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Decision Making
Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Learning Outline
After you read this chapter you should know the following learning objectives:
#1:
#2: #3:
Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Decision Making
Decision
Making a choice from two or more alternatives
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Identify a Problem
Financial qualifications Franchisor history Start-up costs Open geographical locations Franchisor support
Start-up costs .......................................................10 Franchisor support ................................................7 Financial qualifications .........................................8 Open geographical locations ...............................6 Franchisor history ..................................................7
Develop Alternatives
Curves for Women Second Cup Jani-King Liberty Tax Service Curves for Women Second Cup Jani-King Liberty Tax Service Curves for Women Second Cup Jani-King Liberty Tax Service
Merle Norman Petland Chem-Dry Carpet Cleaning McDonald s Merle Norman Petland Chem-Dry Carpet Cleaning McDonald s Merle Norman Petland Chem-Dry Carpet Cleaning McDonald s
Analyze Alternatives
Select an Alternative
Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Making Decisions
Rationality
Managers make consistent, value-maximizing choices with specified constraints Assumptions are that decision makers:
Are perfectly rational, fully objective, and logical Have carefully defined the problem and identified all viable alternatives Have a clear and specific goal Will select the alternative that maximizes outcomes in the organizations interests rather than in their personal interests
Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Making Decisions
Bounded Rationality
Managers make decisions rationally, but are limited (bounded) by their ability to process information Assumes decision makers:
Will not seek out or have knowledge of all alternatives Will satisfice Can be influenced by escalation of commitment
Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Making Decisions
Role of Intuition
Intuitive decision making
Making decisions on the basis of experience, feelings, and accumulated judgment One-third of managers and other employees said they emphasized gut feeling over cognitive problem solving
Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Cognitive-based decisions
Managers use data from subconscious mind to help them make decisions
Source: Based on L.A. Burke and M.K. Miller. Taking the Mystery Out of Intuitive Decision Making. Academy of Management Executive. October 1999. pp. 9199.
Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Programmed Decision
A repetitive decision that can be handled by a routine approach
Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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A Rule
An explicit statement that limits what a manager or employee can or cannot do
A Policy
A general guideline for making a decision about a structured problem
Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Non-programmed Decisions
Decisions are unique and nonrecurring; they require custom-made solutions
Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Decision-Making Conditions
Certainty
Accurate decisions possible because the outcome of every alternative is known
Risk
Decision maker estimates the likelihood of outcomes that result from the choice of particular alternatives
Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Decision-Making Conditions
Uncertainty
Limited information prevents estimation of outcome probabilities; may force managers to rely on intuition, hunches, and gut feelings
Maximax: the optimistic managers choice to maximize the maximum payoff Maximin: the pessimistic managers choice to maximize the minimum payoff Minimax: the managers choice to minimize his maximum regret
Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Decision-Making Styles
Dimensions of Decision-Making Styles
Ways of thinking
Rational, orderly, and consistent versus Intuitive, creative, and unique
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Decision-Making Styles
Types of Decision Makers
Directive
Use minimal information and consider few alternatives
Analytic
Make careful decisions in unique situations
Conceptual
Maintain a broad outlook and consider many alternatives in making long-term decisions
Behavioural
Avoid conflict by working well with others and being receptive to suggestions
Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Directive
Behavioural
Intuitive
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Hindsight
Immediate Gratification
Self-serving
Anchoring Effect
Sunk Costs
Selective Perception
Randomness
Confirmation
Representation Availability
Framing
Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Overconfidence Bias
Holding unrealistically positive views of ones self and ones performance
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Selective Perception
Selecting, organizing, and interpreting events based on the decision makers biased perceptions
Confirmation Bias
Seeking out information that reaffirms past choices and discounting contradictory information
Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Availability Bias
Losing decision-making objectivity by focusing on the most recent events
Representation Bias
Drawing analogies and seeing identical situations when none exist
Randomness Bias
Creating unfounded meaning out of random events
Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Self-serving Bias
Taking quick credit for successes and blaming outside factors for failures
Hindsight Bias
Mistakenly believing that an event could have been predicted once the actual outcome is known (after-thefact)
Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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Chapter 5, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright 2009 Pearson Education Canada
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