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Fundamentals of Management: Foundations of Decision Making

Fundamentals of Management Robbins & DeCenzo Sixth Edition

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Ahmed Zidan
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53 views

Fundamentals of Management: Foundations of Decision Making

Fundamentals of Management Robbins & DeCenzo Sixth Edition

Uploaded by

Ahmed Zidan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 17

Fundamentals of Management

Sixth Edition

Robbins and DeCenzo


with contributions from Henry Moon

C H AP T E R

4
2008 Prentice Hall, Inc.
All rights reserved.

Part II: Planning

Foundations of
Decision Making
PowerPoint Presentation by Charlie Cook
The University of West Alabama

Decision-Making
Decision-Making Process
A set of eight steps that includes identifying a

problem, selecting a solution, and evaluating the


effectiveness of the solution

Problem
A discrepancy between an existing and a desired

state of affairs

Decision Criteria
Factors that are relevant in a decision

2008 Prentice Hall, Inc. All

42

Decision-Making (contd)
Decision Implementation
Putting a decision into action; includes conveying the

decision to the persons who will be affected by it and


getting their commitment to it.

2008 Prentice Hall, Inc. All

43

Making Decisions: The Rational Model


Certainty
The implication that the outcome of every possible

alternative is known.

Uncertainty
A condition under which there is not full knowledge of

the problem and reasonable probabilities for


alternative outcomes cannot be determined.

Risk
The probability that a particular outcome will result

from a given decision.

2008 Prentice Hall, Inc. All

44

What Is Creative Potential?


Expertise
Understanding, abilities, knowledge, proficiencies,

necessary in the field of creative endeavor.

Creative-Thinking Skills
The personality characteristics associated with

creativity, the ability to use analogies, as well as the


talent to see the familiar in a different light.

Intrinsic Task Motivation


The desire to work on something because its

interesting, involving, exciting, satisfying, or


personally challenging.
2008 Prentice Hall, Inc. All

45

Making Decisions: The Rational Model


Rational
Describes choices that are consistent and value-

maximizing within specified constraints.

Bounded Rationality (Herbert Simon)


Behavior that is rational within the parameters of a

simplified model that captures the essential features


of a problem.

Satisfice
Making a good enough decision: choosing the first-

identified alternative that satisfactorily and sufficiently


solves the problem.
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46

Common Decision-Making Errors


Heuristics: Using Judgmental Shortcuts
Availability heuristic

The tendency to base judgments on information that is


readily available.

Representative heuristic

The tendency to base judgments of probability on things


(objects or events) that are familiar

Escalation of commitment

An increased commitment to a previous decision despite


negative information about the decisions present outcomes.

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47

How Do Problems and Decisions Differ?


Well-Structured Problems
Straightforward, familiar, easily defined problems

Ill-Structured Problems
New problems in which information is ambiguous or incomplete

Programmed Decision
A repetitive decision that can be handled by a routine approach

Nonprogrammed Decisions
Decisions that must be custom-made to solve unique and

nonrecurring problems

2008 Prentice Hall, Inc. All

48

Programmed Decision-Making Aids


Policy
A general guide that establishes parameters for

making decisions about recurring problems.

Procedure
A series of interrelated sequential steps that can be

used to respond to a well-structured problem (policy


implementation).

Rule
An explicit statement that tells managers what they

ought or ought not to do (limits on procedural


actions).
2008 Prentice Hall, Inc. All

49

Technology And Decision Making


Expert Systems
Software that acts like an expert in analyzing and

solving ill-structured problems


Use specialized knowledge about a particular problem area
rather than general knowledge
Use qualitative reasoning rather than numerical calculations
Perform at a level of competence higher than that of
nonexpert humans.

Neural Networks
Software that is designed to imitate the structure of

brain cells and connections among them

2008 Prentice Hall, Inc. All

410

Group Decision Making


Advantages
Makes more accurate

decisions
Provides more complete
information
Offers a greater diversity
of experiences and
perspectives
Generates more
alternatives
Increases acceptance of a
solution
Increases the legitimacy of
a decision.

2008 Prentice Hall, Inc. All

Disadvantages
Is more time-consuming

and less efficient


Can result in minority
domination that influences
decision process
Can produce increased
pressures to conform to
the groups mindset
(groupthink)
Can create ambiguous
responsibility for the
outcomes of decisions

411

When Are Groups Most Effective?


High Need for Creativity
Groups tend to be more creative than individuals.

Acceptance of the Final Solution


Groups help increase the acceptance of decisions.

Effectiveness of Group Decision Making


Groups of five to seven members are optimal for

decision process speed and quality.

2008 Prentice Hall, Inc. All

412

National Culture and Decision-Making


Practices
Decision-making practices differ from country to
country by:
Participation: groups, teams, individuals
Power distance: who will make the decision
Level of risk: uncertainty avoidance
Efficiency of decision making: pace of decisions
Alternatives considered: many or few
Consensus building: ringsei
Decision-making style: rational, autocratic or

participative
2008 Prentice Hall, Inc. All

413

Quantitative
Module
QUANTITATIVE DECISION-MAKING AIDS

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414

Queuing Theory
Queuing Theory
Balancing the cost of having a waiting line against

the cost of service to maintain that line.

where P = probability of n customers waiting in line, n = 3 customers,


arrival rate = 2 per minute, and service rate = 4 minutes per customer

2008 Prentice Hall, Inc. All

415

Economic Order Quantity Model


Fixed-Point Reordering System
A preestablished point for replenishing inventory

Economic Order Quantity (EOQ)


A technique for balancing purchase, ordering,

carrying, and stock-out costs to derive the optimum


quantity for a purchase order.
D = forecasted demand for the item
OC = cost of placing each order
V = value or purchase price of the item
CC = carrying cost (as percentage) of total inventory

2008 Prentice Hall, Inc. All

416

Economic Order Quantity Example


Forecast sales: 4,000 units a year
Unit cost:

$50.00 each

Ordering cost:

$35.00 per order

Carrying costs: 20% of units value.

2008 Prentice Hall, Inc. All

417

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