MGMT EXAM 2 STUDY GUIDE CHAPTER 4 DECISION MAKING 1 Decisions and Information PROBLEM SOLVING involves identifying and taking action to resolve problems o Problem Avoider or opportunity Not active in gathering information and do not want to make decisions ignore information that would offer wise signal in the presence of threat Costa Concordia captain let boat sink and let people die o Problem Solver Make decisions and try to solve problems but only when required They are reactive and do not act prior to issue occurring These managers deal well with performance threats but do not act upon performance opportunities Boat was on its side and had to be turned over in order to prevent environmental issues and find bodies o Problem Seeker into the future and are eager to take action ahead of time Actively looking for problems to solve or opportunities to explore Think New Pegula hockey arena at Penn State KNOWLEDGE WORKERS add value to organizations through their intellectual capabilities Planning Organizing Leading Controlling o TECHNOLOGICAL COMPETENCY the ability to understand new technologies and use them to their best advantage o INFORMATION COMPETENCY the ability to gather information and solve problems o ANALYTICAL COMPETENCY the ability to evaluate and analyze information to make actual decisions and solve real problems Threats vs Opportunities o PERFORMANCE THREAT situation where something is wrong or likely to be wrong o PERFORMANCE OPPORTUNITY situation that offers the possibility of a better future if the right steps are taken o In class example Threats and opportunities between Coca Cola and Honest Tea Coke large company decides to work with Honest Tea new much smaller company What are the threats and opportunities of working together for Honest Tea Pros larger market to people seek wisdom from Coke obtain more sales with big name like Coke Cons could be viewed as unhealthy could have no power under such a large company Coke Pros partnership viewed as healthier expansion of products and customers can overpower small company Cons changing product mix less control over sales Systematic Intuitive Thinking o SYSTEMATIC THINKING approaches problems in a rational and analytical fashion o INTUITIVE THINKING approaches problem in a flexible and spontaneous fashion o COGNITIVE STYLE the way an individual deals with information while making decisions Example Miracle on the Hudson Pilot 2 Decision Making Steps Programmed vs Non programmed decisions o DECISION a choice among possible alternative courses of action o PROGRAMMED DECISION applies a solution from a past experience to a routine problem Example preplanned vacation and holiday work schedules o NONPROGRAMMED DECISIONS applies a specific solution that has been called to address a unique problem Example head of NFL did not have a set protocol when Ray Rice beat his wife there was no set of guidelines to how to handle it Risk Decision Making Types of Environments o CERTAIN ENVIRONMENT offers complete information on possible action alternatives and their consequences o RISK ENVIRONMENT lacks complete information but offers probabilities of the likely outcomes for possible action alternatives o UNCERTAIN ENVIRONMENT lacks so much information that it is difficult to assign probabilities to the likely outcomes of alternatives Traditional Decision Making Process in class example was Lonnie Johnson and his Super Soaker Gun o 1 Identify Define The Problem Common issues when identifying problems 1 Defining problem too broadly or 2 Dealing with symptoms not real 3 Focusing on wrong problems to too narrowly causes begin with Lonnie identified an opportunity for a new exciting toy o 2 Generate and evaluate alternative courses of action COST BENEFIT ANALYSIS involves comparing the costs and benefits of each potential course of action Lonnie realizes it is too difficult to manufacture on his own and once pairing with a company tries out different models to figure out what works best and sells o 3 Decide on a preferred course of action CLASSICAL DECISION MODEL describes decision making with complete information OPTIMIZING DECISION chooses the alternative providing the absolute best solution to a problem BEHAVIORAL DECISION MODEL describes decision making with limited information and bounded reality SATISFICING DECISIONS chooses the first satisfactory alternative that presents itself Lonnie originally decided to sell it as The Power Drencher but changed the name opened a web campaign to explain the product and chose to price the product at 14 as opposed to 50 cent water guns in stores o 4 Implement the decision making process o 5 Evaluate Results LACK OF PARTICIPATION ERROR failure to include the right people in the decision Lonnie creates a new model that will not injure children and will generate sales Lonnie recognizes the newer model is safer and takes old model off the shelves continues measure sales and profitability o Ethical reasoning is important at all steps in decision making 4 Criteria 1 Utility does the decision satisfy everyone 2 Rights does decision respect rights duties of everyone 3 Justice is decision consistent with canons of justice 4 Caring is decision consistent with my responsibilities to care SPOTLIGHT QUESTIONS highlight the risks of public disclosure of one s actions How would I feel if my family found out about this How would I feel if this was exposed in local newspaper or on the internet What would the person I know who has the strongest sense of character ethical judgment say about my decision Advanced Six Sigma Decision making process o Amazon Problem Solving Case Case 4 More distribution centers Amazon Prime Air drone delivery 1 Define takes a day to get people stuff too long of a time 2 Measure distance from warehouse 3 Analyze 4 Improve 5 Control 3 Issues in Making Decisions CREATIVITY the generation of a novel idea or a unique approach that solves a problem or crafts an opportunity o BIG C CREATIVITY occurs when extraordinary things are done by exceptional people o LITTLE C CREATIVITY occurs when average people come up with unique ways to deal with daily events and situations Group Decision Making o Pros More information more viewpoints to help solve problems More alternatives more things to take into consideration and make better decisions Greater commitment Increased understanding more support and acceptance of the choice of the group o Cons Conformity with social pressure can feel intimidated by others
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