management

• Decision-making process


  A set of 8 steps
• Decision-making process


  1. Identifying a decision problem

  2. Identifying decision criteria

  3. Weighting criteria

  4. Developing alternatives

  5. Analyzing alternatives

  6. Selecting the best alternative

  7. Implementing the decision

  8. Evaluating the decision

  
• Problem


  A discrepancy between an existing and a desired state of affairs
• Identifying the right problem

  • Considering past performance, previously set goals, and performance of other units in the organization
• Decision criteria


  Relevant factors to consider in the decision, e.g. price, model, size, manufacturer, options, repair record
• Weighting criteria


  Assigning weights to the criteria, with the most important criterion assigned a weight of 10
• Criteria and weights in a car-buying decision

  • Price (10)
  • Interior comfort (8)
  • Durability (5)
  • Repair record (5)
  • Performance (3)
  • Handling (1)
• Analyzing alternatives


  Evaluating the alternatives based on the criteria and weights, using personal judgement
• Selecting the best alternative

  Evaluating the alternatives by multiplying the criteria weights and the alternative ratings, then selecting the alternative with the highest total score
• Implementing the decision


  Putting the decision into action, including participatory decision making for enhanced commitment
• Evaluating the decision


  Appraising the outcome of the decision to see if the problem was resolved
• Common decision-making errors and biases

  • Overconfidence bias
  • Immediate gratification
  • Anchoring effect
  • Selective perception bias
  • Confirmation bias
  • Framing bias
  • Availability bias
  • Representation bias
  • Sunk cost error
  • Self-serving bias
  • Hindsight bias
  • Randomness bias
  • Revision bias

  
• Overconfidence bias


  Individuals think they know more than they do or hold unrealistically positive views
• Immediate gratification


  Individuals want immediate rewards and to avoid immediate costs, seeking quick payoffs
• Anchoring effect


  Individuals fixate on initial information as a starting point and fail to adjust
• Selective perception bias


  Individuals selectively organize and interpret events based on biased perception
• Confirmation bias


  Individuals seek out information that reaffirms past choices
• Framing bias


  Drawing attention to specific aspects of a situation, using an incorrect reference point
• Availability bias


  Individuals remember events that are most recent
• Representation bias


  Individuals assess the likelihood of an event based on how closely it resembles other events
• Sunk cost error


  Individuals fixate on past expenditure of time, money, or effort in assessing a choice
• Self-serving bias


  Individuals are quick to take credit for success and to blame failure on outside factors
• Hindsight bias


  Individuals falsely believe that they would have accurately predicted the outcome, once the outcome is known
• Randomness bias


  Individuals try to create meaning out of random events
• Revision bias


  Individuals believe that revision means improvement or something better than the original
• Decisions managers make


  • Planning decisions
  • Organizing decisions
  • Leading decisions
  • Controlling decisions

  
• Planning decisions


  Decisions about the organization's long-term objectives, strategies, short-term objectives, and individual goals
• Organizing decisions


  Decisions about the number of employees reporting directly to a manager, the level of centralization, job design, and organizational structure

  
• Leading decisions


  Decisions about handling unmotivated employees, effective leadership styles, the effect of changes on worker productivity, and when to stimulate conflict
• Controlling decisions


  Decisions about what activities need to be controlled, how to control them, when performance deviations are significant, and what type of management information system to use
• Organizing


  1. How many employees should I have report directly to me?

  2. How much centralization should there be in an organization?

  3. How should jobs be designed?

  4. When should the organization implement a different structure?
• Leading


  1. How do I handle unmotivated employees?

  2. What is the most effective leadership style in a given situation?

  3. How will a specific change affect worker productivity?

  4. When is the right time to stimulate conflict?
• Controlling


  1. What activities in the organization need to be controlled?

  2. How should those activities be controlled?

  3. When is a performance deviation significant?

  4. What type of management information system should the organization have?
• Rational decision making


  Choices that are consistent and value-maximizing within specified constraints
• Rationality is not a very realistic approach
• Bounded rationality


  • Human being has limitation regarding information processing ability
  • Managers make decisions rationally, but are limited or bounded by their ability to process information
  • Satisfice
  • Escalation of commitment
  • A more realistic approach
• Intuition


  • Use it to complement, not replace, other decision-making approach
  • Look to act quickly with limited information because of past experience with a similar problem
  • Pay attention to the intent feelings and emotions experienced when making decision
• Structured problem


  Straightforward, familiar, easily defined
• Unstructured problem


  New or unusual for which information is ambiguous or incomplete
• Programmed decisions


  • Repetitive decisions that can be handled using a routine approach
  • Procedure: series of interrelated sequential steps that a manager can use when responding to a well-structured problem
  • Rules: an explicit statement that tells a manager what can or cannot be done
  • Policies: a guideline for making decisions