Decision-Making and Ethics in Management

Learning Objectives and Concepts

LO 6.1: Types of Decisions Managers Make

• Decision-making: Process of identifying a strategy to resolve problems.
• Programmed decisions: Routine tasks made following preestablished rules/guidelines.
• Nonprogrammed decisions: Decisions made using reason/intuitively in response to unique situations.

LO 6.2: Steps in the 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 the criteria.
• Step 5: Choose, implement, and evaluate the best alternative.

LO 6.3: Different Decision-Making Styles

• Value orientation: Focus on task/technical vs. people/social concerns when making decisions.
• Tolerance for ambiguity: Level of comfort with uncertainty.
• 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 in the Workplace

• Bounded rationality: Decision-making is limited by cognitive capacity.
• Satisficing: Choosing the first acceptable alternative.
• Intuition: Decision-making based on feelings and beliefs.
• Heuristics: Mental shortcuts for decision-making:
• Availability heuristic: Decisions based on readily available information.
• Anchoring and adjustment heuristic: Decisions based on initial figures or estimates.
• Representative heuristic: Comparing situations to mental prototypes.

Biases

• Common-information bias: Weighting information held by the majority more heavily.
• Confirmation bias: Favoring information that confirms existing beliefs.
• Sunk cost bias: Continuing investments based on prior commitments.
• Hindsight bias: Believing one could have foreseen an outcome after learning it.
• Escalation of commitment: Continuing investment in failing proposals despite adverse evidence.
• Framing bias: Decisions influenced by how information is 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: Listing pros and cons.
• Report card method: Evaluating decisions against a rubric.
• Partner-in-absentia method: Seeking feedback from uninvolved parties.

LO 6.6: Group Decision-Making Methods

• Groupthink: Collective thinking that diminishes creativity.
• Sequential decision-making: Decisions made one at a time.
• Techniques:
• Brainstorming: Quick idea generation.
• Delphi technique: Gathering expert opinions via surveys.
• Nominal group technique (NGT): Structured idea generation and prioritization.

LO 7.1: Goal-Setting Process in Organizations

• Goal: Commitment to achieve a desired result.
• Strategic framework: Composed of mission, vision, and values.

LO 7.2: Types of Goals and Plans

• Types of Goals:
• Short-term, long-term, stretch goals.
• Distal (long-term) and proximal (short-term) goals.
• Types of Plans:
• Operational plans: Standing plans (policies, procedures) and single-use plans (projects).
• Tactical plans, directional plans, business plans, action plans.

LO 7.3: Principles of Goal Setting

• Goal Setting Theory: Performance driven by conscious goals.
• Core Principles:
• Clarity: Specific and unambiguous goals.
• Challenge: Difficult yet attainable goals.
• Commitment: Investment in achieving goals.
• Feedback: Regular progress tracking and adjustments.
• Task Complexity: Goals tailored to task complexity.

LO 7.4: SMART Goals

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

LO 7.5: Goal-Setting Approaches

• Results-centered: SMART goals and Management by Objectives (MBO).
• Process-centered: Total Quality Management (TQM).
• Contingency model: Adapting goals to task characteristics.

LO 7.6: Tracking Progress of Goal Plans

• Performance dashboards: Visualizing strategies and goals.
• Key Performance Indicators (KPIs): Vital measurements for performance.
• Balanced scorecard: Focus on customers, internal processes, learning and growth.

LO 2.1: Ethics in Management

• Ethics: Moral principles governing behavior.
• Kohlberg's stages: Levels of moral reasoning in development.

LO 2.2: Managing Organizational Ethics

• Ethical Decision-Making Principles:
• Legal, Individual, Virtuous, Long-term self-interest, Community, Utilitarian, Distributed justice.
• Codes of conduct: Guidelines for ethical behavior.

LO 2.3: Management and Responsible Businesses

• Internalizing negative externalities: Addressing harmful business impacts.
• Ethical Organizational Cultures:
• Frameworks for ethical decision-making.
• Ethics training programs.

LO 2.4: Social Responsibility in Business

• Social Responsibility: Contribution to organizational and societal benefit.
• Corporate Social Responsibility (CSR): Efforts for positive change.

LO 2.5: Social Entrepreneurship

• Social Entrepreneurship: Innovative solutions to social and environmental issues.
• Social Entrepreneurs: Individuals managing social impact ventures.
• Models of Social Entrepreneurship:
• Social Purpose Ventures: Address social issues primarily.
• Social Consequence Ventures: Profit while creating positive impacts.
• Enterprising Nonprofits: Generate revenue to support missions.