feelings, and
accumulated judgment.
• Evidence-based management (EBMgt)– the
systematic use of the best available evidence to improve
management practice.
STRUCTURED PROBLEMS AND PROGRAMMED

DECISION
• Structured Problems – straightforward, familiar, and

easily defined problems.
• Programmed decision – a repetitive decision that can
be handled by a routine approach.
• Procedure – a series of sequential steps used to respond
to a well-structured problem.
• Rule – an explicit statement that tells managers what
can or cannot be done.
• Policy – a guideline for making decisions.
UNSTRUCTURED PROBLEMS AND NONPROGRAMMED

DECISIONS
• Unstructured Problems – problems that are new or

unusual and for which information is ambiguous or
incomplete.
• Nonprogrammed decisions – unique and nonrecurring
and involve custom made solutions.
DECISION-MAKING CONDITIONS
• Certainty – a situation in which a manager can make
accurate decisions because all outcomes are known.
• Risk – a situation in which the decision maker is able to
estimate the likelihood of certain outcomes.
• Uncertainty – a situation in which a decision maker has
neither certainty nor reasonable probability estimates
available.
MANAGING RISK
DECISION-MAKING STYLES
• Linear Thinking Style – a person’s tendency to use
external data/facts; the habit of processing
information through rational, logical thinking.
• Nonlinear Thinking Style – a person’s preference
for internal sources of information; a method of
processing this information with internal insights,
feelings, and hunches
DECISION-MAKING BIASES AND ERRORS
• Heuristics– using “rules of thumb” to simplify
decision-making.
• Overconfidence Bias – holding unrealistically
positive views of oneself and one’s performance.
• Immediate Gratification Bias – choosing
alternatives that offer immediate rewards and avoid
immediate costs.
• Anchoring Effect – fixating on initial information and
ignoring subsequent information.
• Selective Perception Bias – selecting, organizing
and interpreting events based on the decision
maker’s biased perceptions.
• Confirmation Bias – seeking out information that
reaffirms past choices while discounting contradictory
information.
• Framing Bias – selecting and highlighting certain
aspects of a situation while ignoring other aspects.
• Availability Bias – losing decision-making
objectivity by focusing on the most recent events.
• Representation Bias – drawing analogies and
seeing identical situations when none exist.
• Randomness Bias– creating unfounded meaning
out of random events.
• Sunk Costs Errors – forgetting that current actions
cannot influence past events and relate only to future
consequences.
GUIDELINES FOR MAKING EFFECTIVE
DECISIONS
• Understand cultural differences
• Create standards for good decision-making
• Know when it’s time to call it quits
• Use an effective decision-making process
• Build an organization that can spot the unexpected
and quickly adapt to the changed

Chapter 2 Summary

Uploaded by

Copyright:

Available Formats

Chapter 2 Summary

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Chapter 2 Summary

Uploaded by

Copyright:

Available Formats

Chapter 2

Decision making a choice from two or more alternatives.

Decision making process

Step 1: Identify a Problem

1. Start in the center with an image of the topic.

MAKING DECISIONS: RATIONALITY

STRUCTURED PROBLEMS AND PROGRAMMED

• Structured Problems – straightforward, familiar, and

UNSTRUCTURED PROBLEMS AND NONPROGRAMMED

• Unstructured Problems – problems that are new or

You might also like