Chapter 6

• Decision - a choice made from available alternatives
• Decision-making - the process of identifying problems and opportunities and then resolving them
• Programmed decisions - involve situations that have occurred often enough to enable decision rules to be developed and applied in the future
• Nonprogrammed decisions - made in response to situations that are unique, are poorly defined and largely unstructured and have important consequences for the organization
• Certainty - situation in which all information the decision maker needs is fully available
• Risk - decision has clear-cut goals and good information is available, but future outcomes associated with each alternative are subject to chance of loss or failure
• Uncertainty - goals are known, but information about alternatives and future events is incomplete
• Ambiguity - goals to be achieved or problems to be solved are unclear, alternatives are difficult to define, and information about outcomes is unavailable
• Classical model - based on rational economic assumptions and manager beliefs about what ideal decision making should be
• Normative - how a decision maker should make a decision
• Administrative model - use of a rational decision-making process within the limits of human and environmental factors
• Descriptive - how managers actually make decisions in complex situations
• Bounded rationality - people have limits or boundaries on how rational they can be
• Satisficing - choosing the first solution that satisfies minimal decision criteria
• Administrative Model

  1. Intuition - quick apprehension of decision situation based on experience but without conscious thought
  2. Quasirationality - combining intuitive and analytical thought
• Coalition - informal alliance among managers who support specific goal
• Decision-Making Steps

  1. Recognition of decision requirement
  2. Diagnosis and analysis
  3. Development of alternatives
  4. Selection of desired alternative
  5. Implementation of chosen alternative
  6. Evaluation and feedback
• Decision styles - distinctions among people with respect to how they evaluate problems, generate alternatives, and make choices

  1. Directive Style
  2. Analytical Style
  3. Conceptual Style
  4. Behavioral Style
• Anchoring bias - occurs when we allow initial impressions, statistics, and estimates to act as anchors to our subsequent thoughts and judgments
• Loss aversion - stronger response to a potential loss than to an expected gain
• Confirmation bias - occurs when a manager puts too much value on evidence that is consistent with a favored belief or viewpoint and discounts evidence that contradicts it
• Brainstorming - uses a face-to-face interactive group to spontaneously suggest as many ideas as possible for solving a problem

  Electronic brainstorming - brings people together in an interactive group over a computer network

  Evidence-based decision making - a commitment to make more informed and intelligent decisions based on the best available facts and evidence