MGT 500 Week 11 Final Exam Answers Part 2 (Chapter 15-19)
Management (T1) by Richard L. Daft Chapter 1+2+3+6+7+8 everything to pass your first MNO exam
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Management en Organisatie
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Management and Organization
Chapter 9 – Managerial Decision-Making
Managers are often referred to as decision-makers, and every organization grows, prospers,
or fails as a result of decisions by its managers. Many manager decisions are strategic, such
as whether to build a new factory, move into a new line of business or sell of a division. Yet
managers also make decisions about every other aspect of an organization, including
structure, control systems, responses to the environment and human resources.
Decision
A choice made from available alternatives
Decision-making
The process of identifying problems and opportunities and then resolving them.
Programmed decision
A decision made in response to a situation that has occurred often enough to enable
decision rules to be developed and applied in the future. For example the decision to reorder
office supplies when inventories drop low.
Non-programmed decision
A decision made in response to a situation that is unique, is poorly defined and largely
unstructured, and has important consequences for the organization. For example the
decision to build a new factory or move headquarters to another location.
,Certainty
The situation in which all the information the decision-makers needs is fully available.
Few decisions are certain in the real world, most contain risk or uncertainty.
Risk
A situation in which a decision has clear-cut goals and good information is available, but the
future outcomes associated with each alternative are subject to chance.
Statistical analysis might be used to calculate the probabilities of success or failure. The
measure of risk captures the possibility that future events will render the alternative
unsuccessful.
Uncertainty
The situation that occurs when managers know which goals they wish to achieve, but
information about alternatives and future events is incomplete. Factors that may affect a
decision, such as price, production costs, volume or future interest rates, are difficult to
analyze and predict. Managers may have to base decisions on assumptions even though
these could be incorrect.
Ambiguity
A condition in which the goals to be achieved or the problem to be solved is unclear,
alternatives are difficult to define and information about outcomes is unavailable.
Fortunately, most decisions are not characterized by ambiguity. But when they are,
managers must conjure goals and develop reasonable scenarios in the absence of
information.
The approach managers use to make decisions usually falls into one of three types – the
classical model, the administrative model or the political model. The choice of model
depends on the manager’s personal preference, whether the decision is programmed or
non-programmed, and the degree of uncertainty associated with the decision.
Classical model
A decision-making model based on the assumption that managers should make logical
decisions that will be in the organization’s best economic interests.
Ideal, rational model.
• Strive to make economically sensible decisions
• Four assumptions of the model:
1. The decision maker operates to accomplish goals that are known and agreed
on.
2. Decision maker strives for conditions of certainty. All alternatives are
calculated.
3. Criteria for evaluating alternatives are known.
, 4. The decision maker is rational and uses logic to assign values in attempt to
maximize organizational goals.
Normative
An approach that defines how a decision-maker should make decisions and provides
guidelines for reaching an ideal outcome for the organization.
Administrative model
A decision-making model that describes how managers actually make decisions in situations
characterized by non-programmed decisions, uncertainty and ambiguity, in these difficult
situations, managers are typically unable to make economically rational decisions even if
they want to.
• Descriptive approach that recognizes human and environmental limitations
• Focus on organizational factors that influence decisions
• Seek to find alternatives for complex problems instead of rational approach
1. Decision goals are vague and lack consensus.
2. Rational procedures are not always used.
3. Search for alternatives is limited because of human, information and resource
constraints.
4. Managers will settle for satisficing rather than maximizing.
Descriptive
An approach that describes how managers actually make decisions rather than how they
should make decisions according to a theoretical ideal.
Bounded rationality
The concept that people have the time and cognitive ability to process only a limited amount
of information on which to base decisions.
Organizations are complex, and managers have the time and the ability to process only a
limited amount of information on which to base decisions, because of this they must satisfice.
Satisficing
To choose the first solution of alternative that satisfies minimal decision criteria, regardless
of whether better solutions are presumed to exist. The decision-maker cant often not justify
the time and expense of obtaining complete information.
Intuition
The immediate comprehension of a decision situation based on past experience but without
conscious thought.
, Intuition comes with experience and it’s the art of recognizing patterns at lightning fast
speed. Both rationality and intuitions are important in effective decision-making.
Political model
Useful for making non-programmed decisions when conditions are uncertain, information is
limited, and there are manager conflicts about what goals to pursue or what course of action
to take.
• Useful for non-programmed decisions
• Resembles the real environment in which managers operate
• Four basic assumptions:
1. Organizations are made up of diverse interests, goals and values.
2. Information is ambiguous and incomplete.
3. Managers do not have the resources to identify all dimensions of the problem
4. Managers engage in the push and pull of debate to decide goals and
alternatives.
Coalition
An informal alliance among managers who support a specific goal. Example a manager who
supports a specific alternative such as increasing corporation growth by acquiring another
company then talks to other executives in an informal way to persuade them to support the
decision.
Whether a decision is programmed or non-programmed and regardless of managers’ choice
of the classical, administrative, or political model of decision-making, six steps typically are
associated with effective decision processes.
,Managers confront a decision requirement in the form of either a problem or an
opportunity.
Recognition of Decision Requirement
When a problem or opportunity is presented, decisions must be made by gathering data and
assessing whether the organization is progressing towards its goals.
Problem
A situation in which organizational accomplishments have failed to meet established goals.
Opportunity
A situation in which managers see potential organizational accomplishments that exceed
current goals. Managers see potential accomplishment that exceeds specified current goals.
Diagnosis and analysis of Causes
Once a problem or opportunity comes to a manager’s attention, the understanding of the
situation should be refined.
Diagnosis
The step in the decision-making process in which managers analyze underlying causal factors
associated with the decision situation.
,These kind of questions help specify what actually happened and why.
• Managers must understand the situation—diagnosis
• Managers ask a series of questions:
1. What is the state of disequilibrium affecting us?
2. When did it occur?
3. Where did it occur?
4. How did it occur?
5. To whom did it occur?
6. What is the urgency of the problem?
7. What is the interconnectedness of events?
8. What result came from which activity?
Development of Alternatives
The next step is to generate alternative solutions that will respond to the needs of the
situation and correct underlying causes. Decision alternatives can be thought of as tools for
reducing the difference between the organization’s current and desired performance.
• Generate possible alternative solutions .
• For programmed decisions, feasible alternatives are easy to identify.
• Non-programmed decisions, however require developing new courses of action.
Selection of Desired alternative
The manager tries to select the choice with least amount of risk and uncertainty. The best
alternative is one in which the solution best fits overall goals and values of the organization
and achieves the desired result using fewest resources.
• Managers will choose the most promising of several alternative courses of action.
• The selection should fit the goals and objectives.
• The manager tries to select the choice with the least amount of risk and uncertainty.
Risk propensity
The willingness to undertake risk with the opportunity of gaining an increased payoff.
Implementation of Chosen Alternative
• Use managerial, administrative and persuasive abilities to ensure that the alternative
is carried out
• Success depends on the managers ability to translate alternative into action
• Implementation requires communication, motivation, and leadership
Implementation
The step in the decision-making process that involves using managerial, administrative and
persuasive abilities to translate the chose alternative into action.
, Evaluation and Feedback
• How well was the alternative implemented?
• Was the alternative successful?
• Feedback is a continuous process
• Large problems may involve several alternatives in sequence
Decision styles
Differences among people with respect to how they perceive problems and make decisions.
Four major decision styles: directive, analytical, conceptual, and behavioral:
1. The directive style is used by people who prefer simple, clear-cut solutions to
problems.
2. Managers with an analytical style like to consider complex solutions based on as
much data as they can gather.
3. People who tend toward a conceptual style also like to consider a broad amount of
information in a more socially oriented way then the analytical type.
4. The behavioral style is often the style adopted by managers having a deep concern
for others as individuals.
Innovative Group Decision-Making is becoming more and more common. Managers do
make some decisions as individuals, but decision-makers more often are part of a group.
Major decisions in the business world rarely are made entirely by an individual.
Brainstorming
A technique that uses a face-to-face group to spontaneously suggest a broad range of
alternatives for decision-making. The key to effective brainstorming are that people can build
on one another’s ideas; all ideas are acceptable no matter how crazy they are.
Electronic brainstorming
Bringing people together in an interactive group over a computer network to suggest
alternatives; sometimes called brainwriting. This process can be very effective because it’s an
anonymous.
Devil’s advocate
A decision making-technique in which an individual is assigned the role of challenging the
assumptions and assertions made by the group to prevent premature consensus.
Point-counterpoint
A decision-making technique in which people are assigned to express competing points of
view.
, Groupthink
The tendency of people in groups to suppress contrary opinions. The desire for harmony
outweighs concerns over decision quality.
Escalating commitment
Continuing to invest time and resources in a failing decision. Key here is: know when to bail
out.
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