CH 07

Place Slide Title Text Here
JOHN R. SCHERMERHORN, JR.

MANAGEMENT
12th Edition
Chapter 7
The Decision-Making
Process
2013 John Wiley & Sons, Inc. All rights reserved. 7-1
Planning
Place Ahead
Slide Chapter
Title Text Here 7 Study Questions
1. What is the role of information in the management

process?
2. How do managers use information to make
decisions?
3. What are the steps in the decision-making
process?
4. What are the current issues in managerial decision
making?
Chapter
Place Slide 7 Learning
Title Text Here Dashboard
1. Information, Technology, and Management

1. What is useful information?
2. Information systems and business intelligence
3. Information needs in organizations
4. How information technology is changing organizations
2. Information and Managerial Decisions
1. Managers as information processors
2. Managers as problem solvers
3. Types of managerial decisions
4. Decision conditions
Chapter
Place Slide 7 Learning
Title Text Here Dashboard
3. The Decision-Making Process

1. Step 1 Identify and Define the Problem
2. Step 2 Generate and Evaluate Alternative Courses of Action
3. Step 3 Decide on a Preferred Course of Action
4. Step 4 Implement the Decision
5. Step 5 Evaluate Results
6. At All Steps Check Ethical Reasoning
4. Issues in Managerial Decision Making
1. Decision errors and traps
2. Creativity in decision making
Takeaway
Place Slide1:Title
Information, Technology, & Management
Text Here

Managers must have
Technological competency
Ability to understand new technologies and to use them to
their best advantage
Information competency
Ability to locate, gather, organize, and display information for
decision making and problem solving
Analytical competency
Ability to evaluate and analyze information to make actual
decisions and solve real problems
Takeaway
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Text Here
What is useful information?

Data
Raw facts and observations
Information
Data made useful and meaningful for decision
making
Information drives management functions
Takeaway
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Text Here
Characteristics of useful information:

Timely
High quality
Complete
Relevant
Understandable
Analytics: systematic gathering and
processing of data to make it useful as
information
Takeaway
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Text Here
Information systems and business intelligence

Management information systems
Use IT to collect, organize, and distribute data for use
in decision making
Business intelligence
Taps information systems to extract and report data in
organized ways that are helpful to decision makers
Takeaway
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Text Here
Executive dashboards
Visually update and display key
performance indicators and information
on a real-time basis
Takeaway
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Text Here
Information needs in organizations

Information exchanges with the external
environment:
Gather intelligence information
Provide public information
Information exchanges within the organization:
Facilitate decision making
Facilitate problem solving
Takeaway 1: Information, Technology, & Management
Implications of IT for
Implications of IT within
relationships with external
organizations:
environment:
Helps with customer Facilitation of
relationship management communication and
Helps organizations with information sharing
supply chain management Operating with fewer
Helps in monitoring middle managers
outsourcing and other Flattening of organizational
business contracts structures
Faster decision making
Increased coordination and
control
Figure 7.1 Internal and external information
needs in organizations
Figure 7.2 Information technology is breaking
barriers and changing organizations
Takeaway
Place Slide 2: Information
Title and Managerial Decisions
Text Here
Information and Managerial Decisions

Managers as Information Processors
Continually gather, give, and receive
information
Now as much electronic as it is face to face
Always on, always connected
Figure 7.3 The manager as an information-
processing nerve center
Takeaway
Text Here
Problem solving
The process of identifying a discrepancy between actual
and desired performance and taking action to resolve it
Performance Performance
Decision
threat opportunity
A choice among Situation offers
Something is
possible the chance for a
wrong or has
alternative better future if
the potential to
courses of the right steps
go wrong
action are taken
Takeaway
Text Here
Problem-solving approaches or styles:
Problem avoiders Problem solvers Problem seekers

Inactive in information Reactive in gathering Proactive in
gathering and solving information and anticipating problems
problems solving problems and opportunities and
taking appropriate
action to gain an
advantage
Takeaway
Text Here
Systematic versus intuitive thinking
Systematic Intuitive
thinking thinking
approaches approaches
problems in a problems in a
rational, step-by- flexible and
step, and spontaneous
analytical fashion fashion
Takeaway
Text Here
Multidimensional thinking applies both

intuitive and systematic thinking
Effective multidimensional thinking
requires skill at strategic opportunism
Takeaway
Text Here
Managers use different cognitive styles
Takeaway
Text Here
Types of problems
Structured problems are ones that are familiar,
straightforward, and clear with respect to
information needs
Programmed decisions apply solutions that are
readily available from past experiences to solve
structured problems
Takeaway
Text Here
Types of problems
Unstructured problems are ones that are
full of ambiguities and information
deficiencies
Nonprogrammed decisions apply a specific
solution to meet the demands of a unique
problem
Commonly faced by higher-level
management
Takeaway
Text Here
Crisis decision making

A crisis involves an unexpected problem
that can lead to disaster if not resolved
quickly and appropriately
Takeaway
Text Here
Rules for crisis management:
Figure out what is going on

Remember that speed matters
Remember that slow counts, too
Respect the danger of the unfamiliar
Value the skeptic
Be ready to fight fire with fire
Takeaway
Text Here
Managers make decisions with various amounts of information
Certain environment
offers complete information on possible action

alternatives and their consequences
Risk environment
lacks complete information but offers probabilities of

the likely outcomes for possible action alternatives
Uncertain environment
lacks so much information that it is difficult to assign

probabilities to the likely outcomes of alternatives
Figure 7.4 Three environments for managerial
decision making and problem solving
Figure 7.5 Steps in managerial decision making and
problem solving
Takeaway
Place 3 : The
Slide Title TextDecision-Making
Here Process
Step 1 Identify and define the problem

Focuses on information gathering, information
processing, and deliberation
Decision objectives should be established
Common mistakes in defining problems:
Defining the problem too broadly or too narrowly
Focusing on symptoms instead of causes
Choosing the wrong problem
Takeaway
Place 3 : The
Here Process
Step 2 Generate and Evaluate Alternative

Courses of Action
Potential solutions are formulated and more
information is gathered, data are analyzed, the
advantages and disadvantages of alternative
solutions are identified
Approaches for evaluating alternatives:
Stakeholder analysis
Cost-benefit analysis
Takeaway
Place 3 : The
Here Process
Step 2 Generate and Evaluate Possible

Courses of Action (cont.)
Criteria for evaluating alternatives:
Benefits
Costs
Timeliness
Acceptability
Ethical soundness
Takeaway
Place 3 : The
Here Process
Step 2 Generate and Evaluate

Possible Courses of Action (cont.)
Common mistakes:
Abandoning the search for alternatives
too quickly
Takeaway
Place 3 : The
Here Process
Step 3 Decide on a Preferred Course

of Action
Two different approaches
Behavioral model leads to satisficing
decisions
Classical model leads to optimizing decisions
Figure 7.6 Differences in the classical and behavioral
decision-making models
Takeaway
Place 3 : The
Here Process
Step 4 Implement the Decision

Involves taking action to make sure the solution
decided upon becomes a reality
Managers need to have willingness and ability to
implement action plans
Lack-of-participation error should be avoided
Takeaway
Place 3 : The
Here Process
Step 5 Evaluate Results

Involves comparing actual and desired results
Positive and negative consequences of chosen
course of action should be examined
If actual results fall short of desired results, the
manager returns to earlier steps in the decision-
making process
Takeaway
Place 3 : The
Here Process
At all steps, check ethical reasoning!

Ask these spotlight questions
Utility Does the decision satisfy all constituents

or stakeholders?
Rights Does the decision respect the rights and

duties of everyone?
Justice Is the decision consistent with the

canons of justice?
Caring Is the decision consistent with my

responsibilities to care?
Takeaway
Place 4: Issues
Slide Title Textin Managerial
Here Decision Making
Issues in decision making

How do decision errors happen?
Heuristics are strategies for simplifying
decision making
Takeaway
Place 4: Issues
Slide Title in Managerial
Text Here Decision Making
Availability Bias
Bases a decision on recent information or events
Representativeness Bias
Bases a decision on similarity to other situations
Anchoring and Adjustment Bias

Bases a decision on incremental adjustment from a prior decision point
Framing Error
Trying to solve a problem in the context in a positive or negative context
Confirmation Error
Focusing on information that confirms a decision already made
Escalating Commitment
Continuing a course of action even though it is not working
Takeaway
Place 4: Issues
Slide Title in Managerial
Text Here Decision Making
Creative Decision making:

Creativity is the generation of a novel idea or
unique approach that solves a problem or crafts
an opportunity
Big-C creativity occurs when extraordinary things are
done by exceptional people
Little-C creativity occurs when average people come
up with unique ways to deal with daily events and
situations
Takeaway
Place 4: Issues
Personal creativity drivers
Task
Motivation
Task Creativity
Expertise Skills
Creativity
Takeaway
Place 4: Issues
Situational creativity drivers
Management
Support
Team Organizational
Creativity
Skills Culture
Creativity

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Place Slide Title Text Here

JOHN R. SCHERMERHORN, JR.

1. What is the role of information in the management

1. Information, Technology, and Management

3. The Decision-Making Process

Information, Technology, & Management

What is useful information?

Characteristics of useful information:

Information systems and business intelligence

Information needs in organizations

Information and Managerial Decisions

Problem-solving approaches or styles:

Problem avoiders Problem solvers Problem seekers

Systematic versus intuitive thinking

Multidimensional thinking applies both

Managers use different cognitive styles

Crisis decision making

Rules for crisis management:

Figure out what is going on

Managers make decisions with various amounts of information

offers complete information on possible action

lacks complete information but offers probabilities of

lacks so much information that it is difficult to assign

Step 1 Identify and define the problem

Step 2 Generate and Evaluate Alternative

Step 2 Generate and Evaluate Possible

Step 2 Generate and Evaluate

Step 3 Decide on a Preferred Course

Step 4 Implement the Decision

Step 5 Evaluate Results

At all steps, check ethical reasoning!

Utility Does the decision satisfy all constituents

Rights Does the decision respect the rights and

Justice Is the decision consistent with the

Caring Is the decision consistent with my

Issues in decision making

Anchoring and Adjustment Bias

Creative Decision making:

Personal creativity drivers

Situational creativity drivers

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