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MGHB02H3 (269)
Chapter 11


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Management (MGH)
Samantha Montes

Chapter11 Decision Making I. What is Decision Making? Decision making -the process of developing a commitment to some course of action process that involves making a choice, a process and it also involves making a commitment of resources such as time, money or personnel Decision making involves making a choice between alternatives; a process; how the decision is reached, and the commitment of resources A problem exists when a gap is perceived between some existing state and some desired state Decision making is also a process of problem solving A. Well-Structured Problems Well-structured problem-the existing state is clear, the desired state is clear, and how to get from one state to the other is fairly obvious o Usually problems are repetitive and familiar Program- a standardized way of solving a problem when dealing with well-structured problems o Programs short-circuit the decision-making process by enabling the decision-maker to go directly from problem identification to solution Many of the problems encountered in organizations are well structured and programmed Decision making is a useful means of solving these problems Programs are only as good as the decision making process that led to the adoption of the program in the first place CONS: decision program si has tendency to persist even when problem conditions change o Seen in ineffective hiring: filling out forms B. 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 o ie: marketing manager suspects that sales are going down, but does not have a exact figure; want to know where the competitors stand, but not sure of the figure, and have no plan of increasing sales These problems are usually unique, complex, and have not been encountered before Cannot be solved with programmed decisions organizations use non-programmed decision making which means that they will gather more information and be more self-consciously analytical in their approach can entail high risk and stimulate political considerations problems tend to be complex and involve a high degree of uncertainty arose controversy, and conflicts among the ppl who a are interested in the decision II. The Complete Decision Maker A Rational Decision-Making Model when problem is id, search for info begins, info clarifies the nature of the problem and suggests alternative solutions, solutions are evaluated and solution chosen, implementation monitored over time to ensure effectiveness o if difficulties result, repetition or recycling 1 www.notesolution.comA. Perfect versus Bounded Rationality Perfect rationality- a decision strategy that is completely informed, perfectly logical, and oriented toward economic gain While useful for theoretical purposes, these characteristics do not exist in real decision makers. According to Herbert Simon, administrators use bounded rationality rather than perfect rationality Bounded rationality- a decision strategy that relies on limited info and that reflects time constraints and political considerations o While they try to act rationally, they are limited in their capacity to acquire and process information, and time constraints and political considerations also act as bounds to rationality o Framing and cognitive biases illustrate the operation of bounded rationality. Framing- refers to aspects of the presentation of information about a problem that are assumed by decision makers o How problems and decisions are framed can have a powerful impact on resulting decisions Cognitive biases- are tendencies to acquire and process information in an error-prone way although more effective, higher chance for error They involve assumptions and shortcuts that can improve decision making efficiency but frequently lead to serious errors in judgment. B. Problem Identification and Framing Problem exists when a gap occurs bt existing and desired conditions The perfectly rational decision maker, infinitely sensitive and completely informed, should be a great problem identifier Bounded rationality, however, can lead to several difficulties in problem identification: 1. Perceptual defense-The perceptual system may act to defend the perceiver against unpleasant perceptions. 2. Problem defined in terms of functional specialty-Selective perception can cause decision makers to view a problem as being in the domain of their own specialty 3. Problem defined in terms of solution- This form of jumping to conclusions short-circuits the rational decision-making process. 4. Problem diagnosed in terms of symptoms- A consideration on surface symptoms will provide the decision maker with few clues about an adequate solution. When problems are id, need FRAMING o Even if the facts of the matter might be the same, different decision frames lead to very different decision Rational decision makers self conscious about how they frame problems, but do no overarching and over framing C. Information Search Once a problem has been identified, a search for information is instigated The perfectly rational Economic Person has free and instantaneous access to all information necessary to clarify the problem and develop alternative solutions Bounded rationality, however, suggests that information search might be slow and costly. 2 www.notesolution.com
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