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Chapter 4 - Foundations of Decision Making Learning Outcomes
Chapter 4 - Foundations of Decision Making Learning Outcomes
Chapter 4 - Foundations of Decision Making Learning Outcomes
6. Identify the two types of decision problems and the two types of decisions that are used to solve
them.
7. Define heuristics and explain how they affect the decision-making process.
Opening Vignette
SUMMARY
Some researchers who study how decisions are made will tell you that more than 90 percent of
business decisions are made quickly and based on a “gut reaction.” Software maker, Business Objects,
located in San Jose, California, believes it has a way to help business people make better decisions.
Customers include such companies as Kraft Foods, MasterCard, PepsiCo, and General Electric.
Business Objects saw its revenue increase 19 percent in 2001 to more than $416 million. How does this
software help companies make decisions? Owens and Minor (O&M) sells medical supplies—about $4
billion worth a year. It has had trouble tracking purchases, inventory, and order backlogs. Business
Objects software is a sophisticated computer database system that has enabled O&M to make decisions
that have allowed the company to reduce its inventory by 14 percent, saving the company about $50
million annually. It also enabled O&M to recognize that about half of its product line wasn’t selling, and
could be eliminated. (See Exhibit 4-1.)
Business Objects’ software has helped GE track costs, maintenance, and performance of X-Ray
and MRI machines. Harrah’s Entertainment also uses the software to accurately predict which regular
casino customers would respond more favorably to a free meal or a free room. Even the 2002 Super
Bowl witnessed the benefits of Business Objects. Best Buy used the software to analyze patterns of
sports fans in the area. Armed with this information, Best Buy shipped added inventory into the Boston
area—and saw television sales increase by 26 percent.
Business Objects gives people a “tool” that performs thousands of relational analyses in seconds
so that the decision maker is better able to make an informed decision with more complete
information.Canadian entrepreneur Brian Scudamore has made a thriving business out of hauling people’s
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trash. His business, Got Junk? resulted from seeing a dilapidated truck hauling some trash in a
McDonald’s drive-thru. Scudamore figured that many people had stuff they needed to get rid of, and that
they made their decisions on who to call to haul away rubbish based on what the haulers looked like.
What Scudamore has done has been nothing short of phenomenal. His goals were to do a good job at
a reasonable price, to look professional, and to be the go-to company to have trash hauled away. That, to
Scudamore, meant having newer trucks that were washed every day, and dressing employees in a uniform
ofuniform of slacks, royal blue golf shirts, a baseball cap, belt, and boots. The business was an immediate
success and as it continued to grow, Scudamore began envisioning a “Got Junk?” empire.
15 years later, Scudamore’s company gets more than 1500 calls a day and uses software call JunkNet
to route the calls to one of the 74 territories where GotJunk? exists. Within 24 hours, a GotJunk?
technician arrives in his or her clean truck, professionally dressed, and hauls the junk away. Averaging
$238 per customer, Scudamore’s company is generating the $12.5 million in revenues the company had in
2003. It is now one of the fastest growing franchises in North America, with at least one GotJunk?
operation in 28 of the top metropolitan areas. Those early decisions Brian Scudamore made were
correct.
Teaching tips
1. What factors were key in Brain Scudamore’s decision to start his business? What about how to
design it?
2. How are GotJunk’s? decisions for routing made currently? concerns would you have about relying on
software such as this for making decisions
3. What steps would you recommend to address those concerns and assure that the data analyzed was
indeed reliable and accuratcan we learn from Scudamore’s decision making approach?
e
4. Can companies today afford NOT to utilize software such as this to assist management in having
information on which to base decisions? Why or why not?
5.
A. Introduction
1. See Exhibit 4-1 for examples of planning function decisions. (PPT 4-5)
A. Introduction
1. The decision-making process begins with the identification of a problem (Step 1), a
discrepancy between an existing and a desired state of affairs.
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3. The manager who mistakenly solves the wrong problem perfectly is likely to perform just as
poorly as the manager who fails to identify the right problem and does nothing.
a) How do managers become aware that they have a discrepancy?
1) Past performance.
1. Once a problem is identified, the decision criteria must be identified (Step 2).
3. Every decision maker has criteria—explicitly stated or not—that guide his/her decision.
1. It is necessary to allocate weights to the items listed in Step 2 in order to give them their
relative priority in the decision (Step 3).
2. A simple approach, give the most important criterion a weight of ten and then assign weights
to the rest against that standard.
a) Exhibit 4-3 lists the criteria and weights for vehicle replacement decision. (PPT 4-7)
3. Then the decision maker lists the alternatives that could succeed in resolving the problem
(Step 4).
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4. Once identified, the decision maker must critically analyze each alternative (Step 5).
a) Each alternative is evaluated by appraising it against the criteria and weights established
in Steps 2 and 3.
1) Exhibit 4-4 shows the assessed values for each vehicle; it does not reflect the
weighting done in Step 3. (PPT 4-8)
b) If you multiply each alternative assessment against its weight, you get Exhibit 4-5. (PPT
4-9)
c) Notice that the weighting of the criteria has changed the ranking of alternatives in our
example.
1. The critical act of choosing the best alternative from among those enumerated and assessed
(Step 6).
1. The decision may still fail if it is not implemented properly (Step 7).
2. Decision implementation includes conveying the decision to those affected and getting their
commitment to it.
3. The people who must carry out a decision are most likely to enthusiastically endorse the
outcome if they participate in the decision-making process.
1. The last step (Step 8) appraises the result of the decision to see whether it has corrected the
problem.
2. Did the alternative chosen in Step 6 and implemented in Step 7 accomplish the desired result?
A. Introduction
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2. A decision maker who was perfectly rational would be fully objective and logical.
a) He or she would carefully define the problem and have a clear and specific goal.
b) The steps in the decision-making process would consistently lead to selecting the
alternative that maximizes that goal.
3. The assumptions of rationality often do not hold true, because the level of certainty that the
rational model demands rarely exists.
5. Decisions made with limited information are made under a condition of uncertainty.
1. The rational decision maker needs creativity—the ability to produce novel and useful ideas.
a) Different from what’s been done before and appropriate to the problem or opportunity
presented.
2. Creativity allows the decision maker to appraise and understand the problem more fully,
including “seeing” problems other can’t see.
3. Creativity’s most obvious value is in helping the decision maker identify all viable
alternatives.
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3. Individual creativity requires expertise, creative-thinking skills, and intrinsic task motivation
(See Exhibit 4-7). (PPT 4-13)
c) Intrinsic task motivation is the desire to work on something because it’s interesting,
involving, exciting, satisfying, or personally challenging.
1) Determines the extent to which individuals fully engage their expertise and creative
skills.
2) Creative people often love their work, to the point of seeming obsessed.
2. When we are faced with complex problems, most of us respond by reducing the problem to
something we can readily understand.
3. We satisfice: seek solutions that are satisfactory and sufficient—or just good enough.
4. When managers face a simple problem having few alternatives, when time pressures are
minimal, and when the cost of seeking and evaluating alternatives is low—the rational model
provides a good description of the decision-making process.
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a) They suggest that decision making often veers from the logical, consistent, and
systematic process.
b) Despite the limits to perfect rationality, managers are expected to appear to follow the
rational process.
6. “Good” decision makers are supposed to do certain things: identify problems, consider
alternatives, gather information, behave thoughtfully, and act decisively but prudently.
7. Managers signal that they are competent and that their decisions are the result of intelligent
and rational deliberation.
2. The essence of managerial jobs revolves around the rational decision-making process.
3. Herbert Simon found that within certain constraints, managers do act rationally.
4. Because it is impossible for human beings to process and understand all the information
necessary, they construct simplified models that extract the essential features from problems.
a) Bounded rationality, decision makers behave rationally within the limits of the simplified
or bounded model.
5. How do managers’ actions within these boundaries differ from actions within the rational
model?
a) Once a problem is identified, the search for criteria and alternatives begins.
1) This list of criteria is generally limited and made up of the more conspicuous
choices.
b) Simon found that decision makers focus on easy-to-find choices—those that are highly
visible.
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c) This means developing alternatives that vary only slightly from past decisions about
similar problems.
d) Once this limited set of alternatives is identified, decision makers begin reviewing them.
1) The first alternative to meet the “good enough” criterion ends the search.
(a) Accept offer as cash flow manager with mid-sized firm 60 miles from home at
starting salary of $44,500.
(b) Further searching would have revealed an opening for a cash flow manager with
a Fortune 1000 firm 25 miles from home at a starting salary of $48,000.
(c) You stopped searching when the first job was found because it was “good
enough.”
f) What are the implications of bounded rationality on the manager’s job? In situations in
which the assumptions of perfect rationality do not apply (including many of the most
important and far-reaching decisions that a manager makes), the details of the decision-
making process are strongly influenced by the decision maker’s self-interest, the
organization’s culture, internal politics, and power considerations.
2. Behaviors that speed up the process, judgmental shortcuts, are called heuristics.
4. Availability heuristic.
a) The tendency for people to base their judgments on information that is readily available.
1) Events that invoke strong emotions, that are vivid to the imagination, or that have
recently occurred create a strong impression.
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5. Representative heuristic
b) No longer hiring college graduates from a particular college program because the last
three hired from that program were poor performers.
7. Escalation of Commitment
a) Example, blackjack.
d) Some of the most notorious events involving escalation of commitment were decisions
made by presidents of the United States.
8. George H. W. Bush believed that, given his popularity after Operation Desert Storm and the
fall of the Soviet Union, he had only to pay attention to foreign affairs to win the 1992
presidential election.
9. At Allfirst Financial (a U.S. subsidiary of Allied Irish Banks), a Baltimore trader continued to
trade the yen in hopes of recouping his initial losses—his actions led to a $691 million loss to
the bank.
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V. V
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A. Introduction
1. Some problems are straightforward. The goal of the decision maker is clear, the problem
familiar, and information about the problem easily defined and complete.
2. Many situations, however, are ill-structured problems. They are new or unusual. Information
about such problems is ambiguous or incomplete.
a) Examples of ill-structured problems include the decision to enter a new market segment,
to hire an architect to design a new office park, etc.
1. Programmed, or routine, decision making is the most efficient way to handle well-structured
problems.
2. When problems are ill structured, managers must rely on nonprogrammed decision making.
3. Decisions are programmed to the extent that they are repetitive and routine and to the extent
that a specific approach has been worked out for handling them.
a) Programmed decision making is relatively simple and tends to rely heavily on previous
solutions.
4. A procedure is a series of interrelated sequential steps that a manager can use when
responding to a well-structured problem.
c) Example of auto mechanic shop and following company policy in case of damage to a
customer’s car. purchasing manager and request for copies of XXXXMcAfee Virus
Software
d)
5. A rule is an explicit statement that tells a manager what he or she ought or ought not to do.
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a) Rules are frequently used with a well-structured problem because they are simple to
follow and ensure consistency.
6. A policy provides guidelines to channel a manager’s thinking in a specific direction.
a) In contrast to a rule, a policy establishes parameters for the decision maker rather than
specifically stating what should or should not be done.
c) Analogy, think of the Ten Commandments as rules and the U.S. constitution as policy.
Questions
1. Do you believe that a company like Advanced Cell Technology can make ethical decisions in this
arena when so much is at stake?
2. Should public opinion keep a company from doing something simply because it is unpopular—
even though it is legal? What’s your opinion?
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Teaching notes
1. Students may hold strong, and opposing, positions about the issue of stem-cell research. It is
important that focus be placed on their reasoning process and their realization of the difficulty of the
practical realities of their position.
2. Begin this exercise by asking students to create an argument for stem-cell research or against stem-
cell research to present to the Advanced Cell board of advisors.
Who are the stakeholders? Who has a vested interest in the decision and will be affected by it? Rank
their importance and explain the ranking.
What choices does Advanced Cell have? Are there other alternatives that would help them address the
problem?
4. Have students present their arguments in class, allowing other teams to critique their decision-making
process.
2. Such decisions are unique and nonrecurring, involving an ill-structured problem with no cut-
and-dried solution.
1) Bezos’ strategy to “get big fast” helped the company grow but at the cost of perennial
financial losses.
2) To make a profit, Bezos made decisions affecting how the company operated,
including allowing other sellers to sell their books at Amazon—result was $59
million in profit in 2001.
E. How Can You Integrate Problems, Types of Decisions, and Level in the Organization?
1. Exhibit 4-8 describes the relationship between types of problems, types of decisions, and
level in the organization. (PPT 4-18)
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a) The problems confronting managers up the organizational hierarchy are more likely to
become ill structured.
b) There are strong economic incentives for top management to create policies, standard
operating procedures, and rules to guide other managers.
1. Expert systems use software programs to encode the relevant experience of an expert and
allow a system to act like that expert in analyzing and solving ill-structured problems.
a) Use specialized knowledge about a particular problem area rather than general
knowledge that would apply to all problems.
d) Guide users through problems by asking them a set of sequential questions about the
situation and drawing conclusions based on the answers given.
a) Use computer software to imitate the structure of brain cells and connections among
them.
b) People can’t easily assimilate more than two or three variables at once, but neural
networks can perceive correlations among hundreds of variables.
c) Example, most banks today use neural networks to flag potential credit card fraud and it’s
more likely that the majority of credit card transactions flagged will be actual cases of
fraud. Also, fraudulent activities on a credit card can be uncovered in a matter of hours
with neural networks.
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A. Introduction
1. Every decision maker brings a unique set of personal characteristics to his or her problem-
solving efforts.
a) Some decision makers are logical and rational, processing information sequentially.
b) Some individuals who think creatively and use their intuition, see matters from a big
picture perspective.
a) Some have a high need for consistency and order and seek to minimize ambiguity.
b) Others tolerate high levels of uncertainty, processing many thoughts at the same time.
4. When we diagram these two dimensions, four decision-making styles are formed.
a) Characterized by high tolerance for ambiguity combined with a rational way of thinking.
a) Tends to be very broad in outlook and typically will look at many alternatives.
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b) Tends to focus on the long run and look for creative solutions.
a) Reflects an individual who thinks intuitively but has a low tolerance for uncertainty.
b) These decision makers work well with others, are open to suggestions, and are concerned
about the individuals who work for them.
10. See information about Self-Assessment #20, pp. 135exercise, page XXX135127.
1. Many decisions in organizations, especially important decisions that have far-reaching effects
on organizational activities and personnel, are typically made in groups.
2. In many cases, these groups represent people who will be most affected by the decisions.
1. Individual and group decisions have their own set of strengths—neither is ideal for all
situations.
3. A group will bring a diversity of experiences and perspectives to the decision process.
a) Quantity and diversity of information are greatest when group members represent
different specialties.
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b) A minority that dominates a group frequently has an undue influence on the final
decision.
4. Finally, there is ambiguous responsibility. In a group decision, the responsibility of any single
member is watered down.
a) Because of pressures for conformity, groups often deter individuals from critically
appraising unusual, minority, or unpopular views.
a) Group members rationalize any resistance to the assumptions they have made.
b) Members apply direct pressures on those who momentarily express doubts about any of
the group’s shared views or who question the arguments favored by the majority.
c) Those members who have doubts or hold differing points of view seek to avoid deviating
from what appears to be group consensus.
a) Yes.
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2. On the average, groups make better decisions than individuals—although groupthink may
occur.
5. If effectiveness means the degree of acceptance the final solution achieves, then groups are
better.
a) The larger the group, the greater the opportunity for heterogeneous representation.
b) A larger group requires more coordination and more time to allow for contributions.
d) Because five and seven are odd numbers, strict deadlocks are avoided.
a) Groups almost always are less efficient than the individual decision maker.
1. Three ways of making group decision making more creative: brainstorming, the nominal
group technique, and electronic meetings.
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2. What is brainstorming?
b) It utilizes an idea-generating process that specifically encourages any and all alternatives.
2) The leader states the problem clearly, ensuring understanding by all participants.
b) Group members must be present, but they are required to operate independently.
d) The chief advantage is that it permits a formal meeting but does not restrict independent
thinking.
a) This approach—called the electronic meeting—blends the nominal group technique with
computer technology.
b) Once the technology for the meeting is in place, the concept is simple.
c) Numerous people sit around a horseshoe-shaped table that is empty except for a series of
computer terminals.
d) Issues are presented to participants, who type their responses onto their computer screens.
e) Individual comments, as well as aggregate votes, are displayed on a projection screen in
the room.
f) The major advantages of electronic meetings are anonymity, honesty, and speed.
1) Participants can anonymously type any message they want, and it will flash on the
screen for all to see at the push of a board key.
5. Experts claim that electronic meetings are significantly faster and much cheaper than
traditional face-to-face meetings.
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a) Nestles example.
6. Drawbacks.
a) Those who can type quickly can outshine those who may be verbally eloquent but are
lousy typists.
b) Those with the best ideas don’t get credit for them.
7. The future of group decision making is very likely to include extensive usage of electronic
meetings.
a) By linking together media from different locations, people can have face-to-face
meetings even when they are thousands of miles apart.
b) This has enhanced feedback among the members, saved countless hours of business
travel, and ultimately saved companies hundreds of thousands of dollars.
A. Introduction
a) Only very senior-level managers make decisions, and they are likely to make safe ones.
a) Swedish senior managers tend not to be afraid to make risky decisions and also push
decisions down in the ranks.
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5. Egypt, where time pressures are low, managers make decisions at a slower and more
deliberate pace than managers in the United States.
6. Italy, history and traditions are valued, managers tend to rely on tried and proven alternatives.
7. Decision making in Japan is much more group oriented than in the United States.
8. France, autocratic decision making is widely practiced, and managers avoid risks.
9. Managerial styles in Germany reflect the German culture’s concern for structure and order,
extensive rules and regulations, and managers accept that decisions must go through
channels.
10. Managers who deal with employees from diverse cultures need to recognize what is common
and accepted behavior regarding decision making.
11. Managers who can accommodate diversity in decision-making philosophies and practices can
expect a high payoff.
1. Decision making is an eight-step process: (1) identify a problem, (2) identify decision criteria, (3)
allocate weights to the criteria, (4) develop alternatives, (5) analyze alternatives, (6) select an
alternative, (7) implement the alternative, and (8) evaluate decision effectiveness.
2. The rational decision model assumes that the decision maker can identify a clear problem, has no
goal conflict, knows all options, has a clear preference ordering, keeps all preferences constant, has
no time or cost constraints, and selects a final choice that maximizes his or her economic payoff.
3. Rationality assumptions do not apply in many situations because problems are not simple, goals
are not clear, alternatives are many, and there are time and cost constraints. In addition, decision
makers sometimes increase commitment to a previous choice to confirm its original correctness; prior
decision precedents constrain current choices, and most organizational cultures discourage taking
risks and searching for innovative alternatives.
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4. Certainty implies that a manager can make an accurate decision because the outcome of every
alternative is known. Because this is often not the case, risk involves assigning probabilities to
outcomes that may result. When decision makers have neither full knowledge of the problem nor a
reasonable probability of what may happen, they must make their decisions under a condition of
uncertainty.
7. Heuristics are shortcuts decision makers can take to speed up the decision-making process.
Heuristics commonly exist in two forms—availability and representative. Both types create biases in
a decision maker’s judgment.
8. The four decision-making styles are the directive style (characterized by low tolerance for
ambiguity and a rational way of thinking), the analytic style (characterized by high tolerance for
ambiguity combined with a rational way of thinking), the conceptual style (characterized by a very
broad outlook and a tendency to look at many alternatives), and the behavioral style (characterized by
intuitive thinking and a low tolerance for uncertainty).
10. Three ways of improving group decision making are brainstorming (utilizing an idea-generating
process that specifically encourages any and all alternatives while withholding any criticism of those
alternatives), the nominal group technique (a technique that restricts discussion during the decision-
making process), and electronic meetings (the most recent approach to group decision making, which
blends the nominal group technique with sophisticated computer technology).
Companion Website
We invite you to visit the Robbins/DeCenzo Companion Website at www.prenhall.com/robbins for this
chapter’s Internet resources, including an online study guide, Internet exercises, and “In the News” with
full text articles provided by XanEdu.
Companion Website
We invite you to visit the Robbins/DeCenzo Companion Website at www.prenhall.com/robbins for the
chapter quiz and student PowerPoints.
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OneKey
We invite you to visit www.prenhall.com/onekey for the part-ending ethics scenarios, diversity exercises,
and Manager’s Workshop employee modules.
Enhancing your Skill in Ethical Decision Making
New to this edition is an online interactive feature designed to give students experience in making
management decisions about hypothetical yet realistic ethical issues. Introductory paragraphs at the ends
of Parts 1, 2, 3, 4, and 5 provide background about the company (Boeing) and set up the situation for each
set of exercises. After they have studied the chapters in each part, have students log onto
www.prenhall.com/onekey and work through the two multiple choice questions and two short-essay
questions. You may want to hold classroom debates, assign students to conduct role-plays, or have
students work in teams to explore the decision alternatives involved in some of these ethical challenges.
Diversity Perspectives: Communication and Interpersonal Skills, by Carol Harvey and June
Allard Diversity
1. How could the director change the perceptions of the majority about the vocal minority and vice
versa?
To avoid perceptions based on physical interaction, where overtalking, ignoring and physical
appearance have effect, meetings could be help electronically. Everyone then would get a change to have
his/her say without being shut out or intimidated. This can help with the problem of scheduling meetings
at times when some members cannot attend. (The downside of this is whether everyone has access to
electronic communication and is comfortable using it.)
In face-to-face meetings a strong chairperson can do much to give everyone equal “air time,” (even
going so far as to allot everyone so many minutes), but cannot totally overcome the perceptions of
superiority and inferiority imposed by physical appearance.
Brainstorming is a good technique for hearing from everyone.
2. What could the director do to structure committee interactions to reduce minority domination?
The director or whoever chairs the council must take a firm stand. Insisting on hearing from everyone,
perhaps timing each member’s minutes on the floor.
If subcommittees are formed, then everyone serves on only one committee and the vocal minority and
other members are mixed on all committees and the minority do not always serve as chairs of the
committees (divide and conquer technique). The chair must be alert to keep minorities from coalescing
and caucusing.
When it comes time to make decisions, intimidation can be avoided by voting by mail, closed ballot,
electronically, etc.
3. What could the director do to better define the committee tasks to reduce minority domination?
The key is to structure the problem into phases/tasks from the very outset and to conduct any face-to-
face meetings with a written agenda. Again, electronic meetings and votes taken by mail, closed ballot or
electronically help.
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Simon found that decision makers focus on easy-to-find choices—those that are highly visible. This
means developing alternatives that vary only slightly from past decisions about similar problems.
Once this limited set of alternatives is identified, decision makers begin reviewing them. The review
will not be exhaustive. They review alternatives only until an alternative that is sufficient is found.
4. How do creativity, certainty, risk, and uncertainty affect individuals when they make a decision?
Answer – Creativity is the ability to produce novel and useful ideas. It allows the decision maker to
appraise and understand the problem more fully, including “seeing” problems others can’t see. It
helps the decision maker identify all viable alternatives.
The assumptions of rationality often do not hold true, because there rarely exists the level of certainty
that the rational model demands. Most managers try to assign probabilities to outcomes that may
result. This process is dealing with risk. Decisions made with limited information because of a lack of
full knowledge of the problem and the degree of probability can’t be determined are made under a
condition of uncertainty.
Groupthink applies to a situation in which a group’s ability to appraise alternatives objectively and
arrive at a quality decision is jeopardized. Because of pressures for conformity, groups often deter
individuals from critically appraising unusual, minority, or unpopular views. Consequently, there is a
deterioration of an individual’s mental efficiency, reality testing, and moral judgment.
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2. Is the order in which alternatives are considered more critical under assumptions of perfect rationality
or bounded rationality? Why?
Answer – Yes, as decision makers focus on easy-to-find choices—those that are highly visible. This
means developing alternatives that vary only slightly from past decisions about similar problems.
Once this limited set of alternatives is identified, decision makers begin reviewing them. They review
alternatives only until an alternative that is sufficient is found. An escalation of commitment is the
increased commitment to a previous decision despite negative information. The further increase of
commitment to the original solution may be an effort to demonstrate that their initial decision was not
wrong.
3. Explain how a manager might deal with making decisions under conditions of uncertainty.
Answer – He/she would assign degrees of probability to the various alternatives considered and
choose the decision with the highest probability of a beneficial outcome.
4. “With more and more managers using computers, they’ll be able to make more rational decisions.”
Do you agree or disagree with the statement? Why?
Answer – Students should realize that technology helps decision making, it doesn’t make decisions.
The human factor—hidden agendas, power relationships, office politics, etc., will still be present.
Students should tie their answer into the characteristics of the technology, however.
The electronic meeting blends the nominal group technique with computer technology. Numerous
people sit around a horseshoe-shaped table that is empty except for a series of computer terminals.
Issues are presented to participants, who type their responses onto their computer screens. Individual
comments, as well as aggregate votes, are displayed on a projection screen in the room. The major
advantages of electronic meetings are anonymity, honesty, and speed. Participants can anonymously
type any message they want, and it will flash on the screen for all to see at the push of a board key. It
is fast—chitchat is eliminated, discussions do not digress, and many participants can “talk” at once
without interrupting the others. But there are drawbacks. Those who can type quickly can outshine
those who may be verbally eloquent but are lousy typists. Those with the best ideas don’t get credit
for them. The process lacks the informational richness of face-to-face oral communication.
5. Why do you think organizations have increased the use of groups for making decisions during the
past twenty years? When would you recommend using groups to make decisions?
Answer – Students should see a significant increase in the use of groups. It is certainly in all the
literature, but their individual experience may vary. Many decisions in organizations, especially
important decisions that have far-reaching effects on organizational activities and personnel, are
typically made in groups. In many cases, these groups represent people who will be most affected by
the decisions. Managers spend up to 40 percent or more of their time in meetings. Groups are most
effective if creativity is important, if effectiveness means the degree of acceptance of the final
solution, then groups are better, and if the group is relatively small in size.
Management Workshop
Team Skill-Building Exercise
Individual versus Group Decisions
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Time: 15 minutes.
Instructions:
1. Have students read the story (allow them 5 minutes to read it) and then have them respond to each of
the 11 statements circling: True, False, Unknown.
Advise students that if any element of a statement is false, the whole statement should be
considered false.
They should use “unknown” whenever there is insufficient information to decide if the statement
is true or false.
They have a maximum of ten minutes. They should simply respond, not spend a great deal of
time looking for clues or tricks.
The Story
A salesclerk had just turned off the lights in the store when a man appeared and demanded money.
The owner opened a cash register. The contents of the cash register were scooped up, and the man sped
away. A member of the police force was notified promptly.
4. The man who opened the cash register was the owner. True False Unknown
7. After the man who demanded the money scooped up the contents
of the cash register, he ran away. True, false, or unknown? True False Unknown
8. The cash register contained money, but the story does not
state how much. True False Unknown
10. The story concerns a series of events in which only three persons
are referred to: the owner of the store, a man who demanded money,
and a member of the police force. True False Unknown
11. The following events in the story are true: someone demanded
money; a cash register was opened; its contents were scooped up;
a man dashed out of the store. True False Unknown
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Instructions (continued)
2. Form groups of four or five members each.
3. Give them ten minutes to discuss their answers and agree on the correct answers to each of the eleven
statements.
4. Discuss each statement with the class. First poll the groups for their answers. Then give the correct
answer.
5. To be prepared to point out their misperceptions, you will need to study each statement before
conducting the exercise.
Answers:
1. Unknown: Cannot say for certain that the owner and the salesclerk are the same person.
2. Unknown: Cannot say there was a robbery; only that cash register contents were scooped up
and a man sped away. May imply a robbery, but that is not a given.
3. False.
4. Unknown: Don’t know if the owner is a man or a woman.
5. Unknown: Don’t know who scooped up the contents of the cash register and don’t know if
the man who ran away was the owner.
6. True.
7. Unknown: Don’t know who scooped up the contents of the cash register
8. Unknown: The story says contents of cash register, but does not mention cash. You cannot
assume contents mean cash.
9. Unknown: There is no factual basis that a robbery occurred.
10. Unknown: There could be 4 people---salesclerk, man who demanded money, owner, and
member of the police force.
11. True.
Understanding Yourself
Before you can develop other people, you must understand your present strengths. To assist in this
learning process, we encourage you to complete the following self-assessment from the Prentice-Hall
Self-Assessment Library 2.0:
What’s my Decision Making Style? How Intuitive Am I? ((#2018) (Also available in this chapter, pp.
135)
Am I a Procrastinator? (# 21)
After you complete this assessment, we suggest you print out the results and store them as part of your
“portfolio of learning.”
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Chapter 4Part 2 - Planning
Creativity is a frame of mind. You need to open your mind to new ideas. Every individual has
the ability to be creative, but many people simply don’t try to develop that ability. In contemporary
organizations, those people may have difficulty being successful. Dynamic environments and managerial
chaos require that managers look for new and innovative ways to attain their goals, as well as those of the
organization.
The following are suggestions for developing your creativity by opening your mind up to new ideas, a
critical skill for you as a manager:
1. Think of yourself as creative.
How many words can you make using the letters in the word Brainstorm? There are at least 95.
Teaching Tips
1. Allow students a set time to work as individuals on this exercise. Perhaps 3-5 minutes. Emphasize
the importance of not talking—NO collaboration.
2. Call time and ask students to total their word list. Emphasize there is still NO collaborating or
sharing of word lists.
3. At this point, you can ask for a response to categories by a show of hands (number who created 5 or
more words, 15 or more, 25 or more, etc.) until people with the most words are recognized.
4. You might also want to write on the board the words created by the students, polling students around
the room until no additional words are left.
5. You can stop at this point and discuss why some people may have created more words than others.
Did the class as a whole (with each student’s individual words included on the board) create more
words than any one individual student? You might ask the students about working in groups for
another project requiring creativity. If they were to work in groups on such an exercise or project,
you might ask their opinions about group formation. Based on the outcomes of the previous exercise,
would they want homogeneous vs. heterogeneous groups? What factors would be the basis of those
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groupings? Should groups be created based on their productivity as individuals? Why or why not?
What would be the expected impact on group effectiveness?
The Chinese names for the years 2003 and 2004 were the “Year of the Goat” and the “Year of the
Monkey” . While not necessarily intending to be predictions, quite possibly these two so-named years
may very well describe the trials and tribulations of U.S. CEOs. With indictments handed down in the
Enron scandal, the conviction of Martha Stewart in March 2004 of lying to Federal Investigators during a
stock-scandal investigation, the resignation in disgrace of American Airline’s CEO Donald McCarty, and
the retirement of MBNA’s Chairman Charles M. Cawley given serious confrontations with his Board of
Directors, being a CEO appears to be losing some of its luster. What underlies their decision process, and
why did they make the decisions they did? Take the case of American Airline’s Donald McCarty.
American Airlines had been losing money for some time. After staff reductions due to September
11, 2001, the “bleeding” wasn’t stopping. By early 2003, the company was losing more than $5 million a
day. In an effort to save the company and avoid bankruptcy, McCarty pleaded with the union leaders
representing the company’s 110,000 employees to consider accepting pay and benefits cuts totaling more
than $1.8 billion annually. While Mc Carty built the case as a last resort, what he failed to mention was
that while he was seeking such concessions from the employees, American Airlines was quietly filing an
SEC report. In that report, plans for the 45 top company executivesexecutives’ Cathy Hughes is an
individual on a mission. Having spent several years studying broadcasting and working as a radio
broadcaster, she dreabonuses were outlined---triple their salary! In addition, a ‘bankruptcy-proof’ $41
million pension plan was outlined. Needless to say, the plan was not well received by the 110,000
American employees. In the end, the Board of Directors scraped the “special deal for executives and
accepted McCarty’s resignation.
med of one day becoming a station owner. Cathy knew that owning a radio station would not be
an easy task. For example, how does one go about getting FCC licensing? How does one obtain the
necessary advertising to ensure an influx of revenues to operate the station? How does one select a
program format so that a large listening audience can be generated—which in turn brings in more
advertising dollars? Answers to such questions for Hughes meant dedicating herself to researching the
facts, generating a database, and making appropriate decisions. Once prepared, and building on her
To Cathy, building a successful company requires intuition, concrete plans, astute business savvy,
and the ability to make timely and accurate decisions. She focused on one listener, one community at a
time. And she has been successful. Today she owns about 30 radio stations in nine of the top 20 markets
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What helped her along the way? Cathy worked in almost every job in the radio business that is
required to bring a radio program to life. For her, doing these jobs gave her more complete information to
work from and gave her some level of confidence in running such a risky venture.
Questions:
1. How do you think poor decision-making has contributed to the failure of Martha Stewart? Donald
McCarty? Discuss. What decisions did Cathy Hughes make that you believe helped her build the
Radio One Empire?
Answer – Martha Stewart clearly engaged in poor decision making when she sold stock and lied to
investigators. Donald McCarty also engaged in poor decision making when he thought that the
employees would not find out about the executive bonuses. He also engaged in poor decision making
in deciding to award the executive bonuses when employees were taking a pay cut. Cathy was
realistic and thorough. She was realistic about expecting it to be hard work and she worked hard to
learn. She had held almost every job in the radio business that is required to bring a radio program to
life. She dedicated herself to researching the facts, generating a database, and making appropriate
decisions. Her knowledge and experience helped her to be prepared to make the necessary decisions.
2. How could the 8-step decision-making process have helped Donald McCarty to make a better
decision? Explain. What role do you believe social responsibility plays when Radio One attempts to
enter into a new market?
Answer – Student responses will vary. Comments supporting social responsibility could include the
concept of giving back to the community, being a part of the community, etc. Steps 2 and 3 would
have helped McCarty to employ different criteria---ethical criteria. And, step 5 would have allowed
him to see the potential downfalls of his eventual plan.
3. What role, if any, did escalation of commitment play in McCarty’s decision? Defend your choice.
How might business software, like that of Business Objects, help a company like Radio One?
Answer – Escalation of commitment likely played a large role in McCarty’s decision, since in the
face of more and more negative information, he became more committed to the top management of
the company. By feeding data into a sophisticated computer database system, “neat looking tables,
charts
and maps” are generated that help in making a proper decision. This software can help track costs
and predict customer preferences. The point of Business Objects business intelligence software is not
to suggest that a machine can make a better decision than people. Instead, Business Objects
recognizes that humans have limits in processing masses of data and by giving people a “tool” that
performs thousands of relational analysis in seconds, the decision maker is better able to make an
informed decision with more complete information.
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2. Describe a situation in which a decision you made was influenced by availability or representative
heuristics. In retrospect, provide an evaluation of how effective that decision was.
3. Research the question of whether there is a difference in how men and women make decisions.
Present your results.
1. Break the class into groups of 5. Give the following scenario, and tell the groups they have to arrive at
a decision as a group about what to do.
“Someone in your class has cheated on an exam. Your teacher is aware that cheating has occurred, but is
not sure who did it. You have an idea who it is. Your teacher explains that if the cheater is not turned in,
all members of the class will suffer a 10% reduction in their exam score. If the cheater is turned in, then
nobody’s exam score will suffer and the person who turns the cheater in will receive a 5% increase in
their exam score as a reward. The problem is that the cheater is your best friend. What do you do?”
Give the groups 10 minutes to arrive at their decision. Have one representative from each group describe
the group’s decision, and then ask him/her why they chose that decision. Write each group’s decision and
a few notes about the group’s decision criteria on the board. Once all the groups have explained their
decision, ask the class what evidence of heuristics they saw.
This exercise will stimulate a great deal of discussion amongst students. The availability heuristic will
almost always be evident, as students will recall a class they’re in currently where a similar thing is
happening and what was done. They may also be particularly sensitive to either cheating or issues
regarding a best friend.
Or, the representative heuristic may also come up---one student may believe that because another teacher
was a pushover and did nothing even though he threatened to in a similar situation, this teacher will do
the same (do nothing even though threatening the 10% reduction).
2. Alternatively, use the same scenario above and give the groups a chance to try the nominal group
decision technique. Break the class into groups of 5 and tell the class to write down their thoughts
(anonymously) individually on a piece of paper regarding a solution to the problem. (5-7 minutes) Then,
have the groups get together; someone in the group should collect the responses and read them to the
group. (5-7 minutes) The group should deliberate and arrive at a decision. (5-7 minutes) Once the groups
are finished discussing, have them present their decision to the class in 1 minute or less.
When the presentations are done, have the groups meet again and discuss the process they went through
as a group. Ask them to generate 3 pros and 3 cons of the technique. (5-7 minutes). Then, have each
group present their conclusions to the class and as they speak, record their thoughts on the board (have
two columns---one for Pros and one for Cons. )
3. Have the students form groups of 4-6. Prior to class, prepare a basket or hat or some sort of container
filled with folded over pieces of paper. On each piece of paper (prior to folding), write down a word
found AT RANDOM in a dictionary (closing your eyes and pointing your finger to someplace on a
random page always works well). The hat (container) should be filled with at least 25 different words.
Have each group select three words from the hat. Then, place a chair in the front of the room and ask
them to design a marketing slogan/campaign for the chair using the three words they’ve chosen. Give the
groups 25 minutes to design their campaign, and have them present their work to the class. Explain
afterwards that these kinds of activities are the types of things that are taught in creativity workshops.
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This type of exercise is exactly what the text is referring to when it sayssays, “Move away from your
comfort zone.”.
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