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• Supervision in Organizations
• Chapter 7
• Solving Problems Making Decisions

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Learning OutcomesAfter reading this chapter, I
will be able to

• Describe the steps in the decision-making
  process.
• Explain the four types of decision styles.
• Identify and explain the common decision-making
  errors.
• Compare and contrast group decision making and
  individual decision making.
• List and describe three techniques for improving
  group decision making.
• Explain three different ethical viewpoints.

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Decision-making

• Decision-making process
• A set of seven steps that includes identifying a
  problem, selecting a solution, and evaluating the
  effectiveness of the solution
• Problem
• A discrepancy between an existing and a desired
  state of affairs
• Decision criteria
• Factors that are relevant in a decision

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Examples of Planning-Function Decisions

• What are the organizations long-term objectives?
• What strategies will best achieve those
  objectives?
• What should the organizations short-term
  objectives be?
• What is the most efficient means of completing
  tasks?
• What might the competition be considering?
• What budgets are needed to complete department
  tasks?
• How difficult should individual goals be?

Exhibit 4.1
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The Decision-Making Process
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Step 1 Identifying the Problem

• Problem
• A discrepancy between an existing and a
  desired state of affairs (p. 186)
• Ask the question, Why?
• Determine the reason
• Separating the symptoms from problems
• Example
• A physician must identify reasons for a fever.
  Once the cause is identified, the problem has
  been determined

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Step 2 Collect Relevant Information

• Gather facts information relevant to the
  problem
• Ask questions
• When did the problem start appearing?
• Why is appearing now?
• What are the affects of the problem?
• What are the costs associated with the problem?

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Step 3 Develop Alternatives

• Generate a full range of alternatives for solving
  the problem
• Creativity is critical
• The more alternatives generated, the greater
  likelihood the best choice is among the
  possibilities

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Step 4 Evaluate Each Alternative

• Evaluation of all the strengths and weaknesses of
  each alternative
• Guard against biases
• Estimate the cost of each alternative
• Estimate the implementation time of each
  alternative
• Identify the strengths and weaknesses of each
  alternative
• Approximate the expected outcome of each
  alternative
• Favorable Unfavorable

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Step 5 Select the Best Alternative

• Selection of the best alternative will depend on
• Comprehensiveness and accuracy of information
  gathered
• Creativeness of alternatives
• Quality of analysis

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Step 6 Implement the Decision

• Establish a plan
• When will the decision be implemented?
• Who will be involved?
• What will be involved?
• What changes will take place?
• How will they occur?
• Convey the decision to those affected
• Assign responsibilities
• Allocate necessary resources
• Identify and clarify deadlines
• Get commitment from those involved in the
  implementation

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Step 7 Follow Up Evaluate

• Continually monitor outcomes
• Did your choice accomplish the desired result?
• Did it correct the identified problem

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Decision Tools

• Supervisors face three possible conditions
  when making decisions
• Certainty
• The implication that the outcome of every
  possible alternative is known.
• Risk
• The probability that a particular outcome will
  result from a given decision. Must rely on
  personal experiences, secondary information, and
  historical data.
• Uncertainty
• A condition under which there is not full
  knowledge of the problem and reasonable
  probabilities for alternative outcomes cannot be
  determined.

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Decision Tools

• What is the Expected Value Analysis?
• Expected Value Analysis
• A procedure that permits decision makers to
  place monetary value on various consequences
  likely to result from the selection of a
  particular course of action (p. 190)

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Decision Tools cont

• How are Decision Trees Helpful?
• Decision Tree
• A diagram that analyzes hiring, marketing,
  investment, equipment purchases
• Encompass expected value analysis by assigning
  probabilities to each possible outcome and
  calculating payoffs for each decision path

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Decision Tools cont

• Marginal Analysis
• A decision method that helps decision makers
  optimize returns or minimize costs by dealing
  with the additional cost in a particular
  decision, than the average cost (p. 192)
• Example Taking on a new customer
• What additional revenue would be generated by
  the new customer
• What additional costs would be generated by the
  new customer
• If the increased revenue exceeds the
  increased costs, total profits would be increased
  by accepting the new customer

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Decision Making Styles

• Directive style
• Characterizes the low tolerance for ambiguity and
  a rational way of thinking of individuals who are
  logical and efficient and typically make fast
  decisions that focus on the short term.
• Analytic style
• Characterizes the high tolerance for ambiguity
  combined with a rational way of thinking of
  individuals who prefer to have complete
  information before making a decision.
• Careful decision makers with the ability to adapt
  or cope with new situations
• Example Supervisors, business students, top
  executives

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Decision Making Styles (contd)

• Conceptual style
• Individuals who tend to be very broad in outlook,
  to look at many alternatives, and to focus on the
  long run and often look for creative solutions.
• Behavioral style
• Individuals who think intuitively but have a low
  tolerance for uncertainty they work well with
  others, are open to suggestions, and are
  concerned about the individuals who work for them.

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Decision-Making Styles
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Common Decision-making Errors

• Heuristics Using judgmental shortcuts
• Availability heuristic
• The tendency to base judgments on information
  that is readily available.
• Representative heuristic
• The tendency to base judgments of probability on
  things (objects or events) that are familiar
• Example Not hiring certain types of people based
  upon previous performance of
  similar person
• Escalation of commitment (Blackjack Strategy)
• An increased commitment to a previous decision
  despite negative information about the decisions
  present outcomes.

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How Do Problems Differ?

• Well-structured problems
• Straightforward, familiar, easily defined
  problems (use programmed decision to solve)
• Ill-structured problems
• New problems in which information is ambiguous or
  incomplete
• (hire consultants to solve problem)
• Programmed decision
• A repetitive decision that can be handled by a
  routine approach
• Nonprogrammed decisions
• Decisions that must be custom-made to solve
  unique and nonrecurring problems
• New laws
• New organizational/departmental strategy

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Group Decision Making

• Advantages
• Make more accurate decisions
• Provides more complete information
• Offers a greater diversity of experiences and
  perspectives
• Generates more alternatives
• Increases acceptance of a solution
• Increases the legitimacy of a decision.

• Disadvantages
• Is more time-consuming and less efficient
• Minority domination can influence decision
  process
• Increased pressures to conform to the groups
  mindset (groupthink)
• Ambiguous responsibility for the outcomes of
  decisions

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When Are Groups Most Effective?

• Creativity
• Groups tend to be more creative than individuals.
• Acceptance of the final solution
• Groups help increase the acceptance of decisions.
• Effectiveness of group decision making
• Groups of five to seven members are optimal for
  decision process speed and quality.

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Improving Group Decision Making

• Brainstorming
• An idea-generating process that encourages
  alternatives while withholding criticism.
• Nominal group technique
• A decision-making technique in which group
  members are physically present but operate
  independently.
• Electronic meeting
• A type of nominal group technique in which
  participants are linked by computer.

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Ethics and Business

• Ethics
• A set of rules or principles that defines right
  and wrong conduct
• Code of ethics
• A formal document that states an organizations
  primary values and the ethical rules it expects
  managers and operatives to follow

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Three Views of Ethics

• Utilitarian view of ethics
• Making decisions solely on the basis of their
  outcomes or consequences.
• Providing the greatest good for the greatest
  number
• Rights view of ethics
• Respecting and protecting individual liberties
  and privileges
• Decision consistent with Bill of Rights
• Theory of justice view of ethics
• Fairly and impartially imposing and enforcing
  rules.
• Union pay is equal, seniority decides layoff,
  etc