Chapter 8

Fundamentals of Decision Making

Hellriegel, Jackson, and Slocum MANAGEMENT: A Competency-Based Approach South-Western College Publishing Copyright 2002

8.1

Learning Objectives
After reading this chapter, you should be able to:
Explain the role of decision making for managers and employees State the conditions under which individuals make decisions Describe the characteristics of routine, adaptive, and innovative decisions

Explain the features of three basic models of decision making

Hellriegel, Jackson, and Slocum MANAGEMENT: A Competency-Based Approach South-Western College Publishing Copyright 2002

8.2

Conditions Under Which Decisions Are Made

Certainty

Risk

Uncertainty

Objective probabilities

Subjective probabilities

Hellriegel, Jackson, and Slocum MANAGEMENT: A Competency-Based Approach South-Western College Publishing Copyright 2002

Adapted from Figure 8.1

8.3

Framework for Decision Making

Unusual and ambiguous Innovative decisions Uncertainty

Types of Problems

Adaptive decisions Risk Routine decisions

Certainty
Known and well defined
Hellriegel, Jackson, and Slocum MANAGEMENT: A Competency-Based Approach South-Western College Publishing Copyright 2002

Types of Solutions

Untried and ambiguous

Adapted from Figure 8.2

8.4

Benefits of Continuous Improvement

1) Enhanced customer value through new and improved products and services 2) Reduction in errors, defects, and waste 3) Increased responsiveness changes in customer expectations 4) Increased productivity and effectiveness in the use of resources

Hellriegel, Jackson, and Slocum MANAGEMENT: A Competency-Based Approach South-Western College Publishing Copyright 2002

8.5

Rational Decision Making Model

Phase 1: Define and diagnose the problem Phase 2: Set goals Phase 3: Search for alternative solutions Phase 4: Compare and evaluate alternative solutions

External and internal environmental factors and stakeholders

Phase 7: Follow up and control Phase 6: Implement the solution selected Phase 5: Choose among alternative solutions

Hellriegel, Jackson, and Slocum MANAGEMENT: A Competency-Based Approach South-Western College Publishing Copyright 2002

Adapted from Figure 8.3

8.6

Factors Influencing a Satisficing Decision

Information Processing Biases Limited search
Triggers Leads to

Perceived problem

Satisficing decision

Limited information
Hellriegel, Jackson, and Slocum MANAGEMENT: A Competency-Based Approach South-Western College Publishing Copyright 2002

Adapted from Figure 8.4

8.7

Political Model of Decision Making

Divergence In Problem Definition
Multiple Stakeholders with Power

Divergence in goals
Triggers Leads to

Political Decision Making

Divergence in Solutions
Hellriegel, Jackson, and Slocum MANAGEMENT: A Competency-Based Approach South-Western College Publishing Copyright 2002

Adapted from Figure 8.5