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Editor's Notes

• #12: 4 The decision-making process is a set of 8 steps that allows a manager (or any other person) to “choose among alternatives.” The example in the text deals with a sales manager at Weyerhaeuser Canada who has spent nearly $5000 on auto repairs in the past few years and now has a blown engine in his car. Repair estimates indicate that it is not economical to repair the car and public transportation is not realistic.
• #13: 5 The first step in the decision-making process is identifying a problem. This can be a difference between past and present performance, or it can be the current performance compared to the planned performance, or it can be the difference against goals set. In this case, the sales manager has decided that he needs a new car.
• #14: 6 The next step is to determine the factors that might be relevant in making the decision. In our example, John decides that price, interior comfort, durability, repair record, performance, and handling are the criteria he’ll use to make his decision. Interesting to note that the repair record is the 4th criterion even though he has had problems with excessive repairs on his current car.
• #15: 7 It is important to determine the relative ranking or priority of each of the criterion. Going back to our example, price has been determined to be the most important factor, then interior comfort with handling being the least important.
• #16: 8 This slide illustrates the type of decision-making matrix being generated using the relevant factors for the decision and the weights you have assigned. Again, note that price is the most important on a scale of 1-10 with handling being the least important at a 1.
• #17: 9 Step 4 is to identify the possible car manufacturers that John might be interested in. He has identified 12 vehicles that are viable choices: Jeep Cherokee, Ford Mustang, Mercedes E500, Chevrolet Camaro, Mazda Protégé, Chrysler PT Cruiser, Acura TSX, Hyundai Tiburon, BMW 320, Audi A6, Toyota Camry, and Volkswagen Passat.
• #18: 10 Step 5 now requires us to to assess the value of each alternative. We will use the criteria and weights established in steps 2 and 3. Each alternative is evaluated by appraising it against the criteria. Exhibits 4-4 and 4-5 take you through the decision-makers assessment of the value of each criterion and the weighting of each factor--which is the assessment times the criteria weight.
• #19: 12 The final steps in the decision making process is selecting the best choice, implementing the decision and evaluating the decision. Did the alternative chosen in Step 6 accomplish the desired result. You will note on Exhibit 4-5 (page91) in the text that the car with the highest total value is the Toyota Camry. On the basis of the criteria identified, the weights given given to the criteria, the decision maker’s assessment of each vehicle’s achievement on the criteria, the Toyota scored 224 which makes it the best alternative.
• #20: When a manager makes a decision, it is assumed that the manager is able to do so with knowing all the information. But this is a perfect world that rarely exists for managers today. Remember that the assumptions of rationality often do not hold true because the level of certainty that the rational model demands rarely exists. Most managers then try to determine the amount of risk and make their decisions under a condition of uncertainty.
• #21: Most people have creative potential that they can use when confronted with a decision-making problem. But to unleash that potential they need to get out of the thinking ruts and learn how to think about a problem in different ways.
• #22: There are ways that we can unleash our creativity. What we need to be able to look at problems and situations differently. For example, take a few minutes and sit on the floor and look around you. Describe what you see. Now stand up and do the same thing. Is there something different that you see standing up that you didn’t see sitting down? There is a three-component model of creativity which enable people to make use of their potential. Expertise is the foundation of all creative work. Therefore, the more abilities, knowledge, etc. that a person has, the more creative potential there is to unleash. Creative-thinking skills encompass personality characteristics associated with creativity, the ability to use analogies as well as the talent to see the familiar in a different light. For instance, intelligence and risk-taking plus an internal locus of control have been found to be associated with the development of creative ideas. This is a learned skill that people can practice with. The exercises at the end of this chapter help people become more creative in their thinking. Intrinsic task motivation is the desire to work on something because it’s interesting and involving. This motivational component turns creative potential into actual creative ideas.
• #23: 14 Because most managers deal with incomplete or uncertain information and because there is an element of risk in making any decision, most managers operate under the bounded rationality decision-making model. Here, managers make decisions recognizing the various constraints that are “good enough” or satisficing. In addition, they tend to focus on alternatives that are highly-visible.
• #24: Heuristics are judgmental shortcuts that we take to avoid information overload. One type of heuristic is availability --which is our tendency to base our judgment on information that is readily available to us. For example, you may do a quick search on the Internet for some information about traffic statistics and make a judgment based on the number of newspaper articles you find that deal with the subject. Representative heuristics is the tendency of individuals to match the likelihood of an occurrence with something that they are familiar with. For example, you might watch a bike race and because you enjoy riding a bike and are fairly good at it, that you could complete in the race. The last area of errors in decision-making is escalation of commitment where a decision-maker stays on the same path even though there is negative data that suggests otherwise. For example, a manager might continue with decision to keep the operation open longer to service customers even though few if any customers come in after the original closing time.
• #27: 16 In today’s business environment, the nature of the problem in many situations determines how the problem will be approached. Those problems that are simple and straightforward such as a customer wanting a refund for a defective product are described as “well-structured.” They are familiar and easily-defined. However, in many cases a manager may be facing a new or unusual problem where information may be incomplete. An example would be the desire to have a capability on the company’s web site to purchase products and have them delivered more quickly and cheaply.
• #28: 17 Just as there are two types of problems, there are also two types of decisions: programmed and non-programmed. A programmed decision is one where it is repetitive and easily handled through a routine. On the other hand, a non-programmed decision is one where a unique solution is required.
• #29: 18 Every manager will need to deal with and understand a procedure, rule and policy. Basically, a procedure is a series of related and sequential steps. For example, if a student wishes to appeal a grade on a course. A rule is an explicit statement that tells managers what they can and cannot do. An example would be a store rule that requires a manager to approve any refund of more than $25. A policy is a general guideline that establishes the parameters in which to make a decision. An organization may have a policy to “take appropriate steps to satisfy any customer complaint.” This gives the manager a great deal of freedom in which to make a decision.
• #30: 19 As you can see from this slide, the more senior managers tend to handle ill-structured problems with non-programmed decisions. This means that the problem may be new and therefore requires a unique solution. Likewise, lower level managers tend to handle more routine problems with solutions that were used in the past. Few managerial decisions in the real world are either fully programmed or fully non-programmed--no matter what level in the organization. Few programmed decisions are designed to eliminate individual judgment completely. At the other extreme, even the most unusual situation requiring a non-programmed decision can be helped by programmed routines.
• #31: Information technology is providing managers with a wealth of decision-making support. Among these are expert systems, neural networks, and groupware. Expert systems use software programs to encode the relevant experience of an expert and allow a system to act like that expert in analyzing and solving ill-structured problems. Neural networks are the next step beyond expert systems and use computer software to imitate the structure of brain cells and connections among them. For example, sophisticated robotics use neural networks for their intelligence. Another example is the use of neural networks tracking credit card transactions.
• #32: 21 Because managers are unique, each manager will bring personal characteristics into the decision-making process. The styles that we will examine look at the way in which managers think and their tolerance for ambiguity. The directive style tends to be logical and focus on the short-term. The analytical style is characterized by high tolerance for ambiguity and a rational way of thinking. These people want to have complete information before making a decision. The behavioural style reflects someone who thinks intuitively but have a low tolerance for ambiguity. These managers work well with others and are open to suggestions. The conceptual style represents someone who can live with lots of ambiguity. These individuals will look at the big picture and look for creative solutions. As you can see on this slide, the more a person can handle ambiguity and thinks more intuitively, the more likely the decisions will be broad in outlook. Managers today need to be able to use each of these styles depending on the situation. However, each manager will tend to have a dominant style.
• #33: 21 Because managers are unique, each manager will bring personal characteristics into the decision-making process. The styles that we will examine look at the way in which managers think and their tolerance for ambiguity. The directive style tends to be logical and focus on the short-term. The analytical style is characterized by high tolerance for ambiguity and a rational way of thinking. These people want to have complete information before making a decision. The behavioural style reflects someone who thinks intuitively but have a low tolerance for ambiguity. These managers work well with others and are open to suggestions. The conceptual style represents someone who can live with lots of ambiguity. These individuals will look at the big picture and look for creative solutions. As you can see on this slide, the more a person can handle ambiguity and thinks more intuitively, the more likely the decisions will be broad in outlook. Managers today need to be able to use each of these styles depending on the situation. However, each manager will tend to have a dominant style.
• #34: 22 Part of today’s work environment is the increase in teams and groups. As a consequence, many organizations will have different groups working on different issues and therefore will encourage group decision making. The reasons an organization will use group decision-making is that more complete information can be generated;the people involved have a variety of experiences to bring to the problem; more people can generate more alternatives--”two heads are better than one”; and people who are involved in a decision that will affect them tend to accept the decision more readily.
• #35: 23 Even with so many organizations using groups to make decisions, there are some problems that can surface. One of the more visible problems is that group decision-making is very time-consuming. It takes time for groups to learn to work with each other as well as to generate the outcomes. And a group can have one or several people attempt to dominate the discussion and to push their own view. Lastly, there is a tendency for pressures of group conformity. This phenomenon is called groupthink--the withholding by group members of different views in order to appear to be in agreement.
• #36: 24 It is important to recognize that group decision-making is not always the best. However, if accuracy, creativity and buy-in to the solution is important, than groups are more effective than individuals. For a group to function well, the optimum size is 5-7 people involved.
• #37: 25 There are several ways in which a group can become more effective in their decision-making. One of the ways is brainstorming--a technique where everyone states their ideas--a “freewheeling” session. The power of brainstorming is to ensure that people do not begin to evaluate. What you want to do is generate a big list of ideas--no matter how strange or unusual. You’ll evaluate the ideas later in the process. Nominal group technique helps groups arrive at a preferred solution. This is done by group members being present at a meeting and secretly writing a lists of preferred solutions to a problem. In this way there is no restriction of an individual’s thinking. Lastly, electronic meetings blend nominal group techniques with technology. People do not have to be in the same room and yet they can put their views and comments forward in a discussion without having to disclose who is saying what.
• #38: 26 Just as we saw in Chapter 2, managers who are able to recognize the cultural differences when making decisions will enable the manager to be more effective. For example, Japanese use consensus-forming group decisions Called ringisei after collecting large amount of information and data. In Germany, the culture is one of structure and order--therefore the decision-making needs to be more directive.