Lecture 2: Decision-Making for a Changing World

Problem

A discrepancy between an existing and a desired state of affairs.

Decision Criteria

Factors that are relevant in making a decision.

Weighting Criteria

The process of assigning relative importance to decision criteria.

Developing Alternatives

List the alternatives that could resolve the problem.

Analyzing Alternatives

Critically analyze each alternative by appraising it against the criteria.

Best Alternative

The alternative that scores the highest after evaluation based on criteria.

Implementing the Decision

The process of putting the chosen decision into action.

Evaluating the Decision

Assessing whether the implemented decision achieved the desired results.

Structured Problem

A straightforward problem that is familiar and easily defined.

Unstructured Problem

A problem that is new or unusual, characterized by ambiguous or incomplete information.

Programmed Decision

A repetitive decision that can be handled using a routine approach

Nonprogrammed Decision

A unique and nonrecurring decision that requires a custommade solution

Three Guides for Making Programmed Decisions

Procedure
Rule
Policy

Procedure

A series of interrelated, sequential steps used to respond to a structured problem.

Rule

An explicit statement that tells employees what can or cannot be done.

Policy

A guideline for making decisions.

Decision-Making Conditions

Certainty

Risk

Uncertainty

Certainty

A situation in which a decision maker can make accurate decisions because all outcomes are known.

Risk

A situation in which a decision maker is able to estimate the likelihood of certain outcomes.

Uncertainty

A situation in which a decision maker has neither certainty nor reasonable probability estimates available.

Contemporary Issues in Managerial Decision Making

National culture
Creativity
Design thinking
Big Data

Rational Decision Making

Describes choices that are consistent and value-maximizing within specified constraints

Bounded Rationality

Making decisions that are rational within the limits of a manager’s ability to process information

Satisfice

Accepting solutions that are “good enough”

Intuitive Decision Making

Making decisions based on values, experience, emotions, or subconscious mental processes.

Experience-Based Decisions

Decide based on past experiences

Values or Ethics-Based Decisions

Decide based on ethical values or culture.

Affect-Initiated Decisions

Decide based on feelings or emotions.

Cognitive-Based Decisions

Decide based on skills, knowledge, and training.

Subconscious Mental Processing

Use data from the subconscious mind to help make decisions.

National Culture

A factor that influences decision-making styles and levels of risk tolerance.

Big Data

The use of advanced tools to analyze vast amounts of information.

Design thinking

Approaching management problems as designers approach design problems.

Creativity

allows the decision maker to appraise and understand a problem more fully, “see” problems others cannot see, and identify all viable alternatives.