Chapter 5 Decisions-makingThe decision-making processThe rational modelThe common errors in the decision-makingTypes of problems, decisions and level in theorganizationDecision-making stylesMaking-decision in groups
Chapter 5 Decisions-making The decision-making process The rational model The common errors in the decision-making Types of problems, decisions and level in the organization Decision-making styles Making-decision in groups
Exhibit 5-1 The Decision-MakingProcessDevelopmentAnalysisAllocationIdentificationIdentificationofofofweightsofaofdecisionTo criteriaalternativesalternativesproblemcriteriaSelectionImplementationEvaluationof anoftheof decisionalternativealternativeeffectiveness
Exhibit 5-1 The Decision-Making Process Identification of a problem Identification of decision criteria Allocation of weights To criteria Development of alternatives Analysis of alternatives Selection of an alternative Implementation of the alternative Evaluation of decision effectiveness
The problemA single,AllalternativesPreferencesPreferencesNo timeFinal choiceandis clear andwill maximizewell-definedare clearare constantorcostand stableconstraintseconomicunambiguousgoalistoconsequencesexistpayoffbe achievedare knownLeadtoRational Decision MakingExhibit 5-2Assumptions of Rationality
The problem A single, All alternatives Preferences Preferences No time Final choice is clear and well-defined and are clear are constant or cost will maximize unambiguous goal is to consequences and stable constraints economic be achieved are known exist payoff Lead to Rational Decision Making Exhibit 5-2 Assumptions of Rationality
Bounded RationalityThis is the behavior that people constructsimplified models that extract the essentialfeatures from problems without capturingall oftheir complexities in order todeciderationally
Bounded Rationality This is the behavior that people construct simplified models that extract the essential features from problems without capturing all of their complexities in order to decide rationally
Availability heuristicThis is the tendency to base judgments on informationthatisreadily availableRepresentative heuristicThis is the tendency for people to base judgments ofprobability on things with which they are familiarEscalationof commitmentIt refers to an increased commitment to aprevious decision despite negative information
Availability heuristic This is the tendency to base judgments on information that is readily available. Representative heuristic This is the tendency for people to base judgments of probability on things with which they are familiar. Escalation of commitment It refers to an increased commitment to a previous decision despite negative information
Exhibit 5-3 Types of Problems,Decisionsand Level in the OrganizationTopIll-structuredNonprogrammedLevel indecisionsType oforganizationproblemProgrammeddecisionsWell-structuredLower
Exhibit 5-3 Types of Problems , Decisions and Level in the Organization Level in organization Ill-structured Type of problem Well-structured Top Lower Programmed decisions Nonprogrammed decisions
TypesofProblemsWell-structured problems are problems that arestraightforward.familiar to the decision makerand the goal is clear, the information about themarecompleteIll-structure problems are new, or unusual, andinformation about such problems is ambiguous onincomplete
Types of Problems Well-structured problems are problems that are straightforward, familiar to the decision maker, and the goal is clear, the information about them are complete. Ill-structure problems are new, or unusual, and information about such problems is ambiguous or incomplete
Types of DecisionsProgrammed decision is a repetitivedecision that can be handle by a routineapproach. (Procedure, rule, policy)Non-programmed decision is a decisionthat must be custom-made to solve uniqueand non-recurring problems
Types of Decisions Programmed decision is a repetitive decision that can be handle by a routine approach. (Procedure, rule, policy) Non-programmed decision is a decision that must be custom-made to solve unique and non-recurring problems
Exhibit 5-4 Decision-MakingHighAnalyticConceptualDirectiveBehavioralLowIntuitiveRationWay of Thinking
Exhibit 5-4 Decision-Making High Low Ration Intuitive Analytic Conceptual Directive Behavioral Way of Thinking Tolerance for Ambiguity
The Advantages and Disadvantages ofGroup Decision MakingAdvantages-Morecompleteinformation-Morealternatives-Increasing acceptance of a solutionIncreasinglegitimacy and democracyDisadvantages-Time-consuming-Minority dominationPressurestoconform (groupthink)Ambiguous responsibility
The Advantages and Disadvantages of Group Decision Making ▪More complete information ▪More alternatives ▪Increasing acceptance of a solution ▪Increasing legitimacy and democracy Advantages ▪Time-consuming ▪Minority domination ▪Pressures to conform (groupthink) ▪Ambiguous responsibility Disadvantages