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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.