Robbins Fom11 Im 04
Robbins Fom11 Im 04
CHAPTER MAKING
4 DECISIONS
LEARNING OUTCOMES
Management Myth
Myth: A good decision should be defined by its outcome.
Truth: A good decision should be judged by the process used, not the results achieved.
SUMMARY
In some cases, a good decision results in an undesirable outcome. As a decision maker, you can
control the process. But in the real world, factors outside your control can adversely affect the
outcome. Using the right process may not always result in a desirable outcome, but it increases
the probability.
Teaching Tips:
Have students think about important decisions they have made recently.
Questions for students to consider:
1. Did they follow a series of steps to think through while making this decision?
2. Was there a high degree of uncertainty involved in making the decision?
3. Was a group of people involved in making this decision? If so, did the group help or hurt the
decision-making process?
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MyLab Management Watch It!: If your instructor has assigned this activity, go to
www.pearson.com/mylab/management to complete the video exercise.
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B. Bounded Rationality
1. Management theory is built on the premise that individuals act rationally, but are
limited by their ability to process information.
2. Most decision makers don’t fit the assumption of perfect rationality.
3. No one can possibly analyze all informational on all alternatives so they satisfice—
accept solutions that are “good enough,” rather than spend time and other resources
trying to maximize.
a) Decision making is also likely influenced by the organization’s culture, internal
politics, power considerations, and by a phenomenon called escalation of
commitment, which is an increased commitment to a previous decision despite evidence that it
may have been wrong.
Classic Concepts in Today’s Workplace
1. Herbert Simon found that within certain constraints, managers do act rationally.
2. Because it is impossible for human beings to process and understand all the information
necessary, they construct simplified models that extract the essential features from problems.
a) Bounded rationality—decision makers behave rationally within the limits of the
simplified or bounded model.
b) The result is a satisfying decision; the solutions are “good enough.”
Discuss This:
• Is satisfying settling for second best? What do you think? In your “assigned” group,
discuss your opinions about this.
• How does knowing about bounded rationality help managers be better decision makers?
MyLab Management Watch It 2!: If your instructor has assigned this activity, go to
www.pearson.com/mylab/management to complete the video exercise.
Managing Technology in Today’s Workplace
Making Better Decisions with Technology
1. Information technology is providing managers with a wealth of decision-making support.
Two decision-making tools include expert systems and neural networks.
a) Encode the relevant experience using software programs.
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Discuss This:
• Striving for more realistic beauty/body image ideals: Who are potential stakeholders in
this situation and what stake do they have in this decision?
• From a generic viewpoint, how do ethical issues affect decision making? In this specific
story, what potential ethical considerations do you see in the decision by CVS to stop
altering beauty images and start using more realistic images?
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managers need to really examine and evaluate how big data might contribute to
their decision making before jumping in with both feet.
MyLab Management Try It!: If your instructor has assigned this activity, go to
www.pearson.com/mylab/management to complete the Mini Sim.
REVIEW AND APPLICATIONS
CHAPTER SUMMARY
4-1 Describe the decision-making process. The decision-making process consists of eight
steps: (1) identify the problem, (2) identify the decision criteria, (3) weight the criteria,
(4) develop alternatives, (5) analyze alternatives, (6) select alternative, (7) implement
alternative, and (8) evaluate decision effectiveness. As managers make decisions, they
may use heuristics to simplify the process, which can lead to errors and biases in their
decision making. The 12 common decision-making errors and biases include
overconfidence, immediate gratification, anchoring, selective perception, confirmation,
framing, availability, representation, randomness, sunk costs, self-serving bias, and
hindsight.
4-2 Explain the three approaches managers can use to make decisions. The first approach
is the rational model. The assumptions of rationality are as follows: The problem is clear
and unambiguous, a single, well-defined goal is to be achieved, all alternatives and
consequences are known, and the final choice will maximize his or her economic payoff.
The second approach, bounded rationality, says that managers make rational decisions
but are bounded (limited) by their ability to process information. In this approach,
managers satisfice, which is when decision makers accept solutions that are good enough.
Finally, intuitive decision making is making decisions on the basis of experience,
feelings, and accumulated judgment.
4-3 Describe the types of decisions and decision-making conditions managers face.
Programmed decisions are repetitive decisions that can be handled by a routine approach
and are used when the problem being resolved is straightforward, familiar, and easily
defined (structured). Non-programmed decisions are unique decisions that require a
custom-made solution and are used when the problems are new or unusual (unstructured)
and for which information is ambiguous or incomplete. Certainty involves a situation in
which a manager can make accurate decisions because all outcomes are known. With
risk, a manager can estimate the likelihood of certain outcomes in a situation. Uncertainty
is a situation where a manager is not certain about the outcomes and can’t even make
reasonable probability estimates.
4-4 Discuss group decision making. Groups offer certain advantages when making
decisions—more complete information, more alternatives, increased acceptance of a
solution, and greater legitimacy. On the other hand, groups are time-consuming, can be
dominated by a minority, create pressures to conform, and cloud responsibility. Three
ways of improving group decision making are brainstorming (utilizing an idea-generating
process that specifically encourages any and all alternatives while withholding any
criticism of those alternatives), the nominal group technique (a technique that restricts
discussion during the decision-making process), and electronic meetings (the most recent
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approach to group decision making, which blends the nominal group technique with
sophisticated computer technology).
4-5 Discuss contemporary issues in managerial decision making. As managers deal with
employees from diverse cultures, they need to recognize common and accepted behavior
when asking them to make decisions. Some individuals may not be as comfortable as
others with being closely involved in decision making, or they may not be willing to
experiment with something radically different. Also, managers need to be creative in their
decision making since creativity allows them to appraise and understand the problem
more fully, including “seeing” problems that others can’t see. Design thinking also
influences the way that managers approach decision making, especially in terms of
identifying problems and how they identify and evaluate alternatives. Finally, big data is
changing what and how decisions are made, but managers need to evaluate how big data
might contribute to their decision making.
DISCUSSION QUESTIONS
4-1 Why is decision making often described as the essence of a manager’s job?
Answer: Making decisions is at the heart of nearly everything a manager does. While
everyone in an organization makes decisions, decision making is especially important for
managers. Managers make routine decisions such as assigning shifts or dealing with
customer complaints as they plan, organize, lead, and control. To appear competent and
intelligent, managers want to be good decision makers and exhibit good decision-making
skills.
4-3 All of us bring biases to the decisions we make. What would be the drawbacks of
having biases? Could there be any advantages to having biases? Explain. What are
the implications for managerial decision making?
Answer: Exhibit 4-5 shows the common managerial biases used in decision making. Any
of these biases could contribute to poor decision making that could negatively impact
individuals and/or the organization. Managers need to be cognizant of any potential biases
prior to making important decisions. Managers also should pay attention to “how” they
make decisions and try to identify the heuristics they typically use and critically evaluate
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how appropriate those are. Finally, managers might want to ask those around them to help
identify weaknesses in their decision-making style and try to improve on them.
4-4 “Because managers have so many powerful decision-making tools, they should be able
to make more rational decisions.” Do you agree or disagree with this statement?
Why?
Answer: Students should realize that technology helps decision making, it doesn’t make
decisions. The human factor—hidden agendas, power relationships, office politics, etc.,
will still be present. Students should tie their answer into the characteristics of the
technology, however.
The electronic meeting blends the nominal group technique with computer technology.
Numerous people sit around a horseshoe-shaped table that is empty except for a series of
computer terminals. Issues are presented to participants, who type their responses onto their
computer screens. Individual comments, as well as aggregate votes, are displayed on a
projection screen in the room. The major advantages of electronic meetings are anonymity,
honesty, and speed. Participants can anonymously type any message they want, and it will
flash on the screen for all to see at the push of a board key. It is fast—chitchat is
eliminated, discussions do not digress, and many participants can “talk” at once without
interrupting the others. But there are drawbacks. Those who can type quickly can outshine
those who may be verbally eloquent but are lousy typists. Those with the best ideas don’t
get credit for them. The process lacks the informational richness of face-to-face oral
communication.
Learning Outcome 4-2: Explain the three approaches managers can use to make
decisions.
AACSB: Analytical Thinking
4-5 Is there a difference between wrong decisions and bad decisions? Why do good
managers sometimes make wrong decisions? Bad decisions? How might managers
improve their decision-making skills?
Answer: Responses to this question will vary by student, but students should note that a
bad decision can cost an organization millions of dollars. Good managers can sometimes
make the wrong choices due to inadequate information, biases, a lack of education or
experience, etc. Bad decisions can be the result of haste, emotion, and a host of other
reasons. Managers could improve decision making through the use of research, experience,
a reduction in bias, asking others for support, and so on.
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4-6 Describe a decision you’ve made that closely aligns with the assumptions of perfect
rationality. Compare this decision with the process you used to select your college. Did
you depart from the rational model in your college decision? Explain.
Answer: Responses to this question will vary by student. In their response, students should
demonstrate an understanding of rationality in decision making and should take all eight
steps into consideration, although they may have some difficulty in applying all the steps.
Some students may introduce the notion of satisficing to describe their college decision
making process.
Learning Outcome 4-2: Explain the three approaches managers can use to make
decisions.
AACSB: Analytical Thinking
4-7 Explain how a manager might deal with making decisions under conditions of
uncertainty.
Answer: While managers would prefer to make decisions in situations where there is
certainty, it is likely that most decisions will involve some risk related to an uncertain
outcome. In these cases, managers can assign degrees of probability to the various
alternatives considered and choose the decision with the highest probability of a beneficial
outcome.
4-8 Why do you think organizations have increased the use of groups for making
decisions and when would you recommend using groups to make decisions?
Answer: Responses to this question will depend on the student’s opinion of group decision
making. Students will probably focus their responses on the advantages and disadvantages
of group decision making.
4-9 Why does the decision maker need to be creative? In which steps of the decision-
making process is creativity likely to be most important?
Answer: The ability to produce novel and useful ideas is an important characteristic of a
successful manager. Being creative allows the manager to better appraise and understand
problems and see things others might not. Thinking outside the box can allow a manager to
identify all viable solutions to a problem. Being a creative decision maker is particularly
important in the development of alternatives step of the decision-making process and also
in the identification of decision criteria and analysis of alternatives stages.
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4-10 What is big data? How can managers effectively use big data to improve their
decision making? Should managers be cautious in using big data?
Answer: Big data refers to the vast amount of quantifiable information that can be
analyzed by highly sophisticated data processing. Most students will probably agree that
big data can be a powerful decision-making tool, but students may also point out that care
should be taken to avoid getting bogged down in too much data or related, but not directly
relevant data.
Learning Outcome 4-5: Discuss contemporary issues in managerial decision making.
AACSB: Analytical Thinking
4-11 Today’s world is chaotic and fast-paced. How does time pressure affect managerial
decision making? What can managers do to still be good decision makers under such
conditions?
Answer: Responses to this question will vary by student. Many will suggest that a chaotic
and fast-paced environment can lead to decisions being made on the fly without careful
consideration of all relevant information. Some students may suggest that this type of
environment could actually lead to better decision making where managers rely on their gut
and don’t get bogged down in information overload. Other students may point out that in
the era of big data, managers cannot possibly process everything and so will automatically
satisfice.
Learning Outcome 4-5: Discuss contemporary issues in managerial decision making.
AACSB: Analytical Thinking
4-12 Discuss the pros and cons of managers using technology to help make decisions.
Answers: Most students will probably suggest that using technology to make decisions can
be both a blessing and a curse. Students might point out for example, that technology can
make routine decisions very easy, leaving the manager with time to address other issues.
More complex decisions can also be facilitated by technology, but they can also be
complicated by the power of technology to create too many alternative options.
Learning Outcome 4-5: Discuss contemporary issues in managerial decision making.
AACSB: Analytical Thinking
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Every time the phone rings, your stomach clenches and your palms start to sweat. And
it’s no wonder! As sales manager for Brinkers, a machine tool parts manufacturer, you’re
besieged by calls from customers who are upset about late deliveries. Your boss, Carter
Hererra, acts as both production manager and scheduler. Every time your sales
representatives negotiate a sale, it’s up to Carter to determine whether production can
actually meet the delivery date the customer specifies. And Carter invariably says “No
problem.” The good thing about this is that you make a lot of initial sales. The bad news
is that production hardly ever meets the shipment dates that Carter authorizes. And he
doesn’t seem to be all that concerned about the aftermath of late deliveries. He says, “Our
customers know they’re getting outstanding quality at a great price. Just let them try to
match that anywhere. It can’t be done. So even if they have to wait a couple of extra days
or weeks, they’re still getting the best deal they can.” Somehow the customers don’t see it
that way. And they let you know about their unhappiness. Then it’s up to you to try to
soothe the relationship. You know the problem is taken care of, but what possible
solutions are there? After all, how are you going to keep from making your manager mad
or making the customer mad?
Break into groups of three. Assume you’re the sales manager. What creative solutions
can your group come up with to deal with this problem?
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Experiential Exercise
Even in today’s digital workplace, procedures, rules, and policies are important tools as they can
help managers and employees do their jobs more efficiently and effectively. Working together in
your “assigned” group, write a procedure, a rule, and a policy for your instructor to use in your
class as a “seated” class. Write another procedure, rule, and policy for your instructor to use in
your class as an “online” class. For both sets, be sure to explain how it fits the characteristics of a
procedure, a rule, or a policy.
Teaching Tip: Topics students might address include deadlines, uploading assignments,
attendance, and so on. Ask students to think about the differences between their
procedures, rules, and policies for the seated class as compared to the online class. Why
do the differences exist? What does this imply about a manager who works remotely as
compared to a traditional office manager?
Discussion Questions
Answer: Responses to this question will vary by student. Many will note that the sheer
number of delivery trucks and packages in the UPS system every day makes efficiency
important to the company. Students should recognize that a wasted moment or activity
multiplied across the entire system can really add up to significant costs. Similarly, small
savings, while perhaps inconsequential on an individual basis, can be important if they
are viewed from a system-wide perspective. Students might point out the unique nature of
the UPS drivers – an individual who spends the entire day driving and delivering
packages, often to remote or unknown areas – makes safety a key concern for the
company. UPS wants to ensure that both its drivers and other drivers on the road are safe,
and that drivers are safe as they deliver packages.
Learning Outcome 4-3: Discuss the types of decisions and decision-making conditions
managers face.
AACSB: Analytical Thinking
4-15 Would you characterize a driver’s route decisions as structured or unstructured problems?
Programmed or nonprogrammed decisions? Explain.
Answer: Many students will probably agree that the driver’s route decisions are
structured, programmed decisions in that they involve making the same decisions each
day about the route to take, etc. Other students will disagree, pointing out that because the
packages differ every day, the driver is dealing with new, and perhaps incomplete
information on a daily basis.
Learning Outcome 4-3: Discuss the types of decisions and decision-making conditions
managers face.
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Answer: ORION provides a computer-generated route map for each driver based on the
packages to be delivered that day. Because it is a computer-generated map rather than a
human designed map, ORION can take into account a more complex set of factors and
generate a better solution. UPS drivers can opt out of the ORION-generated map, but
have to justify why they would do so. Students will likely suggest that this gives drivers
an incentive to develop better solutions. Relying on the map developed by ORION means
that drivers can focus on other aspects of their job such as safe driving.
Learning Outcome 4-3: Discuss the types of decisions and decision-making conditions
managers face.
AACSB: Analytical Thinking
4-17 How is UPS being a sustainable corporation?
Discussion Questions
4-18 In a general sense, what kinds of decisions are made in baseball? Would you characterize
these decisions as structured or unstructured problems? Explain. What type(s) of
decision-making condition would you consider this to be? Explain.
Answer: Responses to this question will depend how the student defines baseball – as the
team, as individual players, as the coaching staff, as the different positions, etc. – and
how much the student knows about the game. A student might suggest for example that
the decisions a pitcher makes are structured in that the pitch requires a certain series of
steps depending on the type of pitch. Another student might suggest just the opposite
pointing out that the pitcher is dealing with a new set of players each inning, that the type
of pitch may depend on how many bases are open or how many outs have been made,
and so on.
Learning Outcome 4-3: Discuss the types of decisions and decision-making conditions
managers face.
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Answer: This question is likely to generate some debate among students. Many will
contend that because baseball is a team sport, basing decisions only on objective,
quantifiable criteria cannot lead to a good outcome. Students may point out for example,
the value of a strong leader on a team in a close game, or the player that sacrifices for the
good of the team, both situations where objective data is not an appropriate way to assess
players.
Learning Outcome 4-3: Discuss the types of decisions and decision-making conditions
managers face.
AACSB: Analytical Thinking
4-20 Describe how baseball front office executives and college coaches could use each of the
following to make better decisions: (a) rationality, (b) bounded rationality, and (c)
intuition.
Answer: Student responses to this question will vary, but might suggest that front office
executives and college coaches can use rationality to establish certain consistent and
logical statistics such as batting average to make decisions about who to recruit or play.
This type of decision making should have lots of data supporting it. When using bounded
rationality, the executives and coaches recognize that they are limited in their ability to
process information and that they need to identify solutions that satisfice such as a batting
average of at least x. Finally, decisions based on intuition might reflect the experience of
the coach or executive who recognizes the potential of a player because “he reminds me
of Derek Jeter.”
Learning Outcome 4-2: Explain the three approaches managers can use to make
decisions.
AACSB: Analytical Thinking
4-21 Can there be too much information in managing the business of baseball? Discuss.
Answer: Many students will probably suggest that there can definitely be too much
information in managing the business of baseball. Students may point out for example
that knowing the player at bat is a lefty who usually hits to right field can be helpful to
the pitcher and the outfield. Knowing that he also hit to right field in the third inning of
the previous game is probably irrelevant although an easily obtainable piece of
information in the era of big data.
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Discussion Questions
4-22 Which decisions in this story could be considered unstructured problems? Structured
problems?
Answer: Structured problems are those that are straightforward, familiar, and easily
defined, while unstructured problems are new or unusual, where information is
ambiguous or incomplete. Students will probably agree that many of the problems
described in the story involving in-store procedures dealing with customers are structured
because Panera has developed a solution for them. In contrast, problems like the mosh pit
or introducing online ordering technology are unstructured.
Learning Outcome 4-3: Discuss the types of decisions and decision-making conditions
managers face.
AACSB: Analytical Thinking
4-23 How did Panera Bread use the decision-making process (see Exhibit 4-1) to tackle its
“mosh pit” problem?
Answer: Exhibit 4-1 shows the decision-making process. Panera used the system by first
recognizing that the problem existed, on through the steps to developing alternatives, and
then choosing and evaluating that selection. Students should recognize that solving the
mosh pit problem required solving many other problems as well.
4-24 Decision making starts with a problem and ends with a solution to solve problems. Did
that happen in this story? Explain your answer.
Answer: Responses to this question will vary by student. Some will probably point out
that setting out to solve one problem can result in the identification and solving of many
other problems first, and that even as a problem is solved, new problems related to that
solution can emerge.
4-25 Creativity and design thinking are two contemporary decision-making issues that we
introduced in the chapter. Were creativity and design thinking illustrated in this story?
Discuss.
Answer: Responses to this question will depend on the opinion of the student. Many will
suggest that creativity and designing thinking were part of Panera’s solution to its mosh
pit and are likely to be part of the company’s new delivery service. Students may note for
example that rather than choosing to put extra workers on at busy times, Panera
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developed an online ordering system and now generates more than $1 billion in sales
digitally.
4-26 What could other companies learn about decision making from Panera’s story? In your
“assigned” group, talk about this and then create a list with some suggestions for helping
you be better decision makers.
Answer: Responses to this question will depend on the individual group’s perspective.
Many will probably focus on the fact that Panera didn’t solve its problem overnight.
Instead, it took six years and the resolution of many other problems to arrive at an
effective solution. Students may also note the importance of thinking outside the box and
taking advantage of evolving technologies.
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