Bài giảng Management: A Pacific Rim Focus - Chapter 5 Managerial decision making

CHAPTER 5MANAGERIAL DECISION MAKING1© 2003 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition. Slides prepared by David Meacheam & George Sansbury.Lecture outlineNature of managerial decision makingManagers as decision makersEffective decision makingBarriers to effective decision makingGroup decision makingCreativity in decision making2© 2003 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition. Slides prepared by David Meacheam & George Sansbury.Decision makingDecision making ‘The process by which managers identify organisational problems and try to resolve them.’3© 2003 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition. Slides prepared by David Meacheam & George Sansbury.Nature of managerial decision makingTypes of problems faced:Crisis problems Serious. Requires immediate action.Non-crisis problems Requires resolution but not both immediate and important.Opportunity problems Opportunity for organisational gain IF appropriate action taken.4© 2003 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition. Slides prepared by David Meacheam & George Sansbury.Nature of managerial decision makingDecision making situations:Programmed decisions Routine, repetitive, well-structured situations by use of pre-determined decision rules.Non-programmed decision making Pre-determined decision rules are impractical due to novel &/or ill-structured situations.The element of risk Possibility that a chosen decision could lead to losses rather than intended results.5© 2003 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition. Slides prepared by David Meacheam & George Sansbury.Managers as decision makersModels of managerial decision making:Rational model Model suggesting managers engage in completely rational decision processes, ultimately making optimal decisions, and possess and understand all information relevant to their decisions at the time they make them.Non-rational models Models suggesting information gathering and processing limitations make it difficult for managers to make optimal decisions.6© 2003 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition. Slides prepared by David Meacheam & George Sansbury.Non-rational modelsSatisficing model Managers seek alternatives only until they find one which looks satisfactory, rather than seeking an optimal decision.Incremental model Managers make the smallest response possible to reduce the problem to at least a tolerable level.Rubbish bin model Managers behave in virtually a random way in making non-programmed decisions.7© 2003 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition. Slides prepared by David Meacheam & George Sansbury.RationaldecisionmakingAn optimal decision is possibleAll relevant information is availableAll relevant information is understandableAll alternatives are knownAll possible outcomes known8© 2003 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition. Slides prepared by David Meacheam & George Sansbury. ‘Satisficing’decisionmakingTime constraintsLimited ability to understand all factorsInadequate baseof informationLimited memory ofdecision-makersPoor perception of factors to be considered in decision process9© 2003 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition. Slides prepared by David Meacheam & George Sansbury.Effective decision makingSteps to effective decision making:Identify the problem Scan for change, categorise as problem/non-problem, diagnose nature and cause.Generate alternative solutions Uncritically brainstorm to develop alternatives, combine & improve ideas.Evaluate & choose an alternative Feasibility, quality, cost, reversibility, ethics, acceptability.Implement and monitor Plan and implement, evaluate effect on others, monitor.10© 2003 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition. Slides prepared by David Meacheam & George Sansbury. Evaluation of decisioneffectivenessIdentificationof the problemGenerate alternative solutionsEvaluate alternativesChoose an alternativeImplementation and monitoring of the chosen alternativeSteps in decision-making11© 2003 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition. Slides prepared by David Meacheam & George Sansbury.Barriers to effective decision makingComplacency Individuals either do not see signs of danger/opportunity or, avoid them.Defensive avoidance Individuals either deny the importance of a danger/opportunity or deny any responsibility for taking action.Panic Individuals become so upset they frantically seek a way to solve the problem.Deciding to decide Decision makers accept the challenge and follow an effective decision-making process.12© 2003 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition. Slides prepared by David Meacheam & George Sansbury. Barriers to effective decision-makingComplacencyDefensive avoidancePanic13© 2003 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition. Slides prepared by David Meacheam & George Sansbury.Decision making biasFraming Tendency to make different decisions depending on how a problem is presented.Prospect theory Decision makers find the prospect of an actual loss more painful than giving up the possibility of a gain.Representativeness Tendency to be overly influenced by stereotypes in making judgements about the likelihood of occurrences.14© 2003 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition. Slides prepared by David Meacheam & George Sansbury.Decision making biasAvailability Tendency to judge the likelihood of an occurrence on the basis of the extent to which other like instances can easily be recalled.Anchoring & adjustment Tendency to be influenced by an initial figure, even when the information is largely irrelevant.Overconfidence Tendency to be more certain of judgements regarding the likelihood of a future event than one’s actual predictive accuracy warrants.15© 2003 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition. Slides prepared by David Meacheam & George Sansbury.Decision escalation ‘Escalating commitment and accelerating losses’Non-rational escalation: increased commitment of resources beyond rational limitsSunk costs: not recoverable, and should not influence decision-making16© 2003 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition. Slides prepared by David Meacheam & George Sansbury.Group decision makingAdvantages:More information availableWide range of ideas/approachesImproved acceptance of decisionDevelops group members’ skillsDisadvantages:More time consumingDisagreement/time problemsOpen to individual dominanceGroupthink may arise17© 2003 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition. Slides prepared by David Meacheam & George Sansbury.Group decision making AdvantagesMore information availableMorealternative solutions Increases solution understanding & acceptanceBuilds member knowledge & skill baseDisadvantagesTime consumingDelays & ill feeling possibleDomination by individualsRisk of groupthink18© 2003 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition. Slides prepared by David Meacheam & George Sansbury.Enhancing group decision makingHeterogenous membershipCommunication/social skillsDevil’s advocatesDialectical inquiryGroupware19© 2003 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition. Slides prepared by David Meacheam & George Sansbury. Techniques to improve group decisionsMember diversityBettergroupdecisionmakingExpert membersDevil’s advocatesGroupware useDialectic inquiry20© 2003 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition. Slides prepared by David Meacheam & George Sansbury.Creativity in decision making ‘Creativity is the cognitive process of developing an idea, concept, commodity or discovery viewed as novel by its creator or target audience.’21© 2003 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition. Slides prepared by David Meacheam & George Sansbury.Creativity in decision makingCreativity requires both: Divergent thinking Attempting to move logically to a problem solution.Divergent thinking Generating new ways of viewing a problem and seeking novel alternatives. 22© 2003 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition. Slides prepared by David Meacheam & George Sansbury.Creativity in decision makingThree basic ingredients necessary for creativity:Domain-relevant skills Expertise in a field relevant to the problem.Creativity-relevant skills Skills in generating novel ideas, approaches, modes of thinking about problems.Task motivation Interest in the task for its own sake, a desire to resolve the problem.23© 2003 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition. Slides prepared by David Meacheam & George Sansbury.Enhancing group creativityBrainstormingNominal group techniqueDelphi techniqueScenario analysis24© 2003 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition. Slides prepared by David Meacheam & George Sansbury. TECHNIQUES TO ENHANCE GROUP CREATIVITYBrainstormingBettergroupcreativityNominal grouptechniqueDelphitechniqueScenario analysis25© 2003 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition. Slides prepared by David Meacheam & George Sansbury.Lecture summaryNature of managerial decision making Problem types, problem situations.Managers as decision makers Rational and non-rational models.Effective decision making Ideal decision making process. 26© 2003 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition. Slides prepared by David Meacheam & George Sansbury.Lecture summaryBarriers to effective decision making Complacency, defensive avoidance, panic Decision making bias, decision escalation.Group decision making Advantages-disadvantages, enhancing group performance.Creativity in decision making Divergent and non-divergent thinking, necessary skills, enhancing group creativity.27© 2003 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition. Slides prepared by David Meacheam & George Sansbury.