MANA 3318 1st EditionExam # 4 Study Guide Lectures: 10 - 12Lecture 10 (October 23)Chapter 10: Decision Making by Individuals and Groups10-1 The Decision-Making ProcessProgrammed 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 MakingEffective 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 cancalculate 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 MakingCognitive 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 groupdiscussions. 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 quickeffective 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 ProcessSynergy: 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 determinefinal 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 GroupDecision 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