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Principles of Management

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Principles of Management ­ MGT503
VU
Lesson 6.16
RATIONAL DECISION MAKING
Managers as decision makers:
Although we know about the decision-making process, we still don't know much about the manager as a
decision maker. In this session, we'll look at how decisions are made, the types of problems and decisions
managers face, the conditions under which managers make decisions, and decision-making styles.
The nature of managerial decision making:
A.
Decision making is the process through which managers identify organizational problems and
attempt to resolve them. Decision makers face three types of problems.
1.
A crisis problem is a serious difficulty requiring immediate action.
2.
A non-crisis problem is an issue that requires resolution, but does not simultaneously have
the importance and immediacy characteristics of crises.
3.
An opportunity problem is a situation that offers a strong potential for significant
organizational gain if appropriate actions are taken.
a.
Opportunities involve ideas that could be sued, rather than difficulties that must
be resolved.
b.
Non-innovative managers tend to focus on problems rather than upon
opportunities.
Models of Decision Making:
Rational Model:
According to the rational model of decision making, managers engage in completely rational decision
processes, ultimately make optimal decisions, and possess and understand all information relevant to their
decisions at the time they make them (including all possible alternatives and all potential outcomes and
ramifications).
Rational Model Step by Step:
Defining Problem by gathering relevant information:
Step 1 is identifying a problem. A problem is defined as a discrepancy between an existing and a desired state
of affairs. Some cautions about problem identification include the following:
1.
Make sure it's a problem and not just a symptom of a problem.
2.
Problem identification is subjective.
3.
Before a problem can be determined, a manager must be aware of any discrepancies.
4.
Discrepancies can be found by comparing current results with some standard.
5.
Pressure must be exerted on the manager to correct the discrepancy.
6.
Managers aren't likely to characterize some discrepancy as a problem if they perceive that they
don't have the authority, money, information, or other resources needed to act on it.
Step 2 is identifying the decision criteria. Decision criteria are criteria that define what is relevant and
important in making a decision.
Step 3 is allocating weights to the criteria. The criteria identified in Step 2 of the decision-making process
aren't all equally important, so the decision maker must weight the items in order to give them correct
priority in the decision.
Step 4 involves developing alternatives. The decision maker now needs to identify viable alternatives for
resolving the problem.
Step 5 is analyzing alternatives. Each of the alternatives must now be critically analyzed. Each alternative is
evaluated by appraising it against the criteria.
Step 6 involves selecting an alternative. The act of selecting the best alternative from among those identified
and assessed is critical. If criteria weights have been used, the decision maker simply selects the alternative
with the highest score from Step 5.
Step 7 is choosing a course of action and implementing the alternative. The chosen alternative must be
implemented. Implementation is conveying a decision to those affected by it and getting their commitment
to it.
Step 8 involves evaluating the decision effectiveness. This last step in the decision-making process assesses
the result of the decision to see whether or not the problem has been resolved.
44
Table of Contents:
  1. HISTORICAL OVERVIEW OF MANAGEMENT:The Egyptian Pyramid, Great China Wall
  2. MANAGEMENT AND MANAGERS:Why Study Management?
  3. MANAGERIAL ROLES IN ORGANIZATIONS:Informational roles, Decisional roles
  4. MANAGERIAL FUNCTIONS I.E. POLCA:Management Process, Mistakes Managers Make
  5. MANAGERIAL LEVELS AND SKILLS:Middle-level managers, Top managers
  6. MANAGEMENT IDEAS: YESTERDAY AND TODAY, Anthropology, Economics
  7. CLASSICAL VIEW OF MANAGEMENT:Scientific management
  8. ADMINISTRATIVE VIEW OF MANAGEMENT:Division of work, Authority
  9. BEHAVIORAL THEORIES OF MANAGEMENT:The Hawthorne Studies
  10. QUANTITATIVE, CONTEMPORARY AND EMERGING VIEWS OF MANAGEMENT
  11. SYSTEMíS VIEW OF MANAGEMENT AND ORGANIZATION:Managing Systems
  12. ANALYZING ORGANIZATIONAL ENVIRONMENT AND UNDERSTANDING ORGANIZATIONAL CULTURE
  13. 21ST CENTURY MANAGEMENT TRENDS:Organizational social Responsibility
  14. UNDERSTANDING GLOBAL ENVIRONMENT WTO AND SAARC
  15. DECISION MAKING AND DECISION TAKING
  16. RATIONAL DECISION MAKING:Models of Decision Making
  17. NATURE AND TYPES OF MANAGERIAL DECISIONS:Decision-Making Styles
  18. NON RATIONAL DECISION MAKING:Group Decision making
  19. GROUP DECISION MAKING AND CREATIVITY:Delphi Method, Scenario Analysis
  20. PLANNING AND DECISION AIDS-I:Methods of Forecasting, Benchmarking
  21. PLANNING AND DECISION AIDS-II:Budgeting, Scheduling, Project Management
  22. PLANNING: FUNCTIONS & BENEFITS:HOW DO MANAGERS PLAN?
  23. PLANNING PROCESS AND GOAL LEVELS:Types of Plans
  24. MANAGEMENT BY OBJECTIVE (MBO):Developing Plans
  25. STRATEGIC MANAGEMENT -1:THE IMPORTANCE OF STRATEGIC MANAGEMENT
  26. STRATEGIC MANAGEMENT - 2:THE STRATEGIC MANAGEMENT PROCESS
  27. LEVELS OF STRATEGIES, PORTERíS MODEL AND STRATEGY DEVELOPMENT (BCG) AND IMPLEMENTATION
  28. ENTREPRENEURSHIP MANAGEMENT:Why Is Entrepreneurship Important?
  29. ORGANIZING
  30. JOB DESIGN/SPECIALIZATION AND DEPARTMENTALIZATION
  31. SPAN OF COMMAND, CENTRALIZATION VS DE-CENTRALIZATION AND LINE VS STAFF AUTHORITY
  32. ORGANIZATIONAL DESIGN AND ORGANIC VS MECHANISTIC VS VIRTUAL STRUCTURES
  33. LEADING AND LEADERSHIP MOTIVATING SELF AND OTHERS
  34. MASLOWíS NEEDS THEORY AND ITS ANALYSIS
  35. OTHER NEED AND COGNITIVE THEORIES OF MOTIVATION
  36. EXPECTANCY, GOAL SETTING AND RE-ENFORCEMENT THEORIES
  37. MOTIVATING KNOWLEDGE PROFESSIONALS LEADERSHIP TRAIT THEORIES
  38. BEHAVIORAL AND SITUATIONAL MODELS OF LEADERSHIP
  39. STRATEGIC LEADERSHIP MODELS
  40. UNDERSTANDING GROUP DYNAMICS IN ORGANIZATIONS
  41. GROUP CONCEPTS, STAGES OF GROUP DEVELOPMENT AND TEAM EFFECTIVENESS
  42. UNDERSTANDING MANAGERIAL COMMUNICATION
  43. COMMUNICATION NETWORKS AND CHANNELS EFFECT OF ICT ON MANAGERIAL COMMUNICATION
  44. CONTROLLING AS A MANAGEMENT FUNCTION:The control process
  45. CONTROLLING ORGANIZATIONAL PERFORMANCE THROUGH PRODUCTIVITY AND QUALITY