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Management (MGH)
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Chapter 11 Decision Making What is Decision Making? Decision Making: The process of developing a commitment to some course of action. o Involves a choice among alternatives, process involves how the decision is reached, and involves a commitment of resources (e.g., time if a store decides to carry a large inventory). Problem: A perceived gap between an existing state and a desired state. Decision making process involves the perception of the existing state, the conception of the desired state, and the steps taken from one state to another. Well-Structured Problems Well-Structured Problem: A problem for which the existing state is clear, the desired state is clear, and how to get from one state to the other is fairly obvious. Problem is repetitive, familiar, simple, and arouses little controversy. Program (Rules, Routines, Standard Operating Procedures, or Rules of Thumb): A standardized way of solving a (well-structured) problem. Shortens the decision- making process by enabling the decision maker to go directly from problem identification to solution. Ill-Structured Problems Ill-Structured Problem: A problem for which the existing and desired states are unclear and the method of getting to the desired state is unknown. Unique (unusual, have not been encountered before). Tend to be complex and involve a high degree of uncertainty often arouses controversy and conflict among people who are interested in the decision. Cannot be solved with programmed decisions (must use non-programmed decision making). Therefore, decision makers are likely to gather more information and be more self-consciously analytical in their approach. Can entail high risk and stimulate strong political considerations. The Rational Decision-Making Process: The Complete Decision Maker A Rational Decision-Making Model Perfect versus Bounded Rationality Perfect Rationality: A decision strategy that is completely informed, perfectly logical, and oriented toward economic gain. Bounded Rationality: A decision strategy that relies on limited information and that reflects time constraints and political considerations (e.g., the need to please other organizational members).
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