THE NATURE OF MANAGERIAL DECISION MAKING
Programmed
decisions are routine decisions made so often that managers have developed
decision rules to be followed automatically. Nonprogrammed decisions
are made in response to situations that are unusual or novel; they are
nonroutine decisions. The classical model of decision making assumes that
decision makers have complete information; are able to process that information in an objective,
rational manner; and make optimum decisions. March and Simon argued that managers
exhibit bounded rationality, rarely have access to all the information they need to make optimum
decisions, and consequently satisfice and rely on their intuition and judgment when making
decisions.
STEPS IN THE DECISION-MAKING PROCESS
When making decisions, managers should take these six steps: recognize the need for a decision, generate alternatives, assess alternatives, choose among alternatives, implement the chosen alternative, and learn from feedback.
COGNITIVE BIASES AND DECISION MAKING
Most of the time managers are fairly good decision makers. On occasion, however, problems can result because human judgment
can be adversely affected by the operation of cognitive biases that result in poor decisions.
Cognitive biases are caused by systematic errors in the way decision makers process information and make decisions. Sources of these errors include prior hypotheses, representativeness, the illusion of control, and escalating commitment. Managers should undertake a personal decision audit to become aware of their biases and thus improve their decision making.
GROUP DECISION MAKING
Many advantages are associated with group decision making, but there are also several disadvantages. One major source of poor decision making
is groupthink. Afflicted decision makers collectively embark on a dubious course of action
without questioning the assumptions that underlie their decision. Managers can improve the quality of group decision making by using techniques such as devil's advocacy and dialectical inquiry and by increasing diversity in the decision-making group.
ORGANIZATIONAL LEARNING AND CREATIVITY
Organizational learning is the
process through which managers seek to improve employees' desire and ability to understand
and manage the organization and its task environment so employees can make decisions that
continuously raise organizational effectiveness. Managers must take steps to promote organizational
learning and creativity at the individual and group levels to improve the quality of
decision making.
ENTREPRENEURSHIP
Entrepreneurship is the mobilization of resources to take advantage
of an opportunity to provide customers with new or improved goods and services. Entrepreneurs
start new ventures of their own. Intrapreneurs work inside organizations and manage
the product development process. Organizations need to encourage intrapreneurship because
it leads to organizational learning and innovation.
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