Ch 7 The Manager as a Decision Maker

1
Ch 7 The Manager as a Decision Maker Programmed
Decision Making - Routine, almost automatic
decision making that have well-established
solutions Non-programmed Decision Making -
Non-routine decision making that involves new,
unusual, or unpredictable situations
2
Intuition - Ability to make sound decisions based
on past experience and feelings about the info
Judgment - Ability to develop a sound opinion
based on evaluation of the importance of the
info Optimum Decision - The most appropriate
decision that are believed to lead to the
most desirable consequences
3
Decision Making Techniques

• Analytical
• Pay less attention
• to intuition
• Follow instruction and rules
• Do more planning
• Organized, careful
• Realistic, serious
• More anxious

• Intuitive
• Tend to use intuition
• Creative, imaginative
• Exciting
• Daydreaming
• Like challenges

4

• Classical Decision Making Model
• Rational, Normative, and Ideal Model
• Focus How decisions should be made
• Basis
• - Systematic Logic - Rational Analysis
• Assumptions
• - Problem clarity
• - Know options
• - Clear criteria to evaluate options
• - Make the optimum decisions

5

• Administrative Model
• Descriptive, Behavioral, and Practical
• Focus How decisions are actually made
• Basis Rational analysis and intuition
• Assumptions
• Bounded rationality - cognitive limitations
• Satisficing choose satisfactory solutions

6

• Why Information Is Incomplete?
• Risk degree of probability for the outcome
• Uncertainty Unpredictability
• Ambiguous info
• That can be interpreted in multiple ways
• Time constraints and info costs
• No time or money to search for all options

7
Fleet Corp.

• Making decisions on marketing strategy
• for Beavis and Butthead Trading Cards
• What did they decide on?
• Design
• Retail price
• Advertising
• Sampling

8
Cognitive Biases and Decision
Making Heuristics - Rules of thumb that simplify
decision making Systematic Errors - Errors that
are made over and over Cognitive Biases - Prior
hypothesis bias - Representativeness bias -
Illusion of control - Escalating commitment