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Introduction to Management 11e John Schermerhorn
Chapter 7Chapter 7
The The
Decision-Making ProcessDecision-Making Process
Planning Ahead — Chapter 7 Study Questions
1. What is the role of information in the management process?
2. How do managers use information to make decisions?
3. What are the steps in the decision-making process?
4. What are the current issues in managerial decision making?
Management 11e Chapter 7 2
Study Question 1: What is the role of information in the management process?
Information, technology and management Managers must have
Computer competency Ability to understand computers and use them to their
best advantage
Information competency Ability to gather, analyze and use information for
decision making and problem solving
Management 11e Chapter 7 3
Study Question 1: What is the role of information in the management process?
What is useful information? Data
Raw facts and observations
Information Data made useful for
decision making
Information drives management functions
Management 11e Chapter 7 4
Study Question 1: What is the role of information in the management process?
Characteristics of useful information: Timely High quality Complete Relevant Understandable
Management 11e Chapter 7 5
Study Question 1: What is the role of information in the management process?
Information needs of organizations Information exchanges with the external
environment: Gather intelligence information Provide public information
Information exchanges within the organization: Facilitate decision making Facilitate problem solving
Management 11e Chapter 7 6
Study Question 1: What is the role of information in the management process?
Management 11e Chapter 7 7
Figure 7.1 Internal and external information needs of an organization
Management 11e Chapter 7 8
Study Question 1: What is the role of information in the management process?
Information systems Use IT to collect, organize and distribute data
for use in decision making
Management information systems Meet the information
needs of managers in making daily decisions
Management 11e Chapter 7 9
Figure 7.2 Information technology is breaking barriers and changing organizations
Management 11e Chapter 7 10
Study Question 2: How do managers use information to make decisions?
Managerial advantages of IT utilization: Planning advantages
Better and more timely access to useful information
Involving more people in planning
Organizing advantages More ongoing and informed communication
among all parts of the organization Improved coordination and integration
Management 11e Chapter 7 11
Study Question 2: How do managers use information to make decisions?
Managerial advantages of IT utilization (cont.): Leading advantages
Improved communication with staff and stakeholders
Keeping objectives clear
Controlling advantages More immediate measures of performance results Allows real-time solutions to performance
problems Management 11e Chapter 7 12
Figure 7.3 The manager as an information-processing nerve center
Management 11e Chapter 7 13
Study Question 2: How do managers use information to make decisions?
Problem solving The process of identifying a discrepancy between
actual and desired performance and taking action to resolve it
Management 11e Chapter 7 14
Study Question 2: How do managers use information to make decisions?
Problem-solving approaches or styles:
Management 11e Chapter 7 15
Study Question 2: How do managers use information to make decisions?
Systematic versus intuitive thinking
Management 11e Chapter 7 16
Study Question 2: How do managers use information to make decisions?
Multidimensional thinking applies both intuitive and systematic thinking Effective multidimensional thinking requires
skill at strategic opportunism
Management 11e Chapter 7 17
Study Question 2: How do managers use information to make decisions?
Management 11e Chapter 7 18
Managers use
different cognitive
styles
Study Question 2: How do managers use information to make decisions?
Types of problems Structured problems are ones that are
familiar, straightforward, and clear with respect to information needs
Programmed decisions apply solutions that are readily available from past experiences to solve structured problems
Management 11e Chapter 7 19
Study Question 2: How do managers use information to make decisions?
Types of problems Unstructured problems are ones that are full
of ambiguities and information deficiencies Nonprogrammed decisions apply a specific
solution to meet the demands of a unique problem
Commonly faced by higher-level management
Management 11e Chapter 7 20
Study Question 2: How do managers use information to make decisions?
Crisis decision making A crisis involves an unexpected problem that
can lead to disaster if not resolved quickly and appropriately
Management 11e Chapter 7 21
Study Question 2: How do managers use information to make decisions?
Management 11e Chapter 7 22
Study Question 2: How do managers use information to make decisions?
Managers make decisions with various amounts of information
Management 11e Chapter 7 23
Figure 7.4 Three environments for managerial decision making and problem solving
Management 11e Chapter 7 24
Study Question 3: What are the steps in the decision-making process?
Five-step decision-making process: Identify and define the problem
Generate and evaluate alternative solutions
Make decision
Implement the decision
Evaluate results
Management 11e Chapter 7 25
Study Question 3: What are the steps in the decision-making process?
Step 1 — Find and define the problem Focuses on information gathering,
information processing, and deliberation Decision objectives should be established Common mistakes in defining problems:
Defining the problem too broadly or too narrowly Focusing on symptoms instead of causes Choosing the wrong problem
Management 11e Chapter 7 26
Study Question 3: What are the steps in the decision-making process?
Step 2 — generate and evaluate alternative courses of action Potential solutions are formulated and more
information is gathered, data are analyzed , the advantages and disadvantages of alternative solutions are identified
Approaches for evaluating alternatives: Stakeholder analysis Cost-benefit analysis
Management 11e Chapter 7 27
Study Question 3: What are the steps in the decision-making process?
Step 2 — generate and evaluate possible solutions (cont.) Criteria for evaluating alternatives:
Benefits Costs Timeliness Acceptability Ethical soundness
Management 11e Chapter 7 28
Study Question 3: What are the steps in the decision-making process?
Step 2 — generate and evaluate possible solutions (cont.) Common mistakes:
Selecting a particular solution too quickly
Choosing a convenient alternative that may have damaging side effects or may not be as good as other alternatives
Management 11e Chapter 7 29
Study Question 3: What are the steps in the decision-making process?
Step 3 — decide on a preferred course of action Two different approaches
Behavioral model leads to satisficing decisions
Classical model leads to optimizing decisions
Management 11e Chapter 7 30
Figure 7.6 Differences in the classical and behavioral decision-making models
Management 11e Chapter 7 31
Study Question 3: What are the steps in the decision-making process?
Step 4 — implement the decision solution Involves taking action to make sure the
solution decided upon becomes a reality Managers need to have willingness and
ability to implement action plans Lack-of-participation error
should be avoided
Management 11e Chapter 7 32
Study Question 3: What are the steps in the decision-making process?
Step 5 — evaluate results Involves comparing actual and desired
results Positive and negative consequences of
chosen course of action should be examined If actual results fall short
of desired results, the manager returns to earlier steps in the decision-making process
Management 11e Chapter 7 33
Study Question 3: What are the steps in the decision-making process?
Check ethical reasoning Ask these spotlight questions
Management 11e Chapter 7 34
Study Question 4: What are the current issues in managerial decision making?
Issues in decision making How do decision errors happen? Hueristics are strategies for simplifying
decision making
Management 11e Chapter 7 35
Study Question 4: What are the current issues in managerial decision making?
Management 11e Chapter 7 36
Study Question 4: What are the current issues in managerial decision making?
Creative Decision making: Creativity is the generation of a novel idea or
unique approach that solves a problem or crafts an opportunity creativity is more likely when decision makers are
highly task motivated
Organizations should create an environment that supports and encourages creativity
Management 11e Chapter 7 37
Study Question 4: What are the current issues in managerial decision making?
Personal creativity drivers
Management 11e Chapter 7 38
Study Question 4: What are the current issues in managerial decision making?
Situational creativity drivers Team creativity skills
Management support for creative ideas
Organizational culture
Management 11e Chapter 7 39
Study Question 4: What are the current issues in managerial decision making?
Situational creativity drivers
Management 11e Chapter 7 40
Chapter 7 Case
Amazon: One E-Store to Rule Them All