Summary on chp 6 by Iman

Chapter:6 Decision Making
Summary
Decision: a choice from two or more alternatives.
Decision making process:the set of eight steps
Identifying a problem
Identifying decision criteria
Allocating weights
Developing alternatives
Analyzing alternatives
Selecting an alternatives
Implementing alternative
Evaluating decision effectiveness
How are decisions made?
Rationality: consistent, value-maximizing choices where the problem is clear and unambiguous, the decision maker’s goal is clear and specific and decision maker must knows all possible alternatives.

Bounded rationality: decisions are made rationally but decision maker is bounded by limited ability to process information ,decision making strongly influenced by organization’s culture, internal politics and power consideration. Intuition: making decision on the basis of experiences, feelings and judgments.
Types of problems and decisions:

Structured problem: straightforward, familiar and easily defined problems
Programmed decision: a repetitive decision that can be handled by a routine approach.
Unstructured problem: problems that are new or unusual and for which information is incomplete.
NonProgrammed decision:a decision that requires a custom made solution.
· Decision making conditions:

three conditions managers may face while decision making.

Certainty: a situation in which a manager can make accurate decisions because all outcomes are known.
Risk: a situation in which the decision maker is able to estimate the likelihood certain outcomes.

Uncertainty: a situation in which a decision maker has neither certainty nor reasonable probability estimates available.
Decision making styles: differ along two dimension, first is individual way of thinking and second is tolerance for ambiguity. Four styles are:
Directive style: a decision-making style characterized by low tolerance for ambiguity and a rational way of thinking.

Analytic style: a decision-making style characterized by a high tolerance for ambiguity and an intuitive way of thinking.

Conceptual style: a decision-making style that is characterized by a high tolerance for ambiguity and intuitive way of thinking.

Behavioral style: a decision-making style characterized by a low tolerance for ambiguity and an intuitive way of thinking.
How do managers need to know about making decisions in today’s world?

Understand cultural difference.

Know when it’s time to call it quit.

Use an effective decision-making process.

Develop highly reliable organizations.


Multiple choice question:
Decision making is a set of ___ steps
(a) four
(b) eight
(c) ten
Rules of thumb in decision-making is known as
(a) heuristics
(b) policy
(c) rule
________ is a situation in which decision maker is able to estimate the likelihood of certain outcomes.
(a) risk
(b) certainty
(c) uncertainty
a decision making style with high tolerance for ambiguity and intuitive way of thinking is
(a) conceptual style
(b) analytic style
(c) directive style