MANA 3318 1st Edition Exam 4 Study Guide Lectures 10 12 Lecture 10 October 23 Chapter 10 Decision Making by Individuals and Groups 10 1 The Decision Making Process Programmed decisions a simple routine matter for which a manager has an established decision rule Nonprogrammed decision a new complex decision that requires a creative solution Process recognize problem identify objective of decision gather and see data and diagnose situation list and see alternatives choose best course of action implement gather feedback follow up 10 2 Models and Limits of Decision Making Effective decision a timely decision that meets a desired objective and is acceptable to those individuals affected by it 3 models rational bounded rationality Z 10 2a Rational Model Rationality a logical step by step approach to decision making with a thorough analysis of alternatives and their consequences Assumes outcome will be rational decision maker has consistent system of preferences and chooses best alternative decision maker is aware of all possible alternatives and decision maker can calculate the probability of success for each alternative Decision maker strives to optimize and select best possible decision 10 2b Bounded Rationality Model Herbert Simon created it Also called administrative man theory Managers select first alternative that is satisfactory managers recognize that their conception of the world is simple managers can make decisions without looking at all options and managers make decisions by rule of thumb or heuristics Bounded rationality a theory that suggests that there are limits to how rational a decision maker can actually be Bounded rationality assumes managers satisfice Satisfice to select the first alternative that is good enough because the costs in time and effort are too great to optimize Also assumes managers make shortcuts called heuristics Heuristics shortcuts in decision making that save mental activity Research shows bounded rationality is more realistic because managers make decisions under risk and time pressure 10 2c Z Model Briggs Myers made Z model Capitalizes strengths of sensing intuiting thinking and feeling Steps Look at facts and details sensing generate alternatives intuition analyze alternatives objectively thinking weigh impact feeling 10 2d Escalation of Commitment Each model have the limit of decision maker s unwillingness to abandon a bad decision Escalation of commitment the tendency to continue to support a failing course of action Can be because of cognitive dissonance theory optimism or control Can combat escalation by splitting responsibility closely monitor decision makers and providing a graceful exit 10 3 Individual Influences on Decision Making Cognitive style an individual s preferred method for gathering information and evaluating alternatives 10 3a Risk and the Manager Risk aversion the tendency to choose options that entail fewer risks and less uncertainty Some managers are risk takers and are more likely to take lead in group discussions Women are more risk averse than men and older experienced managers are more risk averse than younger managers Risk takin influenced by individual tendency and organizational factors 10 3b Personality Attitudes and Values Managers must also use creativity when making decisions Brains have two halves right and left hemispheres Left is verbal sequential logical analytic rational western Right is nonverbal simultaneous spatial gestalt synthetic intuitive and eastern 10 3c Intuition Intuition a fast positive force in decision making that is utilized at a level below consciousness and involves learned patterns of information Mintzberg says managers make decisions based on hunches Dr Klein says skilled decision makers rely on patterns of learned info in making quick effective decisions Intuition may lead to more ethical decision 10 3d Creativity Creativity a process influenced by individual and organizational factors that results in the production of novel and useful ideas products or both 4 stages of creative process preparation incubation illumination and verification Preparation is seeking new experiences Incubation is reflective thought Illumination is sensing insight Verification is if idea is valid Individual influences are divergent thinking dreams personality factors good moods and positive thinking Organizational influences are supportive relationships cohesive social networks sense making consensus building participation flexible structures and supportive environments Individual organization fit makes highest creative performance Following the rules searching for the right answer fearing failure and trying to be logical are mental locks Orgs can facilitate creativity by rewards job rotation and surround workers in stimuli like music art or books 4 types of creativity responsive response to problem that is part of job expected discovering problem because you have to contributory response to problem because you want to be creative and proactive creativity discovering problems because you want to be creative 10 4 The Group Decision Making Process Synergy a positive force that occurs in groups when group members are stimulated to produce new solutions to problems through the process of mutual influence and encouragement within the group Groups bring more knowledge and experience Social decision schemes simple rules used to determine final group decisions Ex majority wins rule truth wins rule two thirds majority rule and first shift rule 10 4a Advantages and Disadvantages of Group Decision Making Advantages more knowledge and info more acceptance and commitment to decision greater understanding of decision Disadvantages pressure to conform and fit in domination by a member or clique the amount of time required Groups are better for judgment tasks For tasks with a right answer an individual is better 10 4b Limits of Group Decision Making Two potential liabilities groupthink and group polarization Groupthink a deterioration of mental efficiency reality testing and moral judgment resulting from pressures within the group Conformity Having to make an important decision and time constraints encourage groupthink Consequences are incomplete survey of alternatives failure to evaluate risks biased information processing and failure to work out contingency plans Group polarization the tendency for group discussion to produce shifts toward more extreme attitudes among members Explained by social comparison approach where