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Decision Making in Management
Decision Making
Rational and Nonrational Decision Making
Conditions for Making Decisions
Decision Making Process
Considering Ethics in Decision Making
Decision Making
Barriers to Decision Making
Decision Making
(continued)
Managing Group Decision Making
Decision Making
Decision Making > Decision Making in Management
Decision Making in Management

• Defining Decision Making
• Decision-Making Styles
• Types of Decisions
www.boundless.com/management/textbooks/boundless-management-textbook/decision-making-10/decision-making-in-management-75/
Decision Making > Rational and Nonrational Decision Making
Rational and Nonrational Decision Making

• Rational Decision Making
• Problems with the Rational Decision-Making Model
• Non-Rational Decision Making
www.boundless.com/management/textbooks/boundless-management-textbook/decision-making-10/rational-and-nonrational-decision-making-76/
Decision Making > Conditions for Making Decisions
Conditions for Making Decisions

• Evidence-Based Decision Making
• The Value of Analytics in Decision Making
• Making Decisions Under Conditions of Risk and Uncertainty
www.boundless.com/management/textbooks/boundless-management-textbook/decision-making-10/conditions-for-making-decisions-77/
Decision Making > Decision Making Process
Decision Making Process

• Identify and Define the Problem
• Generate Alternatives
• Evaluate Alternatives
• Determine a Course
• Implement the Course
• Evaluate the Results
www.boundless.com/management/textbooks/boundless-management-textbook/decision-making-10/decision-making-process-78/
Decision Making > Considering Ethics in Decision Making
Considering Ethics in Decision Making

• Moral Principles in Management
• Applying the Ethical Decision Tree
• Applying the Decision Tree
www.boundless.com/management/textbooks/boundless-management-textbook/decision-making-10/considering-ethics-in-decision-making-79/
Decision Making > Barriers to Decision Making
Barriers to Decision Making

• Cognitive Biases as a Barrier to Decision Making
• Time Pressure as a Barrier to Decision Making
• Group Conflict as a Barrier to Decision Making
www.boundless.com/management/textbooks/boundless-management-textbook/decision-making-10/barriers-to-decision-making-80/
Decision Making > Managing Group Decision Making
Managing Group Decision Making

• Advantages and Disadvantages of Group Decision Making
• The Manager's Role in Group Decisions
• Employee Involvement in Decision Making
• Techniques for Reaching a Group Consensus
www.boundless.com/management/textbooks/boundless-management-textbook/decision-making-10/managing-group-decision-making-81/
Appendix
Decision Making
Key terms
• analytics The use of skills, technologies, and practices to explore and investigate past performance, gain insight, and drive
business decision making.
• appraisal A judgment or assessment—especially a formal one—of the value of something.
• Bayesian network A probabilistic model that represents a set of random variables and their conditional dependencies (e.g., a
Bayesian network could calculate the probabilities between symptoms and a disease).
• bias An inclination towards something; predisposition, partiality, prejudice, preference, predilection.
• bias The human tendency to make systematic decisions in certain circumstances based on cognitive factors rather than
evidence; an inclination or prejudice toward something.
• bounded rationality The idea that decision-making is limited by the information available, the decision-maker's cognitive
limitations, and the finite amount of time available to make a decision.
• cognitive The part of mental functions that deals with logic, as opposed to affective functions, which deal with emotion.
• communicative rationality A theory or set of theories which describes human rationality as a necessary outcome of successful
communication.
• consensus A process of decision-making that seeks widespread agreement among group members.
• decision tree A visualization of a complex decision-making situation in which the possible decisions and their likely outcomes
are organized in the form of a graph that resembles a tree.
Decision Making
are organized in the form of a branched graph.
• dichotomies Two elements, often mutually exclusive, that stand in juxtaposition to one another.
• EBMgt A management practice that emphasizes a rational, objective, and empirical approach to addressing business issues.
• ethics The study of principles relating to right and wrong conduct.
• ethics The study of principles relating to right and wrong conduct.
• force majeure An unavoidable catastrophe, especially one that prevents someone from fulfilling a legal obligation; an
unforeseeable act of nature.
• group A number of things or persons in some relation to one another.
• groupthink The psychological phenomenon wherein a desire for conformity within a group results in them making an irrational
decision; by actively suppressing dissenting viewpoints in the interest of minimizing conflict, group members reach a consensus
without critically evaluating alternative viewpoints.
• groupthink The psychological phenomenon wherein a desire for conformity within a group results in them making an irrational
decision; by actively suppressing dissenting viewpoints in the interest of minimizing conflict, group members reach a consensus
without critically evaluating alternative viewpoints.
• hedge A contract or arrangement reducing one's exposure to risk.
• heuristic An experience-based technique for problem solving, learning, and discovery; examples include using a rule of thumb,
an educated guess, an intuitive judgment, or common sense.
• heuristic A "shortcut" method of problem solving that makes assumptions based on past experiences. Examples include going
by "rule of thumb," when you apply your experience of something having happened a certain way enough times that it's likely to
continue happening that way. It is not guaranteed to be accurate every single time, but it cuts out processing time by avoiding
detailed analysis of every particular situation.
Decision Making
• Homogeneity In the context of group decision making, homogeneity refers to a set of consistent and uniform ideas, prejudices,
and beliefs held by all members within a group.
• insight An extended understanding of a subject resulting from identification of relationships and behaviors within a model,
context, or scenario.
• moral Of or relating to principles of right and wrong in behavior, especially for teaching right behavior.
• motivation An incentive or reason for doing something.
• norms Behaviors or standards regarded as typical.
• Output metrics Standards or data points that showm the rate and speed of production over a certain period of time.
• perfect information A situation in which all data that is relevant to a particular decision is known and available to the decision
maker.
• Problem A difficulty that has to be resolved or dealt with.
• problem seeking The process of clarifying, understanding, and restating the problem.
• problem solving Problem solving involves using generic or ad hoc methods, in an orderly manner, for finding solutions to
specific problems.
• rational Logically sound; not contradictory or otherwise absurd.
• Rational choice theory A framework for understanding and often formally modeling social and economic behavior.
Decision Making
• Rational decision making A logical, multi-step model for choosing between alternatives that follows an orderly path from
problem identification through solution.
• satisficer One who seeks a satisfactory solution rather than an optimal one.
• stakeholder A person or group that affects or can be affected by an organization's actions.
• Synergy Benefits resulting from combining two different groups, people, objects, or processes.
• utility In economics, utility is a representation of preferences over some set of goods and services. Preferences have a utility
representation so long as they are transitive, complete, and continuous.
Decision Making
Rational-decision-making model
This flowchart illustrates the process of rational decision making.
Wikipedia. "TE-Systems-RationalPlanningAndDecisionMaking." CC BY-SA 3.0 http://en.wikipedia.org/wiki/File:TE-Systems-
RationalPlanningAndDecisionMaking.png View on Boundless.com
Decision Making
Influence diagram example

This is a simple example of an influence diagram used to evaluate the alternatives of a decision.
Wikimedia. CC BY-SA http://upload.wikimedia.org/wikipedia/en/c/c2/Figure22.png View on Boundless.com
Decision Making
Employee involvement
Managers use employee involvement in key decision making not only to leverage employees' unique skills, but also to motivate them, signaling that their
impact on the company is meaningful.
Wikimedia. "Teviot employees using Apple Macs." CC BY-SA http://commons.wikimedia.org/wiki/File:Teviot_employees_using_Apple_Macs.jpg View on
Boundless.com
Decision Making
The Brain's Heuristics for Emotions

Emotions appear to aid the decision-making process.
Flickr. "Brain | Flickr - Photo Sharing!." CC BY http://www.flickr.com/photos/greenflames09/100781977/ View on Boundless.com
Decision Making
Analytical Tools
Quantitative metrics and analysis can help decision makers make more accurate decisions and better predict risks associated with decisions.
Flickr. "All sizes | Oracle Exalytics In-Memory Machine | Flickr - Photo Sharing!." CC BY http://www.flickr.com/photos/oracle_images/6205995304/sizes/l/ View on
Boundless.com
Decision Making
Decision tree
An example of a decision tree.
Wikimedia. "Wikipedia article-creation-2." Public domain http://commons.wikimedia.org/wiki/File:Wikipedia_article-creation-2.svg View on Boundless.com
Decision Making
Many choices
Too many choices increase the difficulty of making a decision.
Wikimedia. "Pet Food Aisle." CC BY-SA 3.0 http://commons.wikimedia.org/wiki/File:Pet_Food_Aisle.jpg View on Boundless.com
Decision Making
Manager and employee communicating

Managers can facilitate group decision making by setting clear expectations.
Static Flckr. CC BY http://farm7.staticflickr.com/6035/6314081175_a0c44b81bf_z.jpg View on Boundless.com
Decision Making
Google. " Google Image Result for http://opencage.info/pics/files/800_4543.jpg." CC BY
http://www.google.com/imgres?num=10&hl=en&biw=1274&bih=806&tbs=sur:fmc&tbm=isch&tbnid=GoIlHB9aW0t6jM:&imgrefurl=http://opencage.info/pics.e/large_4
Decision Making
Applied decision tree

Decision trees can improve investment decisions by optimizing them for maximum payoff.
Wikipedia. "Investment decision Insight." Public domain http://en.wikipedia.org/wiki/File:Investment_decision_Insight.png View on Boundless.com
Decision Making
Wikia. "Free will - Psychology Wiki." CC BY-SA http://psychology.wikia.com/wiki/Free_will View on Boundless.com
Decision Making
Decision tree
This example of a decision tree shows the decision maker trying to choose where to go on vacation.
Flickr. "Decision tree." CC BY https://www.flickr.com/photos/jeanlouis_zimmermann/3203572717/sizes/o/in/photostream/ View on Boundless.com
Decision Making
Group dynamics: the New Zealand All Blacks

Rugby, a game with fifteen players per team, is the ultimate team game. Group dynamics require all fifteen players to work together, often demanding
tremendous synergy to outlast an opponent. The historic success of New Zealand's All Blacks has been attributed not only to skill, but also to how the
team achieves ideal group dynamics.
Fotopedia. "Haka on Fotopedia." CC BY http://www.fotopedia.com/items/flickr-24658087/slideshow View on Boundless.com
Decision Making
Consensus flow diagram

This diagram shows a process of steps through which consensus can be reached, by starting with concerns that are raised, moving to a discussion, then
a proposal, and then further testing for consensus.
Wikimedia. CC BY-SA http://upload.wikimedia.org/wikipedia/commons/e/ed/Consensus-flowchart.png View on Boundless.com
Decision Making
Scientific theories
Scientific theories are the result of analysis applied to data, records, insights, and experiments. Evidence is gathered, is analyzed, and from there a
theory is developed.
Grossmont College. CC BY-SA http://www.grossmont.edu/scotttherkalsen/images/img7B.gif View on Boundless.com
Decision Making
Prospect theory and risk aversion

This graph represents Kahneman and Tversky's theory. The distance between the x-axis and the curve is smaller in the positive direction (i.e., for
positive outcomes, or gains) than it is in the negative direction (i.e., for negative outcomes, or losses). This means that people's positive value of gains is
less than people's negative value of losses. In other words, people are more sensitive to possible risk than to possible gain.
Wikimedia. CC BY-SA http://upload.wikimedia.org/wikipedia/commons/4/4e/Valuefun.jpg View on Boundless.com
Decision Making
Time pressure
Time pressure often forces decision makers to look for intuitive shortcuts rather than logically processing all of the required data.
Wikimedia. CC BY-SA http://upload.wikimedia.org/wikipedia/commons/7/7f/Local-time.svg View on Boundless.com
Decision Making
Consensus Flowchart
Regardless of perspective or style, all leaders must make decisions that create consensus. This model underlines how a manager or leader can discuss
various options within a group setting, make proposals for action, and iterate until agreement is reached.
Wikimedia. "Consensus-flowchart.png." CC BY-SA 3.0 https://upload.wikimedia.org/wikipedia/commons/e/ed/Consensus-flowchart.png View on Boundless.com
Decision Making
The Deepwater Horizon Oil Rig on Fire.jpg

The Deepwater Horizon oil rig fire is an example of a risk faced by a management team.
Wikimedia Commons. "Deepwater Horizon Fire." CC BY-SA 3.0
https://commons.wikimedia.org/wiki/File:Deepwater_Horizon_offshore_drilling_unit_on_fire_2010.jpg View on Boundless.com
Decision Making
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Decision Making

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Rational and Nonrational Decision Making

Conditions for Making Decisions

Decision Making Process

Considering Ethics in Decision Making

Decision Making in Management

Rational and Nonrational Decision Making

Conditions for Making Decisions

Decision Making Process

Considering Ethics in Decision Making

Barriers to Decision Making

Managing Group Decision Making

Influence diagram example

The Brain's Heuristics for Emotions

Manager and employee communicating

Applied decision tree

Group dynamics: the New Zealand All Blacks

Consensus flow diagram

Prospect theory and risk aversion

The Deepwater Horizon Oil Rig on Fire.jpg

• Wikipedia. "Influence diagrams." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Influence_diagrams

• Wikipedia. "Rational choice theory." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Rational_choice_theory

• Wikipedia. "Decision-making." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Decision-making

• Wiktionary. "ethics." CC BY-SA 3.0 http://en.wiktionary.org/wiki/ethics

• Boundless Learning. "Boundless." CC BY-SA 3.0 http://www.boundless.com//management/definition/dichotomies

• Wiktionary. "decision tree." CC BY-SA 3.0 http://en.wiktionary.org/wiki/decision_tree

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