Management Decision-Making Concepts and Practices

Learning Objectives & Key Concepts Summary

LO 6.1: Types of Decisions Managers Make

• Decision-making: Identifying a strategy to resolve problems.
• Programmed decisions:
• Routine tasks based on pre-established rules and guidelines.
• Nonprogrammed decisions:
• Decisions based on reasoning or intuition for unique situations requiring tailored actions.

LO 6.2: Classical Decision-Making Model

• Five-step model:
• Step 1: Define the problem.
• Step 2: Identify and weigh decision criteria.
• Step 3: Generate multiple alternatives.
• Step 4: Rate alternatives based on decision criteria.
• Step 5: Choose, implement, and evaluate the best alternative.

LO 6.3: Decision-Making Styles

• Value orientation: Focuses on task/technical vs. people/social concerns.
• Tolerance for ambiguity: Need for structure vs. ambiguity.
• Decision-making styles:
• Directive: Low ambiguity tolerance, rational thinking.
• Analytical: High ambiguity tolerance, rational thinking.
• Conceptual: High ambiguity tolerance, intuitive thinking.
• Behavioral: Low ambiguity tolerance, intuitive thinking.

LO 6.4: Factors Influencing Decisions

• Bounded rationality: Decision-making constrained by cognitive limitations.
• Satisficing: Choosing the first acceptable alternative.
• Intuition: Decisions based on feelings, beliefs, and hunches.
• Heuristics:
• Availability heuristic: Based on readily available information in memory.
• Anchoring and adjustment heuristic: Based on an initial figure.
• Representative heuristic: Comparing a situation to mental prototypes.
• Biases:
• Common-information bias: Weighting majority-held information.
• Confirmation bias: Favoring information that confirms preexisting beliefs.
• Sunk cost bias: Continuing in a failing project to justify investments.
• Hindsight bias: Believing one would have foreseen an outcome after learning it.
• Escalation of commitment: Investing in a failing proposition despite evidence.
• Framing bias: Decisions based on how situations are presented.

LO 6.5: Overcoming Barriers to Decision-Making

• Barriers:
• Fear of being wrong
• Fear of negative feedback
• Fear of follow-through
• Techniques:
• Ben Franklin balance sheet: Weighing pros and cons.
• Report card method: Evaluating decisions against a rubric.
• Partner-in-absentia method: Feedback from uninvolved individuals.

LO 6.6: Group Decision-Making Methods

• Groupthink: Discouraging individual creativity/responsibility within a group.
• Sequential decision-making: Decisions made one after another.
• Techniques:
• Brainstorming: Quickly generating numerous ideas.
• Delphi technique: Expert opinions gathered through surveys.
• Nominal group technique (NGT): Structured method for idea generation and prioritization.

LO 7.1: Goal-Setting Process in Organizations

• Goal: Specific commitment to achieve a result within a period.
• Strategic framework: Mission, vision, and values.

LO 7.2: Types of Goals and Plans

• Types of Goals:
• Short-term goals
• Long-term goals
• Stretch goals
• Distal (long-term) goals
• Proximal (short-term) goals
• Types of Plans:
• Operational plans:
  • Standing plans: Policies, procedures, rules.
  • Single-use plans: Programs, projects.
• Tactical plans
• Directional plans
• Business plans
• Action plans

LO 7.3: Principles of Goal Setting

• Goal-setting theory: Human performance directed by conscious goals.
• Core principles:
• Clarity: Specific and unambiguous goals.
• Challenge: Difficult yet attainable goals.
• Commitment: Dedication to achieving goals.
• Feedback: Regular progress tracking and adjustments.
• Task complexity: Appropriate complexity to avoid overwhelm.

LO 7.4: SMART Goals

• SMART goals: Specific, Measurable, Achievable, Relevant, Time-bound.

LO 7.5: Types of Goal-Setting Approaches

• Results-centered:
• SMART goals
• Management by Objectives (MBO): Agreement between management and employees on goals.
• Process-centered:
• Total Quality Management (TQM): Continuous improvement.
• Contingency model: Adapting goal-setting based on task characteristics.

LO 7.6: Tracking Goal Progress

• Performance dashboards: Visual representation of strategies and goals.
• Key Performance Indicators (KPIs): Critical measurements for company performance.
• Balanced scorecard: Focus on customers, internal processes, and learning/growth.

LO 2.1: Ethics in Management

• Ethics: Governing moral principles and behavior.
• Kohlberg's stages of moral development: Various stages of moral reasoning.

LO 2.2: Managing Organizational Ethics

• Ethical decision-making principles:
• Legal: Compliance with laws.
• Individual: Alignment with personal values.
• Virtuous: Reflecting high ethical standards.
• Long-term self-interest: Maximizing long-term benefits.
• Community: Considering broader community well-being.
• Utilitarian: Maximizing overall happiness, minimizing pain.
• Distributed justice: Ensuring fairness in benefits and burdens.
• Codes of Conduct: Guidelines for ethical behavior.

LO 2.3: Management's Role in Ethical Businesses

• Internalizing negative externality: Proactively mitigating harmful business impacts.
• Ethical organizational cultures:
• Frameworks for ethical decision-making.
• Ethics training.

LO 2.4: Approaches to Social Responsibility

• Social responsibility: Duties to benefit the organization and society.
• Corporate Social Responsibility (CSR): Corporate efforts for positive environmental and societal impact.

LO 2.5: Role of Social Entrepreneurship

• Social entrepreneurship: Innovative solutions to social/environmental problems.
• Social entrepreneurs: Individuals creating ventures for social and financial returns.
• Models of social entrepreneurship:
• Social purpose ventures: Primarily address social issues, profits secondary.
• Social consequence ventures: Profitable with positive social/environmental impacts.
• Enterprising nonprofits: Nonprofits generating revenue to support their missions.