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MGT363H5 Chapter Notes -Satisficing, Bounded Rationality, Learning Organization

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Ann Armstrong

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Chapter 12: Decision-making
Organization decision-making - the process of identifying & solving problems
- involves 2 stages: problem identification & problem solution
- Decisions vary in complexity - 2 categories:
programmed decisions(i.e. decision rules: when to replace a copy machine, whether
an applicant has the qualifications for a job; allow one server per 30 guests for a sit-
down function
Non-programmed (uncertainty whether a proposed solution will solve the problem)
-complex non-programmed decisions are aka “wicked” decisions (associated with
manager conflicts over objectives & alternatives, rapidly changing circumstances, &
unclear linkages among decision elements.
* today’s rapidly changing business environment has increased both the # and
complexity of decisions that have to be made .: creating a need for new decision making
Rational Decision-making (how manager should try to make decisions)
8 Sequential Steps
1. Monitor decision environment
(both external & internal information that will indicate deviations from planned or
acceptable behaviour, i.e. through performance evaluations, reviewing competitors’
activities, learn what merchandise is moving and what is not)
2. Define decision environment
(manager responds to deviations by identifying details of the problem> who was
affected/involved, what, where, when and how the current activities are influenced)
3. Specify decision objectives
4. Diagnose the problem
5. Develop alternative solutions
6. Evaluate alternatives
7. Choose best alternative
8. Implement best alternative
(manager uses managerial, administrative, & persuasive abilities & gives directions to
ensure that the decision is carried out
stages 1-4 = problem identification stage
stages 5-8 = problem solution stage
Bounded Rationality Perspective
-managers should use rational procedures to make decisions, however, time pressure,
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a large number of internal & external factors affecting a decision and the ill-defined
nature of many problems make systematic analysis virtually impossible. .: can’t always
evaluate every goal, problem and alternative
-the attempt to be rational is bounded (limited) by the enormous complexity of many
BOUNDED RATIONALITY: limited time, info, resources to deal with complex,
multidimensional issues
refer to exhibit 12.2 (p.435)
Intuitive Decision-Making - experience and judgement used to make decisions,
- managers develop a “gut” feeling or hunch about which alternative will solve a problem,
speeding the decision making process
- plays an important role in problem identification & solution (guides the choice of a
*The process by which decisions are made in organizations are influenced by
- the number of factors ( the organization’s own internal structures) and the degree of
stability or instability of the external environment.
4 Primary Types of Organizational Decision-Making Processes:
(1) the Management Science Approach: the rational approach by individual
managers - useful when problems are analyzable and when the variables can be
identified & measured
ex. use technology to find the perfect spot for a church camp, or test-marketing the first
of a new family of products,
- management science can accurately & quickly solve problems that have too many
explicit variables for human processing (ex. retailers use software to analyze current and
past sales data to determine when and how much to mark down prices)
- the results need to be discussed and interpreted because the quantitative data is not
always rich and does not convey tactical knowledge -this will help lessen failures
(2) the Carnegie model: indicates that organization-level decisions involved many
managers and that a final choice was based on a coalition among those managers
-- mgm coalitions are needed during decision making 1) organizational goals are often
ambiguous & operative goals of departments are often inconsistent, causing managers
to disagree about problem priorities, thus they can build a coalition around the question
of which problems to solve 2) managers talk to each other to gather info, exchange
points of view and reduce ambiguity - hence reaching a decision that is supported by
interested parties
- this model says that search behaviour is sufficient to produce a satisfactory solution
and that managers typically adopt the first satisfactory solution that emerges
>>coalition formation = decisions are made to satisfice problem solutions using
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