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Chapter 7

The document summarizes rational and nonrational models of decision making. [1] Rational decision making is logical and aims for optimal outcomes, following four steps: identify the problem, generate alternatives, evaluate alternatives, and implement and evaluate the solution. [2] Nonrational decision making accounts for limitations like complexity, time constraints, and imperfect information. Managers use satisficing (good enough), incremental (small steps), and intuition models. [3] Intuition can speed decisions but is subject to biases like rational processes.

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29 views

Chapter 7

The document summarizes rational and nonrational models of decision making. [1] Rational decision making is logical and aims for optimal outcomes, following four steps: identify the problem, generate alternatives, evaluate alternatives, and implement and evaluate the solution. [2] Nonrational decision making accounts for limitations like complexity, time constraints, and imperfect information. Managers use satisficing (good enough), incremental (small steps), and intuition models. [3] Intuition can speed decisions but is subject to biases like rational processes.

Uploaded by

Đặng Yến
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Chapter 7

Individual & Group Decision Making


How Managers Make Things Happen
PAGE 231 - Self-Assessment
What Is Your Decision-Making Style?

Objectives
1. To assess your decision-making style.

2. To consider the implications of your decisionmaking style


GROUP DISCUSSION
PAGE 226 - Practical Action

How Exceptional Managers Make Decisions

Some experts suggest that to help make good decisions you should “be visual,” using

more pictures and diagrams, and “walk and point” to stimulate areas of the brain that

control memory, emotion, and problem solving.

What have you found aids you in making decisions?


GAP – FILLING
• GAP FILLING - CHAPTER 7.docx
7.1 Two Kinds of Decision Making: Rational
& Nonrational

7.3 Four General Decision-Making Styles

7.5 How to Overcome Barriers to Decision


Making
7.1 2 Kinds of Decision Making: Rational & Nonrational

 Decision: choice made from among available alternatives


 Decision making: process of identifying and choosing alternative courses of
action

EX: Which Is Better—Fast or Slow Delivery? Maersk Shipping Line Managers


Decide among Alternatives (p.196)
2 Kinds of Decision Making

Rational= analytical, and slow to act


Nonrational= emotional, impulsive, form and follow habits.

Ex:
” Emotion are more effective than appeals to logic—not because people are stupid
but because the mind is designed to use logic as a tool for supporting our beliefs
rather than for changing them”
7.1 Two Kinds of Decision Making: Rational and Nonrational

*Rational Decision Making = Logical & Optimal Decisions

Rational model / classical model of decision making:

 explains how managers should make decisions

 assumes managers will make logical decisions that will be optimum in

furthering the organization’s interest

 also called the classical model


*Rational Decision Making = Logical & Optimal Decisions
The 4 Steps In Rational Decision Making

Stage 1: Identify the problem or opportunity


- Determining the Actual vs the Desirable

EX: What Do Billionaire Warren Buffett & Female Investors Have in Common?
Making a Correct Diagnosis (P.198)
The 4 Steps In Rational Decision Making

Stage 2: Think up alternative solutions


- Both Obvious and the Creative

“Creativity precedes innovation, which is its physical expression,”


“It’s the source of all intellectual property”
Stage 3: Evaluate alternatives & select a solution

- Ethics, Feasibility, and Effectiveness

Questions needed to ask:

- Ethical?
- Feasible?
- Effective?
The 4 Steps In Rational Decision Making

Stage 4: Implement & Evaluate the solution chosen

(1) For Successful Implementation:


- Plan Carefully
- Be sensitive to those affected

EX: Faulty Implementation: Customer Service Is Often “Just Talk” (P.199)


(2) Evaluation:
What should you do if the action is not working?
- Give it more time
- Change it slightly
- Try another alternative
- Start over

EX: Evaluation: The Boeing 787 Dreamliner, a Bet-the-Company Decision (P.200)


What’s Wrong with the Rational Model?

Rational model is prescriptive


Nonrational Decision Making:

- Explains how managers make decisions


- Assume that decision making is nearly always uncertain and risky, making it
difficult for managers to make optimal decisions.
- Descriptive

- 3 nonrational models are


(1) satisficing,
(2) incremental,
(3) intuition.
(1) Bounded Rationality and the Satisficing Model: “Satisfactory is Good
Enough”
Bounded Rationality: The ability of decision makers to be rational is limited by numerous
constraints, such as:

- Complexity:
- Time and Money Constraints:
- Imperfect Information:
- Different Cognitive Capacity, Values, Skills, Habits, and Unconscious Reflexes:
- Information Overload:
- Different Priorities
- Conflicting Goals:
Because of constraints, managers use the satisficing model

(1) Satisficing Model:

Seeking alternatives until they find one that is satisfactory, not optimal.
2. The Incremental Model:
“The Least That Will Solve the Problem.”

Incremental model:
managers take small, short-term steps to alleviate a problem, rather than steps that
will accomplish a long-term solution.
(3) The Intuition Model:
“It Just Feels Right”

Intuition:
Making a choice without the use of conscious thought or logical inference

- Intuition that stems from Expertise = “Holistic Hunch”


- Intuition based on feelings= automated experience
2 Benefits of Intuition

(1)It can speed up decision making, useful when deadlines are tight.

(2) It can be helpful to managers when resources are limited.


Drawbacks of intuition

- difficult to convince others that your hunch makes sense.

- subject to the same biases -> affect rational decision making


PAGE 229 - Management in Action

Did Faulty Decision Making Lead to the Death of Luge Racer Nodar
Kumaritashvili?

Does the decision-making process used to select the site for the luge track
resemble more of a rational or nonrational process? Explain.

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