•Describetheeightstepsinthedecision-makingprocess•Explainthefourwaysmanagersmakedecisions•Classifydecisionsanddecision-makingconditions•Classifydecisionsanddecision-makingconditions•Identifyeffectivedecision-makingtechniquesDecision-makingachoicefromtwoormorealternatives.Problem-anobstaclethatmakesitdifficulttoachieveadesiredgoalorpurpose.1.Identifyingaproblemanddecisioncriteriaandallocatingweightstothecriteria2.Developing,analyzing,andselectinganalternativethatcanresolvetheproblem3.Implementingtheselectedalternative4.Evaluatingthedecision’seffectivenessCharacteristicsofProblemsAproblembecomesaproblemwhenamanagerbecomesawareofit.Thereispressuretosolvetheproblem.Themanagermusthavetheauthority,information,orresourcesneededtosolvetheproblem.Decisioncriteriaarefactorsthatareimportant(relevant)toresolvingtheproblem,suchas:Coststhatwillbeincurred(investmentsrequired)Riskslikelytobeencountered(chanceoffailure)Outcomesthataredesired(growthofthefirm)Decisioncriteriaarenotofequalimportance:Assigningaweighttoeachitemplacestheitemsinthecorrectpriorityorderoftheirimportanceinthedecision-makingprocess.IdentifyingviablealternativesAlternativesarelisted(withoutevaluation)thatcanresolvetheproblem.Appraisingeachalternative’sstrengthsandweaknessesAnalternative’sappraisalisbasedonitsabilitytoresolvetheissuesrelatedtothecriteriaandcriteriaweight.ChoosingthebestalternativeThealternativewiththehighesttotalweightischosen.•Puttingthechosenalternativeintoaction-ConveyingthedecisiontoandgainingcommitmentfromthosewhowillcarryoutthealternativeThesoundnessofthedecisionisjudgedbyitsoutcomes.Howeffectivelywastheproblemresolvedbyoutcomesresultingfromthechosenalternatives?Iftheproblemwasnotresolved,whatwentwrong?RationalDecision-Making-describeschoicesthatarelogicalandconsistentwhilemaximizingvalue.BoundedRationality-decisionmakingthat’srational,butlimited(bounded)byanindividual’sabilitytoprocessinformation.Satisfice-acceptingsolutionsthatare“goodenough.”Intuitivedecision-makingMakingdecisionsonthebasisofexperience,feelings,andaccumulatedjudgment.ProgrammedDecision-arepetitivedecisionthatcanbehandledbyaroutineapproach.Non-programmedDecisions-uniqueandnonrecurringdecisionsthatrequireacustom-madesolution.Procedure-aseriesofinterrelatedstepsthatamanagercanusetoapplyapolicyinresponsetoastructuredproblem.Rule-anexplicitstatementthatlimitswhatamanageroremployeecanorcannotdo.Policy-ageneralguidelineformakingadecisionaboutastructuredproblem.StructuredProblems-straightforward,familiar,andeasilydefinedproblems.UnstructuredProblems-problemsthatareneworunusualandforwhichinformationisambiguousorincomplete.Certaintyasituationinwhichamanagercanmakeanaccuratedecisionbecausetheoutcomeofeveryalternativechoiceisknown.Riskasituationinwhichthemanagerisabletoestimatethelikelihood(probability)ofoutcomesthatresultfromthechoiceofparticularalternatives.Limitedinformationpreventsestimationofoutcomeprobabilitiesforalternatives.Limitedinformationforcesmanagerstorelyonintuition,hunches,and“gutfeelings.”Maximax:theoptimisticmanager’schoicetomaximizethemaximumpayoff.Maximin:thepessimisticmanager’schoicetomaximizetheminimumpayoff.Minimax:themanager’schoicetominimizemaximumregret.LinearThinkingStyle-aperson’stendencytouseexternaldata/facts;thehabitofprocessinginformationthroughrational,logicalthinking.NonlinearThinkingStyle-aperson’spreferenceforinternalsourcesofinformation;amethodofprocessingthisinformationwithinternalinsights,feelings,andhunches.Heuristics-using“rulesofthumb”tosimplifydecisionmaking.OverconfidenceBias-holdingunrealisticallypositiveviewsofoneselfandone’sperformance.ImmediateGratificationBias-choosingalternativesthatofferimmediaterewardsandavoidimmediatecosts.AnchoringEffect-fixatingoninitialinformationandignoringsubsequentinformation.SelectivePerceptionBias-selecting,organizingandinterpretingeventsbasedonthedecisionmaker’sbiasedperceptions.ConfirmationBias-seekingoutinformationthatreaffirmspastchoiceswhilediscountingcontradictoryinformation.FramingBias-selectingandhighlightingcertainaspectsofasituationwhileignoringotheraspects.AvailabilityBias-losingdecision-makingobjectivitybyfocusingonthemostrecentevents.RepresentationBias-drawinganalogiesandseeingidenticalsituationswhennoneexist.RandomnessBias-creatingunfoundedmeaningoutofrandomevents.SunkCostsErrors-forgettingthatcurrentactionscannotinfluencepasteventsandrelateonlytofutureconsequences.Self-ServingBias-takingquickcreditforsuccessesandblamingoutsidefactorsforfailures.HindsightBias-mistakenlybelievingthataneventcouldhavebeenpredictedoncetheactualoutcomeisknown(after-the-fact).Guidelinesformakingeffectivedecisions:UnderstandculturaldifferencesKnowwhenit’stimetocallitquitsUseaneffectivedecisionmakingprocessHabitsofhighlyreliableorganizations(HROs)ArenottrickedbytheirsuccessDefertotheexpertsonthefrontlineLetunexpectedcircumstancesprovidethesolutionEmbracecomplexityAnticipate,butalsoanticipatetheirlimitsDecisioncriteriaRationaldecisionmaking