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Ryerson University
Global Management Studies
GMS 200
Helene Moore

GMS MIDTERM REVIEW Chapter 13: Information and Decision Making Why do we care about Information and Decision Making? • Decision making leads to outcomes or consequences • Information --> Decision Making --->Action ---> Outcomes or Consequences What is Useful Information? • The management process of planning, organizing, leading and controlling is driven by information. The information should meet five criteria: o Timely - info available when needed o High quality - info is accurate and reliable o Complete - info is complete and sufficient o Relevant - info is appropriate for the task o Understandable - info is clear and easily understood Information and the External Environment 1. Intelligence information is gathered from stakeholders and external environment 2. This information is given to the internal environment. Internal information then flows up, down and across the organization 3. This information is passed out in public and external environment • Therefore, internal and external info flows are essential to problem solving and decision- making in organizations Information and the Internal Environment • The ability of IT to gather and move information quickly within an organization can be a great asset to decision making • Top levels are informed and lower levels speed up the decision making process IT Changing Organizations • IT is helping to break down barriers • People from different departments now use IT to easily communicate or share info • IT plays an important role in CRM by providing quick and accurate info about customer needs and satisfactions Openness to Problem Solving • Problem avoiders o They are passive in information gathering. They ignore information and not want to make decisions and deal with problems • Problem solvers o They are reactive in gathering information. They tend to respond to problems after it occurs or when they're forced to do so • Problem seekers o They are proactive in gathering information. They constantly look for problems to solve and take action to gain advantage of opportunities Systematic, Intuitive and Multidimensional Thinking • Systematic Thinking o person approaches problems in a rational, step-by-step and analytical way o problem is broken into smaller components and then addressed • Intuitive Thinking o person approaches problem in a flexible and spontaneous way o person jumps from one issue to the other quickly o this approach works best in situations where facts are limited • Multidimensional Thinking o ability to view many problems all at once o managers can take actions and make decisions in a short run Types of Managerial Decisions • Structured Problems: familiar, straightforward and clear • Programmed Decisions o use solutions already available from past experiences o decisions can be planned or programmed in advance • Unstructured Problems: new or unusual situations with vagueness • Non-Programmed Decisions o use specific solutions crafted for a unique problem Decision Conditions • Certain Environment o It offers complete information on possible action alternatives and their consequences o Programmed o Risk of failure is low • Risk Environment o where facts and information are incomplete • Uncertain Environment o lacks so much information that it is difficult to assign probabilities and it is the most difficult decision condition o Non-programmed o Risk of failure is high The Decision-Making Process 1. Identify and define the problem 2. Generate and evaluate alternative solutions 3. Choose a preferred course of action and conduct the "ethics double-check" 4. Implement the decision 5. Evaluate results Indentify and Define the problem • it is important to clarify exactly what a decision should accomplish • there are three mistakes that can occur when defining the problem • Mistake #1: defining the problem too broadly or too narrowly • Mistake #2: focusing on symptoms instead of the causes • Mistake #3: choosing the wrong problem to deal with Generate and EvaluateAlternative courses ofAction • once the problem is identified, it is then time to collect all the facts and information that will be useful for problem-solving • clarify what you already know and what needs to be known • use Cost-Benefit Analysis: it involves comparing costs and benefits f each potential course of action. Benefits should be greater than the cost Decide on a Preferred Course ofAction • actual decision is made to select course of action • differences between classical and behavioural decision models of decision- making • Classical Model: It is an optimizing decision. It chooses absolute best among alternatives o Rationality - Classical Model acts in a perfect model • This model is supported by economists o structured problem o clearly defined o certain environment o complete information o all alternatives and consequences are known • Behavioral Model: It is a satisfying decision. It chooses first "satisfactory" alternative o Bounded Rational - Managers are bounded rational and acts with cognitive limitations (managers have not enough information to make structured decisions) • This model is supported by o unstructured problem o not clearly defined o uncertain environment o incomplete information o not all alternatives and consequences are known Implement The Decision • Once the decision is made, actions must be taken to fully implement it • Managers need the ability and willingness to implement the decision • Decision-making process steps 1.2.3 are overall accomplished by how well decisions are implemented Evaluate Results • results must be evaluated by gathering data and comparing them against the goals • evaluation is easier when clear goals, targets and timetables are established to begin with Decision Errors and Traps • Heuristics: strategies used for simplifying decision-making • Availability Heuristic: decision based on recent information or events o Ex: deciding not to invest in a new product based on recent product failure • Representativeness Heuristic: bases a decision on similarity to other situations o Ex: hiring someone based on th
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