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Chapter 11

MGTB23 Chapter 11 Study Guide

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Department
Management (MGH)
Course
MGHB02H3
Professor
Hugh Mac Donald
Semester
Winter

Description
CHAPTER 11 I. What is Decision Making? Decision making is the process of developing a commitment to some course of action. This is a process that involves making a choice, and it also involves making a commitment of resources such as time, money or personnel. 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 In a 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. Organizations prefer a program or standardized way of solving a problem when dealing with well-structured problems. 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. B. Ill-Structured Problems In an ill-structured problem, the existing and desired states are unclear, and the method of getting to the desired state is unknown. These problems are usually unique, complex, and have not been encountered before. Ill-structured problems cannot be solved with programmed decisions. In dealing with these problems, organizations use non-programmed decision making which means that they will gather more information and be more self-consciously analytical in their approach. Ill-structured problems can entail high risk and stimulate political considerations. II. The Complete Decision Maker A Rational Decision-Making Model When a rational decision maker identifies a problem, he or she is likely to search for information to clarify the problem and suggest alternatives; evaluate the alternatives and choose the best for implementation. The implemented solution is then monitored over time to ensure its immediate and continued effectiveness. If difficulties occur at any point in the process, repetition or recycling may be effected. A. Perfect versus Bounded Rationality Perfect rationality involves 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. 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. 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. 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. They involve assumptions and shortcuts that can improve decision making efficiency but frequently lead to serious errors in judgment. B. Problem Identification and Framing www.notesolution.com
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