Chapter 6 management (10 th edition) by robbins and coulter
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The document outlines key concepts about managerial decision making including: 1) The eight step decision making process involves identifying a problem, criteria, alternatives, selecting an alternative, implementation, and evaluation. 2) Managers face bounded rationality and may satisfice rather than optimize. They can also escalate commitment to past decisions. 3) Decisions are either programmed and routine or nonprogrammed and unique. They also occur under certainty, risk, or uncertainty.
Chapter 6 management (10 th edition) by robbins and coulter
- 1. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6–1 ManagersManagers asas Decision MakersDecision Makers ChapterChapter 66 Management Stephen P. Robbins Mary Coulter tenth edition
- 2. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6–2 Learning OutcomesLearning Outcomes Follow this Learning Outline as you read andFollow this Learning Outline as you read and study this chapter.study this chapter. 6.1 The Decision-Making Process. • Define decision.Define decision. • Describe the eight steps in the decision-making process.Describe the eight steps in the decision-making process. 6.2 Managers Making Decisions. • Discuss the assumptions of rational decision making.Discuss the assumptions of rational decision making. • Describe the concepts of bounded rationality, satisficing, andDescribe the concepts of bounded rationality, satisficing, and escalation of commitment.escalation of commitment. • Explain intuitive decision making.Explain intuitive decision making.
- 3. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6–3 Learning OutcomesLearning Outcomes 6.3 Types Of Decisions and Decision-Making Conditions. • Explain the two types of problems and decisions.Explain the two types of problems and decisions. • Contrast the three decision making conditions.Contrast the three decision making conditions. • Explain maximax, maximin, and minimax decision choiceExplain maximax, maximin, and minimax decision choice approaches.approaches. 6.4 Decision-Making Styles • Describe two decision-making styles.Describe two decision-making styles. • Discuss the twelve decision-making biases.Discuss the twelve decision-making biases. • Explain the managerial decision-making model.Explain the managerial decision-making model.
- 4. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6–4 Learning OutcomesLearning Outcomes 6.5 Effective Decision Making In Today’s World. • Explain how managers can make effective decisionsExplain how managers can make effective decisions in today’s world.in today’s world. • List the six characteristics of an effective decisionList the six characteristics of an effective decision making process.making process. • List the five habits of highly reliable organizations.List the five habits of highly reliable organizations.
- 5. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6–5 Decision MakingDecision Making • DecisionDecision Making a choice from two or more alternatives.Making a choice from two or more alternatives. • The Decision-Making ProcessThe Decision-Making Process Identifying a problem and decision criteria andIdentifying a problem and decision criteria and allocating weights to the criteria.allocating weights to the criteria. Developing, analyzing, and selecting an alternativeDeveloping, analyzing, and selecting an alternative that can resolve the problem.that can resolve the problem. Implementing the selected alternative.Implementing the selected alternative. Evaluating the decision’s effectiveness.Evaluating the decision’s effectiveness.
- 6. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6–6 Exhibit 6–1Exhibit 6–1 The Decision-MakingThe Decision-Making ProcessProcess
- 7. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6–7 Step 1: Identifying the ProblemStep 1: Identifying the Problem • ProblemProblem A discrepancy between an existing and desired stateA discrepancy between an existing and desired state of affairs.of affairs. • Characteristics of ProblemsCharacteristics of Problems A problem becomes a problem when a managerA problem becomes a problem when a manager becomes aware of it.becomes aware of it. There is pressure to solve the problem.There is pressure to solve the problem. The manager must have the authority, information, orThe manager must have the authority, information, or resources needed to solve the problem.resources needed to solve the problem.
- 8. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6–8 Step 2: Identifying Decision CriteriaStep 2: Identifying Decision Criteria • Decision criteria are factors that are importantDecision criteria are factors that are important (relevant) to resolving the problem such as:(relevant) to resolving the problem such as: Costs that will be incurred (investments required)Costs that will be incurred (investments required) Risks likely to be encountered (chance of failure)Risks likely to be encountered (chance of failure) Outcomes that are desired (growth of the firm)Outcomes that are desired (growth of the firm) Step 3: Allocating Weights to the CriteriaStep 3: Allocating Weights to the Criteria • Decision criteria are not of equal importance:Decision criteria are not of equal importance: Assigning a weight to each item places the items inAssigning a weight to each item places the items in the correct priority order of their importance in thethe correct priority order of their importance in the decision-making process.decision-making process.
- 9. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6–9 Exhibit 6–2Exhibit 6–2 Criteria and Weights for Computer ReplacementCriteria and Weights for Computer Replacement DecisionDecision Criterion Weight Memory and Storage 10 Battery life 8 Carrying Weight 6 Warranty 4 Display Quality 3
- 10. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6–10 Step 4: Developing AlternativesStep 4: Developing Alternatives • Identifying viable alternativesIdentifying viable alternatives Alternatives are listed (without evaluation) that canAlternatives are listed (without evaluation) that can resolve the problem.resolve the problem. Step 5: Analyzing AlternativesStep 5: Analyzing Alternatives • Appraising each alternative’s strengths andAppraising each alternative’s strengths and weaknessesweaknesses An alternative’s appraisal is based on its ability toAn alternative’s appraisal is based on its ability to resolve the issues identified in steps 2 and 3.resolve the issues identified in steps 2 and 3.
- 11. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6–11 Exhibit 6–3 Assessed Values of LaptopExhibit 6–3 Assessed Values of Laptop Computers Using Decision CriteriaComputers Using Decision Criteria
- 12. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6–12 Step 6: Selecting an AlternativeStep 6: Selecting an Alternative • Choosing the best alternativeChoosing the best alternative The alternative with the highest total weight isThe alternative with the highest total weight is chosen.chosen. Step 7: Implementing theStep 7: Implementing the AlternativeAlternative • Putting the chosen alternative into action.Putting the chosen alternative into action. Conveying the decision to and gaining commitmentConveying the decision to and gaining commitment from those who will carry out the decision.from those who will carry out the decision.
- 13. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6–13 Exhibit 6–4Exhibit 6–4 Evaluation of Laptop AlternativesEvaluation of Laptop Alternatives Against Weighted CriteriaAgainst Weighted Criteria
- 14. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6–14 Step 8: Evaluating the Decision’sStep 8: Evaluating the Decision’s EffectivenessEffectiveness • The soundness of the decision is judged by itsThe soundness of the decision is judged by its outcomes.outcomes. How effectively was the problem resolved byHow effectively was the problem resolved by outcomes resulting from the chosen alternatives?outcomes resulting from the chosen alternatives? If the problem was not resolved, what went wrong?If the problem was not resolved, what went wrong?
- 15. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6–15 Exhibit 6–5Exhibit 6–5 Decisions in the ManagementDecisions in the Management FunctionsFunctions
- 16. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6–16 Making DecisionsMaking Decisions • RationalityRationality Managers make consistent, value-maximizing choicesManagers make consistent, value-maximizing choices with specified constraints.with specified constraints. Assumptions are that decision makers:Assumptions are that decision makers: Are perfectly rational, fully objective, and logical.Are perfectly rational, fully objective, and logical. Have carefully defined the problem and identified all viableHave carefully defined the problem and identified all viable alternatives.alternatives. Have a clear and specific goalHave a clear and specific goal Will select the alternative that maximizes outcomes in theWill select the alternative that maximizes outcomes in the organization’s interests rather than in their personal interests.organization’s interests rather than in their personal interests.
- 17. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6–17 Making Decisions (cont’d)Making Decisions (cont’d) • Bounded RationalityBounded Rationality Managers make decisions rationally, but are limitedManagers make decisions rationally, but are limited (bounded) by their ability to process information.(bounded) by their ability to process information. Assumptions are that decision makers:Assumptions are that decision makers: Will not seek out or have knowledge of all alternativesWill not seek out or have knowledge of all alternatives WillWill satisficesatisfice—choose the first alternative encountered that—choose the first alternative encountered that satisfactorily solves the problem—satisfactorily solves the problem—rather than maximize therather than maximize the outcome of their decision by considering all alternatives andoutcome of their decision by considering all alternatives and choosing the best.choosing the best. Influence on decision makingInfluence on decision making Escalation of commitment: an increased commitment to aEscalation of commitment: an increased commitment to a previous decision despite evidence that it may have beenprevious decision despite evidence that it may have been wrong.wrong.
- 18. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6–18 Types of Problems and DecisionsTypes of Problems and Decisions • Structured ProblemsStructured Problems Involve goals that are clear.Involve goals that are clear. Are familiar (have occurred before).Are familiar (have occurred before). Are easily and completely definedAre easily and completely defined—infor—information aboutmation about the problem is available and complete.the problem is available and complete. • Programmed DecisionProgrammed Decision A repetitive decision that can be handled by a routineA repetitive decision that can be handled by a routine approach.approach.
- 19. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6–19 Types of Programmed DecisionsTypes of Programmed Decisions • ProcedureProcedure A series of interrelated steps that a manager can useA series of interrelated steps that a manager can use to respond (applying a policy) to a structured problem.to respond (applying a policy) to a structured problem. • RuleRule An explicit statement that limits what a manager orAn explicit statement that limits what a manager or employee can or cannot do.employee can or cannot do. • PolicyPolicy A general guideline for making a decision about aA general guideline for making a decision about a structured problem.structured problem.
- 20. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6–20 Policy, Procedure, and RulePolicy, Procedure, and Rule ExamplesExamples • PolicyPolicy Accept all customer-returned merchandise.Accept all customer-returned merchandise. • ProcedureProcedure Follow all steps for completing merchandise returnFollow all steps for completing merchandise return documentation.documentation. • RulesRules Managers must approve all refunds over $50.00.Managers must approve all refunds over $50.00. No credit purchases are refunded for cash.No credit purchases are refunded for cash.
- 21. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6–21 Problems and Decisions (cont’d)Problems and Decisions (cont’d) • Unstructured ProblemsUnstructured Problems Problems that are new or unusual and for whichProblems that are new or unusual and for which information is ambiguous or incomplete.information is ambiguous or incomplete. Problems that will require custom-made solutions.Problems that will require custom-made solutions. • Nonprogrammed DecisionsNonprogrammed Decisions Decisions that are unique and nonrecurring.Decisions that are unique and nonrecurring. Decisions that generate unique responses.Decisions that generate unique responses.
- 22. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6–22 Exhibit 6–7 Programmed Versus Nonprogrammed DecisionsExhibit 6–7 Programmed Versus Nonprogrammed Decisions
- 23. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6–23 Decision-Making ConditionsDecision-Making Conditions • CertaintyCertainty A situation in which a manager can make an accurateA situation in which a manager can make an accurate decision because the outcome of every alternativedecision because the outcome of every alternative choice is known.choice is known. • RiskRisk A situation in which the manager is able to estimateA situation in which the manager is able to estimate the likelihood (probability) of outcomes that resultthe likelihood (probability) of outcomes that result from the choice of particular alternatives.from the choice of particular alternatives.
- 24. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6–24 Terms to KnowTerms to Know • decisiondecision • Decision-making processDecision-making process • problemproblem • decision criteriadecision criteria • rational decision makingrational decision making • bounded rationalitybounded rationality • satisficingsatisficing • escalation of commitmentescalation of commitment • intuitive decision makingintuitive decision making • structured problemsstructured problems • programmed decisionprogrammed decision • procedureprocedure • rulerule • policypolicy • unstructured problemsunstructured problems • nonprogrammed decisionsnonprogrammed decisions • certaintycertainty • riskrisk • uncertaintyuncertainty • directive styledirective style • analytic styleanalytic style • conceptual styleconceptual style • behavioral stylebehavioral style • heuristicsheuristics • business performancebusiness performance management (BPM) softwaremanagement (BPM) software
- 25. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6–25 All rights reserved. No part of this publication may be reproduced,All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or bystored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, orany means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher.otherwise, without the prior written permission of the publisher. Printed in the United States of America.Printed in the United States of America.