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Decision Making Process: A Comprehensive Guide - Prof. Christopher P. Neck, Study notes of Introduction to Business Management

Virginia Polytechnic Institute and State University (Virginia Tech)Introduction to Business Management

Prof. Christopher P. Neck

An in-depth exploration of the decision-making process, including eight steps from identifying a problem to appraising the result. Discover decision-making styles, heuristics, and various organizational structures. Understand the concepts of rationality, certainty, risk, uncertainty, creativity, and more.

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Decision making process- a set of eight steps that include id’ing a problem, selecting a solution,

and evaluating the effectiveness of the solution

Problem (step 1) - a discrepancy b/w an existing and a desired state of affairs

Decision criteria (step 2) – factors that are relevant in a decision.

Weight each criteria (step 3)

List alts that could succeed in solving problem (step 4)

Critically analyze each alt, rate each (step 5)

Choosing the best alt by scoring (step 6)

Decision implementation (step 7) - putting a decision into action; includes conveying the

decision to the persons who will be affected by it and getting their commitment to it

Appraise the result of the decision (step 8)

Rational- describes choices that are consistent and value-maximizing within specified constraints

A perfectly rational decision making is fully objective and logical

Certainty- the implication that, in making a decision, the decision maker knows the outcome of

every possible alt

Risk- the probability that a particular outcome will result from a given decision

Uncertainty- a condition in which managers do not have full knowledge of the problem they face

and cannot determine even a reasonable probability of alt outcomes

Creativity- the ability to produce novel and useful ideas

Creative components- expertise, creative-thinking skills, and intrinsic tast motivation

Satisfice- making a good enough decision

Bounded rationality- behavior that is rational within the parameters of a simplified model that

captures the essential features of a problem. Herbert Simon

Heuristics- judgmental shortcuts

Availability heuristic- the tendency for people to base their judgments on info that is readily

available to them

Representative heuristic- the tendency for people to base judgments of probability on things with

which they are familiar. Wearing Michael Vick jersey and playing like him to go to NFL

Escalation of commitment- an increased commitment to a previous decision despite negative info

ie bidding more in blackjack when you lose

Well-structured problems- straightforward, familiar, easily defined problems

Discover Study notes of Introduction to Business Management Virginia Polytechnic Institute and State University (Virginia Tech)

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Decision making process- a set of eight steps that include id’ing a problem, selecting a solution, and evaluating the effectiveness of the solution Problem (step 1) - a discrepancy b/w an existing and a desired state of affairs Decision criteria (step 2) – factors that are relevant in a decision. Weight each criteria (step 3) List alts that could succeed in solving problem (step 4) Critically analyze each alt, rate each (step 5) Choosing the best alt by scoring (step 6) Decision implementation (step 7) - putting a decision into action; includes conveying the decision to the persons who will be affected by it and getting their commitment to it Appraise the result of the decision (step 8) Rational- describes choices that are consistent and value-maximizing within specified constraints A perfectly rational decision making is fully objective and logical Certainty- the implication that, in making a decision, the decision maker knows the outcome of every possible alt Risk- the probability that a particular outcome will result from a given decision Uncertainty- a condition in which managers do not have full knowledge of the problem they face and cannot determine even a reasonable probability of alt outcomes Creativity- the ability to produce novel and useful ideas Creative components- expertise, creative-thinking skills, and intrinsic tast motivation Satisfice- making a good enough decision Bounded rationality- behavior that is rational within the parameters of a simplified model that captures the essential features of a problem. Herbert Simon Heuristics- judgmental shortcuts Availability heuristic- the tendency for people to base their judgments on info that is readily available to them Representative heuristic- the tendency for people to base judgments of probability on things with which they are familiar. Wearing Michael Vick jersey and playing like him to go to NFL Escalation of commitment- an increased commitment to a previous decision despite negative info ie bidding more in blackjack when you lose Well-structured problems- straightforward, familiar, easily defined problems

Ill-structured problems- new problems in which info is ambiguous or incomplete Programmed decision- a repetitive decision that can be handled by routine approach Procedure- a series of interrelated sequential steps that can be used to respond to a well- structured problem Rule- an explicit statement that tells managers what they ought or ought not to do Policy- a general guide that establishes parameters for making decision Nonprogrammed decisions- decisions that must be custom-made to solve unique and nonrecurring problems Expert systems- software that acts like an expert in analyzing and solving ill-structured problems Neural networks- software that is designed to imitate the structure of brain cells and connections among them Decision-making styles chart page 134 Directive- low torelance for ambiguity and rational way of thinking. Logical and efficient and typically make fast decisions that focus on the short term Analytic- high tolerance for ambiguity combined with rational way of thinking. Prefer to have complete info before making a decision, carefully consider many alts. Conceptual- someone who tends to be very broad in outlook and to look at many alts. Tend to focus on the long run and often look for creative solutions Behavioral- individual who thinks intuitively but has a low tolerance for uncertainity. Work well with others, are open to suggestions, and concerned about the individuals who work for them Nominal group technique- a decision-making technique in which group members are physically present but operate independently Ringisei- Japanese consensus-forming group decisions Work specialization- a component of organization structure that involves having each discrete step of a job done by a different individual rather than having one individual do the whole job. Unity of command- the management principle that no person should report to more than one boss Span on control- the number of subordinates a manager can direct efficiently and effectively Authority- the rights inherent in a managerial position to give orders and expect them to be obeyed Responsibility- an obligation to perform assigned activities

Hierarchy of needs- Maslow’s theory that there is a hierarchy of five human needs; physiological, safety, social, esteem, and self-actualization; as each need becomes satisfied, the next need becomes dominant Theory X- McGregor’s term for the assumption that employees dislike work, are lazy, seek to avoid responsibility, and must be coerced to perform Theory Y- McGregor’s term for the assumption that employees are creative, seek responsibility, and can exercise self-direction The theories are how managers view their employees Motivation-hygiene theory- Herzberg’s theory that intristic factors are related to job satisfaction and extrinsic factors are related to job dissatisfaction Hygiene factors- Herzberg’s term for factors, such as, working conditions and salary, that, when adequate, may eliminate job dissatisfaction but do not necessarily increase job satisfaction Motivators- Herzberg’s term for factors, such as, recognition and growth, that increase job satisfaction Three-needs theory- McClelland’s theory that the needs for achievement, power, and affiliation are major motives in work Equity theory- Adam’s theory that employees perceive what they get from a job situation (outcomes) in relation to what they put into it (input) and them compare their input-outcome ratio with the input-outcome ratios of relevant others Referent- in equity theory, the other persons, the systems, or the personal experiences against which individuals compare themselves to assess equity Job characteristics model- page 329 Expectancy theory- page 331 Broad-banding- present pay level, based on the degree competencies exist Communication process- the transferring and understanding of meaning Encoding- the conversion of a message into symbolic form Filtering- the deliberate manipulation of info to make it appear more favorable to the receiver Selective perception- selective hearing of communications based on one’s needs, motivations, experience, or other personal characteristics Barriers to effective communication  Filtering  Selective perception  Info overload

 Emotions  Language  Gender  National culture Knowledge management- includes cultivating a learning culture in which org members systematically gather knowledge and share it with others How to give effective feedback  Focus on specific behaviors  Keep feedback positive  Keep feedback goal oriented  Make feedback well timed  Ensure understanding  Direct negative feedback toward behavior that the receiver can control How to delegate effectively  Clarify the assignment  Specify employees range of discretion  Allow employees to participate  Inform others that delegation has occurred  Establish feedback controls Traditional view of conflict- the view that all conflict is bad and must be avoided Human relations view of conflict- the view that conflict is natural and inevitable and has the potential to be a positive force Interactionist view of conflict- the view that some conflict is necessary for an org to perform effectively Conflict handling strategies- page 410 Distributive bargaining- negotiation under zero-sum conditions, in which any gain made by one party involves a loss to the other party Integrative bargaining- negotiation in which there is at least one steelement that involves no loss to either party

Decision Making Process: A Comprehensive Guide - Prof. Christopher P. Neck, Study notes of Introduction to Business Management

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