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22 views25 pages

Robbins Fom11 Im 04

Uploaded by

Yonela
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Chapter 4 – Making Decisions

CHAPTER MAKING
4 DECISIONS

LEARNING OUTCOMES

After reading this chapter, students should be able to:


4-1. Describe the decision-making process.
4-2. Explain the three approaches managers can use to make decisions.
4-3. Describe the types of decisions and decision-making conditions managers face.
4-4. Discuss group decision making.
4-5. Discuss contemporary issues in managerial decision making.

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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I. HOW DO MANAGERS MAKE DECISIONS?


A. Introduction
1. Decision making is typically described as “choosing among alternatives.”
2. This is simplistic because decision making is a process.
a) See Exhibit 4-1 illustrating the decision-making process.
B. What Defines a Decision Problem?
1. The decision-making process begins with the identification of a problem (Step 1), a
discrepancy between an existing and a desired state of affairs.
a) Pfizer sales manager example.
2. Problem identification is subjective.
3. The manager who by mistake solves the wrong problem perfectly is likely to perform
just as poorly as the manager who fails to identify the right problem and does nothing.
a) How do managers become aware that they have a discrepancy?
b) Managers compare their current state of affairs against an acceptable standard.
1) Past performance.
2) Previously set goals.
3) Performance of some other unit within the organization or in other
organizations.
C. What Is Relevant in the Decision-Making Process?
1. Once a problem is identified, the decision criteria must be identified (Step 2).
2. Car-buying example continued.
3. Every decision maker has criteria—explicitly stated or not—that guide his/her
decision.
a) What is not identified is as important as what is.
D. How Does the Decision Maker Weight the Criteria and Analyze Alternatives?
1. It is necessary to allocate weights to the items listed in Step 2 in order to give them
their relative priority in the decision (Step 3).
2. A simple approach, give the most important criterion a weight of ten and then assign
weights to the rest against that standard.
a) Exhibit 4-2 lists the criteria and weights in a car-buying decision.
3. Then the decision maker lists the alternatives that could succeed in resolving the
problem (Step 4).
a) No attempt is made to appraise these alternatives, only to list them.
4. Once identified, the decision maker must critically analyze each alternative (Step 5).

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a) Each alternative is evaluated by appraising it against the criteria and weights


established in Steps 2 and 3.
1) Exhibit 4-3 shows the assessed values for each vehicle; it does not reflect the
weighting done in Step 3.
b) If you multiply each alternative assessment against its weight, you get Exhibit 4-
4.
c) Notice that the weighting of the criteria has changed the ranking of alternatives in
our example.
E. What Determines the Best Choice?
1. The critical act of choosing the best alternative from among those enumerated and
assessed (Step 6).
F. What Happens in Decision Implementation?
1. The decision may still fail if it is not implemented properly (Step 7).
2. Decision implementation includes conveying the decision to those affected and
getting their commitment to it.
3. The people who must carry out a decision are most likely to enthusiastically endorse
the outcome if they participate in the decision-making process.
G. What Is the Last Step in the Decision Process?
1. The last step (Step 8) appraises the result of the decision to see whether it has
corrected the problem.
2. Did the alternative chosen in Step 6 and implemented in Step 7 accomplish the
desired result?
H. Common Errors Committed in the Decision-Making Process
1. Making decisions is making choices.
2. Heuristics are “rules of thumb” that managers use to simplify their decision making.
3. Exhibit 4-5 identifies 12 common decision errors and biases that managers make.
4. Some common mistakes:
a) Overconfidence bias—they think they know more than they do or hold
unrealistically positive views of themselves and their performance.
b) Immediate gratification bias— describes decision makers who tend to want
immediate rewards and to avoid immediate costs.
c) Anchoring effect— describes when decision makers fixate on initial information
as a starting point and then, once set, fail to adequately adjust for subsequent
information.
d) Selective perception bias—when decision makers selectively organize and
interpret events based on their biased perceptions.

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e) Confirmation bias—decision makers who seek out information that reaffirms


their past choices and discount information that contradicts past judgments.
f) Framing bias—when decision makers select and highlight certain aspects of a
situation while excluding others.
g) Availability bias—when decisions makers tend to remember events that are the
most recent and vivid in their memory.
h) Representation bias—when decision makers assess the likelihood of an event
based on how closely it resembles other events or sets of events.
i) Randomness bias—describes when decision makers try to create meaning out of
random events.
j) Sunk costs error—when decision makers forget that current choices can’t correct
the past.
k) Self-Serving bias—decision makers who are quick to take credit for their
successes and to blame failure on outside factors.
l) Hindsight bias—the tendency for decision makers to falsely believe that they
would have accurately predicted the outcome of an event once that outcome is
actually known.
m) Revision bias—the tendency of decision makers to assume that when an object or
idea has been changed (revised) in some way, it’s actually been improved and is
better than the original, regardless of whether it truly is better.

MyLab Management Watch It!: If your instructor has assigned this activity, go to
www.pearson.com/mylab/management to complete the video exercise.

II. WHAT ARE THE 3 APPROACHES MANAGERS CAN USE TO MAKE


DECISIONS?
A. Rational Model
1. Decision making is the essence of management. Managers—as they plan, organize,
lead, and control—are called decision makers (Exhibit 4-6).
2. Managerial decision making is assumed to be rational.
a) Rational decision making involves making consistent, value-maximizing choices
within specified constraints.
3. A decision maker who was perfectly rational would be fully objective and logical.
a) He or she would carefully define the problem and have a clear and specific goal.
b) The steps in the decision-making process would consistently lead to selecting the
alternative that maximizes that goal.
c) Decisions are made in the best interests of the organization.
4. Bottom line: Although rationality is based on clarity, objectivity, logic, and complete
knowledge, it’s not a very realistic approach.

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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?

C. Intuition and Managerial Decision Making


1. Intuitive decisions making—making decisions on the basis of experience, feelings,
and accumulated judgment.
2. Described as “unconscious reasoning.”
3. Exhibit 4-7 shows five different aspects of intuition.

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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b) Act like that expert in analyzing and solving ill-structured problems.


c) Guide users through problems by asking sequential questions about the situation and
drawing conclusions based on answers given.
d) Make decisions easier for users through programmed rules modeled on actual reasoning
processes of experts.
e) Allow employees and lower-level managers to make high-quality decisions normally
made only by upper-level managers.
2. Neural networks are the next step beyond expert systems.
a) Use computer software to imitate the structure of brain cells and connections among
them.
b) Can distinguish patterns and trends too subtle or complex for human beings.
c) Can perceive correlations among hundreds of variables, unlike our limited brain capacity,
which can only easily assimilate no more than two or three variables.
d) Can perform many operations simultaneously, recognizing patterns, making associations,
generalizing about problems not exposed to before, and learning through experience.
e) Example: banks using neural network systems to catch fraudulent credit card activities in
a matter of hours, not days.
Discuss This:
 Can a manager ever have too much data when making decisions? Explain.
 How can technology help managers make better decisions?

III. WHAT TYPES OF DECISIONS AND DECISION-MAKING CONDITIONS DO


MANAGERS FACE?
A. How Do Problems Differ?
1. Some problems are straightforward. The goal of the decision maker is clear, the
problem familiar, and information about the problem easily defined and complete.
a) Examples of structured problems include a supplier’s tardiness with an
important delivery, a customer’s wanting to return an Internet purchase, etc.
2. Many situations, however, are unstructured problems, are new, or unusual.
Information about such problems is ambiguous or incomplete.
a) Examples of unstructured problems include the decision to enter a new market
segment, to hire an architect to design a new office park, etc.
B. How Does a Manager Make Programmed Decisions?
1. Programmed, or routine, decision making is the most efficient way to handle
structured problems.
2. When problems are structured, managers rely on programmed decision making.

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a) Automotive mechanic example.


3. Decisions are programmed to the extent that they are repetitive and routine and to the
extent that a specific approach has been worked out for handling them.
a) Programmed decision making is relatively simple and tends to rely heavily on
previous solutions.
b) The develop-the-alternatives stage is given little attention because programmed
decision making becomes decision making by precedent.
4. Procedure is a series of interrelated sequential steps that a manager can use when
responding to a well-structured problem.
a) The only real difficulty is in identifying the problem.
b) Once the problem is clear, so is the procedure.
c) Example of purchasing manager and request for 250 copies of Norton Antivirus
Software.
5. A rule is an explicit statement that tells a manager what he or she ought or ought not
to do.
a) Rules are frequently used with a well-structured problem because they are simple
to follow and ensure consistency.
6. A policy provides guidelines to channel a manager’s thinking in a specific direction.
a) In contrast to a rule, a policy establishes parameters for the decision maker rather
than specifically stating what should or should not be done.
b) Example, “we promote from within, whenever possible.”
C. How Do Nonprogrammed Decisions Differ from Programmed Decisions?
1. Examples of nonprogrammed decisions: deciding whether to acquire another
organization, deciding which global markets offer the most potential, or deciding
whether to sell off an unprofitable division.
2. Such decisions are unique and nonrecurring, involving an unstructured problem with
no cut-and-dried solution.
The creation of a new organizational strategy is an example of a non-programmed
decision.
a) Example, Amazon.com Jeff Bezos’ strategy to “get big fast”:
1) Bezos’ strategy to “get big fast” helped the company grow but at the cost of
perennial financial losses.
2) To make a profit, Bezos made decisions affecting how the company operated,
including allowing other sellers to sell their books at Amazon. For the first
time, Amazon made a profit.

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D. How Are Problems, Types of Decisions, and Organizational Level Integrated?


1. Exhibit 4-8 describes the relationship between types of problems, types of decisions,
and level in the organization.
2. Structured problems are responded to with programmed decision making.
a) Lower-level managers essentially confront familiar and repetitive problems.
3. Ill-structured problems require nonprogrammed decision making.
a) The problems confronting managers up the organizational hierarchy are more
likely to become unstructured.
4. Few managerial decisions are either fully programmed or fully nonprogrammed.
5. Organizational efficiency is facilitated by the use of programmed decision making.
a) Whenever possible, management decisions are likely to be programmed.
b) There are strong economic incentives for top management to create policies,
standard operating procedures, and rules to guide other managers.
c) Programmed decisions minimize the need for managers to exercise discretion.
d) This benefit is important because discretion costs money.
E. What Decision-Making Conditions Do Managers Face?
1. Certainty—a situation where a manager can make accurate decisions because the
outcome of every alternative is known.
2. Risk—conditions in which the decision maker is able to estimate the likelihood of
certain outcomes.
3. Uncertainty—is when you’re not certain about the outcomes and can’t even make
reasonable probability estimates.

IV. HOW DO GROUPS MAKE DECISIONS?


A. Introduction
1. Many decisions in organizations, especially important decisions that have far-
reaching effects on organizational activities and personnel, are typically made in
groups.
2. In many cases, these groups represent people who will be most affected by the
decisions.
3. Managers spend a significant portion of their time in meetings.
B. What Are the Advantages and Disadvantages of Group Decision Making?
1. Individual and group decisions have their own set of strengths—neither is ideal for all
situations.
2. Advantages of group decision making:
a) Group decisions provide more complete information than do individual ones.

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b) A group will bring a diversity of experiences and perspectives to the decision


process.
c) Groups also generate more alternatives.
1) Quantity and diversity of information are greatest when group members
represent different specialties.
d) Group decision making increases acceptance of a solution.
e) This process increases legitimacy.
3. Disadvantages of group decision making:
a) They are time-consuming.
b) There may also be a situation in which there is minority domination.
1) Members of a group are never perfectly equal.
2) A minority that dominates a group frequently has an undue influence on the
final decision.
c) There is ambiguous responsibility. In a group decision, the responsibility of any
single member is watered down.
d) Another problem focuses on the social pressures to conform in groups.
1) Irving Janis’ groupthink—a form of conformity in which group members
withhold deviant, minority, or unpopular views in order to give the
appearance of agreement.
2) Groupthink hinders decision making, possibly jeopardizing the quality of the
decision by:
(a) Undermining critical thinking in the group.
(b) Affecting a group’s ability to objectively appraise alternatives.
(c) Deterring individuals from critically appraising unusual, minority, or
unpopular views.
e) How does groupthink occur?
1) Group members rationalize any resistance to the assumptions they have made.
2) Members apply direct pressures on those who momentarily express doubts
about any of the group’s shared views or who question the arguments favored
by the majority.
3) Those members who have doubts or hold differing points of view seek to
avoid deviating from what appears to be group consensus.
4) There is an illusion of unanimity. Silence is assumed as being in full accord.
f) Groupthink can be minimized if:
1) The group is cohesive.
2) It fosters open discussion.

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3) Is led by an impartial leader who seeks input from all members.


C. When Are Groups Most Effective?
1. Group decisions tend to be more accurate.
2. On the average, groups make better decisions than individuals—although groupthink
may occur.
3. If decision effectiveness is defined in terms of speed, individuals are superior.
4. If creativity is important, groups tend to be more effective than individuals.
5. If effectiveness means the degree of acceptance that the final solution achieves, then
groups are better.
6. The effectiveness is also influenced by the size of the group.
a) The larger the group, the greater the opportunity for heterogeneous representation.
b) A larger group requires more coordination and more time to allow for
contributions.
c) A minimum of five to a maximum of about fifteen is best.
d) Because five and seven are odd numbers, strict deadlocks are avoided.
7. Effectiveness should not be considered without also assessing efficiency.
a) Groups almost always are less efficient than the individual decision maker.

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Making Ethical Decisions in Today’s Workplace


CVS Health Corporation announced in early 2018 that it would stop “materially” altering the
beauty images used in its marketing materials that appear in its stores and on its websites and
social media channels. Although the change applies to the marketing materials it creates, the
drugstore chain has also asked global brand partners—including Revlon, L’Oreal, and Johnson
& Johnson—to join its effort. The company will use a watermark—the “CVS Beauty Mark”—
on images that have not been altered. What does that mean? You’re seeing real, not digitally
modified, persons. The person featured in those images did not have their size, shape, skin or
eye color, wrinkles, or other characteristics enhanced or changed. The company’s goal is for all
images in the beauty sections of CVS’s stores to reflect the “transparency” commitment by
2020. Not surprisingly, there are pros and cons to this decision. And not surprisingly, there are
ethical considerations associated with the decision.

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?

D. How Can You Improve Group Decision Making?


1. Three ways of making group decision making more creative: brainstorming, the
nominal group technique, and electronic meetings.
2. What is brainstorming?
a) A relatively simple technique for overcoming pressures for conformity.
b) It utilizes an idea-generating process that specifically encourages any and all
alternatives.
1) A half-dozen to a dozen people sit around a table.
2) The leader states the problem clearly, ensuring understanding by all
participants.
3) Members then “free-wheel” as many alternatives as they can in a given time.
4) No criticism is allowed; all the alternatives are recorded.
(a) Brainstorming is merely a process for generating ideas.
3. How does the nominal group technique work?
a) The technique restricts discussion during the decision-making process.
b) Group members must be present, but they are required to operate independently.
c) They secretly write a list of general problem areas or potential solutions.
d) The chief advantage is that it permits a formal meeting but does not restrict
independent thinking.

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4. How can electronic meetings enhance group decision making?


a) This approach—called the electronic meeting—blends the nominal group
technique with computer technology.
b) Once the technology for the meeting is in place, the concept is simple.
c) Numerous people sit around a horseshoe-shaped table that is empty except for a
series of computer terminals.
d) Issues are presented to participants, who type their responses onto their computer
screens.
e) Individual comments, as well as aggregate votes, are displayed on a projection
screen in the room.
f) The major advantages of electronic meetings are anonymity, honesty, and speed.
1) 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.
2) It is fast—chitchat is eliminated, discussions do not digress, and many
participants can “talk” at once without interrupting the others.
5. Experts claim that electronic meetings are significantly faster and much cheaper than
traditional face-to-face meetings.
a) Nestle example.
6. Drawbacks
a) Those who can type quickly can outshine those who may be verbally eloquent but
are lousy typists.
b) Those with the best ideas don’t get credit for them.
c) The process lacks the informational richness of face-to-face oral communication.
7. The future of group decision making is very likely to include extensive usage of
electronic meetings.
8. A variation of the electronic meeting is the video conference.
a) By linking together media from different locations, people can have face-to-face
meetings even when they are thousands of miles apart.
b) This has enhanced feedback among the members, saved countless hours of
business travel, and ultimately saved companies hundreds of thousands of dollars.
V. WHAT CONTEMPORARY DECISION-MAKING ISSUES DO MANAGERS FACE?
A. How Does National Culture Affect Manager’s Decision Making?
1. Research shows that, to some extent, decision-making practices differ by country.
2. Two decision variables:
a) The way decisions are made: who makes the decision?
b) The degree of risk a decision maker is willing to take.

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3. India—power distance and uncertainty avoidance are high.


a) Only very senior-level managers make decisions, and they are likely to make safe
ones.
4. Sweden—power distance and uncertainty avoidance are low.
a) Swedish senior managers tend not to be afraid to make risky decisions and also
push decisions down in the ranks.
5. Egypt, where time pressures are low, managers make decisions at a slower and more
deliberate pace than managers in the United States.
6. Italy, history and traditions are valued, managers tend to rely on tried and proven
alternatives.
7. Decision making in Japan is much more group oriented than in the United States.
a) The Japanese value conformity and cooperation.
b) Japanese CEOs collect a large amount of information, to build consensus, called
ringisei.
c) Managerial decisions take a long-term perspective.
8. In France, autocratic decision making is widely practiced, and managers avoid risks.
9. Managerial styles in Germany reflect the German culture’s concern for structure and
order, extensive rules and regulations, and managers accept that decisions must go
through channels.
10. Managers who deal with employees from diverse cultures need to recognize what
common and accepted behavior is regarding decision making.
11. Managers who accommodate the diversity in decision making philosophies and
practices can expect a high payoff if they capture the perspectives and strengths that a
diverse workforce offers.

B. Why Are Creativity and Design Thinking Important in Decision Making?


1. Creativity allows the decision maker to appraise and understand the problem more
fully, including “seeing” problems others can’t see.
2. Creativity’s most obvious value is in helping the decision maker identify novel and
useful ideas.
3. Most people have creative potential.
a) They have to get out of the psychological rut.
b) They have to learn how to think about a problem in divergent ways.
4. People differ in their inherent creativity.
a) Exceptional creativity is scarce.
b) A study of lifetime creativity of 461 men and women.
1) Less than 1 percent was exceptionally creative.

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2) 10 percent were highly creative.


3) About 60 percent were somewhat creative.
5. Three-component model of creativity—individual creativity requires (1) expertise, (2)
creative-thinking skills, and (3) intrinsic task motivation.
a) Expertise is the foundation of all creative work. The potential for creativity is
enhanced when individuals have abilities, knowledge, proficiencies, and similar
expertise in their fields of endeavor.
b) Creative-thinking skills encompass personality characteristics associated with
creativity, the ability to use analogies, as well as the talent to see the familiar in a
different light.
1) Individual traits associated with the development of creative ideas include
intelligence, independence, self-confidence, risk-taking, an internal locus of
control, tolerance for ambiguity, and perseverance in the face of frustration.
c) Intrinsic task motivation is the desire to work on something because it’s
interesting, involving, exciting, satisfying, or personally challenging.
1) Determines the extent to which individuals fully engage their expertise and
creative skills.
2) Creative people often love their work, to the point of seeming obsessed.
6. Five organizational factors can impede creativity.
a) Expected evaluation—focusing on how your work is going to be evaluated.
b) Surveillance—being watched while you’re working.
c) External motivators—emphasizing external, tangible rewards.
d) Competition—facing win-lose situations with your peers.
e) Constrained choices—being given limits on how you can do your work.
7. Design thinking is approaching management problems as designers approach design
solutions.
a) Many managers do not deal specifically with product or process design decisions
but they still make decisions about work issues and design thinking can help them
make better decisions.
b) Design thinking says that managers should look at problem identification
collaboratively and integrated with the goal of gaining a deep understanding of
the situation.
c) Design thinking means opening up your perspective and gaining. Insights by
using observation and inquiry skills, and not relying simply on rational analysis.
8. What does big data have to do with decision making?
a) Big data is using math modeling, predictive algorithms, and artificial intelligence
software to measure and monitor people and machines like never before. But

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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.

Learning Outcome 4-1: Describe the decision-making process.


AACSB: Reflective Thinking

4-2 Describe the eight steps in the decision-making process.


Answer: The decision-making process consists of eight steps: (1) identify problem; (2)
identify decision criteria; (3) weight the criteria; (4) develop alternatives; (5) analyze
alternatives; (6) select alternative; (7) implement alternative; and (8) evaluate decision
effectiveness.

Learning Outcome 4-1: Describe the decision-making process.


AACSB: Reflective Thinking

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.

Learning Outcome 4-1: Describe the decision-making process.


AACSB: Analytical Thinking

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.

Learning Outcome 4-5: Discuss contemporary issues in managerial decision making.


AACSB: Analytical Thinking

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Chapter 4 – Making Decisions

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.

Learning Outcome 4-1: Describe the decision-making process.


AACSB: Analytical Thinking

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.

Learning Outcome 4-4: Discuss group decision making.


AACSB: Analytical Thinking

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.

Learning Outcome 4-5: Discuss contemporary issues in managerial decision making.


AACSB: Analytical Thinking

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Chapter 4 – Making Decisions

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

Management Skill Builder: Building a Creative Decision Maker


Many decisions that managers make are routine, so they can fall back on experience and “what’s
worked in the past.” But other decisions—especially those made by upper-level managers—are
unique and haven’t been confronted before. The uniqueness and variety of problems that
managers face demand creativity—the ability to produce novel and useful ideas. If managers are
to successfully progress upward in an organization, they’ll find an increasing need to develop
creative decisions. Creativity is partly a frame of mind. You need to expand your mind’s
capabilities—that is, open yourself up to new ideas. Every individual has the ability to improve
his or her creativity, but many people simply don’t try to develop that ability.

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MyLab Management Personal Inventory Assessment Go to


www.pearson.com/mylab/management to complete the personal inventory assessment related
to this chapter.

Problem Solving, Creativity, and Innovation


Making decisions is all about solving problems. Do this PIA and find out about your level of
creativity and innovation in problem solving.
Skill Basics
Creativity is a skill you can develop. Here are some suggestions on how you can do this:
 Think of yourself as creative.
 Pay attention to your intuition.
 Move away from your comfort zone.
 Determine what you want to do.
 Think outside the box.
 Look for ways to do things better.
 Find several right answers.
 Believe in finding a workable solution.
 Brainstorm with others.
 Turn creative ideas into action.
Practicing the Skill
Read through this scenario and follow the directions at the end of it.

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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Chapter 4 – Making Decisions

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?

Case Application 1: Big Brown Numbers

Discussion Questions

4-14 Why is efficiency and safety so important to UPS?

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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AACSB: Analytical Thinking


4-16 How would ORION technology help drivers make better decisions? (Think of the steps in
the decision-making process).

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?

Answer: Sustainability was defined in Chapter 1 as “a company’s ability to achieve its


business goals and increase long-term shareholder value by integrating economic,
environment, and social opportunities into its business strategies.” UPS’s new ORION
technology is helping the company find the most efficient delivery route, potentially
reducing the number of miles driven and the emissions associated with those miles, while
at the same generating higher profits.

Learning Outcome 4-5: Discuss contemporary issues in managerial decision making.


AACSB: Analytical Thinking
Case Application 2: The Business of Baseball

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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AACSB: Analytical Thinking


4-19 Is it appropriate for baseball managers to use only quantitative, objective criteria in
evaluating their players? What do you think? Why?

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.

Learning Outcome 4-5: Discuss contemporary issues in managerial decision making.


AACSB: Analytical Thinking

Case Application 3: Slicing the Line

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Chapter 4 – Making Decisions

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.

Learning Outcome 4-1: Describe the decision-making process.


AACSB: Analytical Thinking

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.

Learning Outcome 4-1: Describe the decision-making process.


AACSB: Analytical Thinking

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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Chapter 4 – Making Decisions

developed an online ordering system and now generates more than $1 billion in sales
digitally.

Learning Outcome 4-5: Discuss contemporary issues in managerial decision making.


AACSB: Analytical Thinking

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.

Learning Outcome 4-1: Describe the decision-making process.


AACSB: Analytical Thinking

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