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Overview of Decision Making Harrison, Ch. 1

Overview of Decision Making Harrison, Ch. 1. Fred Wenstøp. Focus. Managerial decision making at the organizational level How can decision making techniques be improved? The emphasis is on normative theory To improve, it is useful to understand what is going on

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Overview of Decision Making Harrison, Ch. 1

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  1. Overview of Decision MakingHarrison, Ch. 1 Fred Wenstøp

  2. Focus • Managerial decision making at the organizational level • How can decision making techniques be improved? • The emphasis is on normative theory • To improve, it is useful to understand what is going on • descriptive theory is important as well Fred Wenstøp

  3. Diverse Viewpoints of Goals of Decision Making • A decision may be considered good if • It has been arrived at through consensus • None of those affected shows bad reactions • It is the alternative with the highest payoff • All alternatives have been carefully scrutinized • All relevant information has been available • It has the best expected consequences • How do these viewpoints link to ethics ? Fred Wenstøp

  4. Definition of Decision • A decision is • a moment in an ongoing process • for evaluating alternatives • for meeting an objective • at which expectations about • a particular course of action • impel the decision maker to select that course of action • which is most likely to result in attaining the objective • A decision is first of all an act • but an act that requires judgement • A judgement requires a choice to become a decision D Fred Wenstøp

  5. The Scope of Decision Making • Decision making occurs at several levels Individual Group Organization Metaorganisation Fred Wenstøp

  6. Individual Decision Making • Problems with rationality of beliefs • Examples • Logic (three cards) • Updating beliefs with new information (LIZA) • Consistency (Linda) • Establishing theories • (2 4 6) Fred Wenstøp

  7. Consistency of beliefs I • Wason 1966 • Cards: A D 3 7 • Each card has a number on one side and a letter on the other • Rule: If there is an A on one side, there is a 3 on the other • Which cards would you turn to check whether the rule has been applied properly? Fred Wenstøp

  8. Tversky & Kahneman 1983 Linda is 31 years old, single, out- spoken, and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice, and also participated in antinuclear demonstrations. Please, rank the following statements by their probability. A. Linda is a teacher in an elementary school B. Linda works in a bookstore and takes Yoga classes C. Linda is active in the feminist movement D. Lina is a psychiatric social worker E. Linda is a member of the league of Women Voters F. Linda is a bank teller G. Linda is an insurance salesperson H. Linda is a bank teller and is active in the feminst movement Consistency of beliefs II Fred Wenstøp

  9. Individual Decision Making Failure to Use a Rational Decision Rule • Common decision rule • Select the most important decision criterion • Delete those alternatives that do not meet the aspiration level for this criterion • Continue with the next criterion until only one alternative remains • A lexicographic decision rule • Select the most important decision criterion • Keep only the alternatives with maximum score on this • Continue with the next criterion until only one alternative remains Fred Wenstøp

  10. The Cuban Missile Crisis Fred Wenstøp

  11. Strong points Discuss consequences Edit and react to documents Find new alternatives Narrow scope of alternatives Create a climate of involvement Represent stakeholders Formulate managerial objectives Reach conclusions that benefit the total organization rather than particular individuals Weak points Difficulty i drafting policies Slow Reactive rather than proactive Group Decision Making Fred Wenstøp

  12. Organizational Decision Making • Simon: decision making is synonymous with managing • Decision making at the organizational level takes place primarily through the basic functions of the manager • Planning • Organizing • Staffing • Directing • Controlling Fred Wenstøp

  13. Category I Programmable, routine, computational, negotiated, compromise Structure Procedural, predictable, recurring Strategy Reliance upon rules and principles, habitual reactions, prefabricated response Category II Nonprogrammable, unique, judgemental, creative, adaptive, innovative, inspirational Structure Novel, unstructured, consequential, complex Strategy Reliance on judgement, intution and creativity; general problem solving processes Decision Categories Fred Wenstøp

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