Mgmt 301 Managers as Decision Makers Exploring Management [Nathan Neale] Slide # 1 Slide Title: WSU Online Title Slide [piano introduction] Slide #2 Slide Title: Chapter 4 Managers as Decisions Makers Welcome back everybody. This week we will talk about managers as decision makers, this is Chapter 4 in our textbook. Slide #3 Slide Title: Chapter 4 How do managers use information to solve problems? What are the five steps in the decision-making process? What are some current issues in the managerial decision making? We will attempt to answer a few questions: How do managers use information to solve problems? What are the five steps in the decision-making process? And what are some current issues in the managerial decision making? Slide #4 Slide Title: 4.1 Using Information to Solve Problems Managers deal with problems posing threats and offering opportunities Managers can be problem avoiders, problem solvers, or problems seekers. Managers make programmed and nonprogrammed decisions when solving problems. Managers can use systematic and intuitive thinking. We will learn that managers deal with problems posing threats and offering opportunities. Managers can be problem avoiders, problem solvers, or problems seekers. And I m sure we have all seen these types of managers without thinking about it. Managers make programmed and nonprogrammed decisions when solving problems. Managers can use systematic and intuitive thinking when making decisions. Slide #5 Slide Title: 4.1 continued Using Information to Solve Problems Managers use different cognitive styles to process information for decision making Mangers make decisions under conditions of certainty, risk, and uncertainty. Managers use different cognitive styles to process information for decision making and mangers make decisions under conditions of certainty, risk, and uncertainty. And I think a lot of times we focus on uncertainty because these are really what happens in most of our organizations.
Slide #6 Slide Title: Using Information to Solve Problems Problems Pose Threats and Opportunities Problem Solving o Identifying and taking action to solve problems. Knowledge Workers o Use information to solve problems, describes managers well. Performance Threat o A situation where something is wrong or likely to be wrong Performance Opportunity o A situation that offers the possibility of a better future, if the right steps are taken. Problems that pose threats and opportunities. Problem solving - Identifying and taking action to solve problems. Knowledge Workers - Use information to solve problems, describes managers well. A Performance Threat - A situation where something is wrong or likely to be wrong and this is important to all of us as managers and then performance opportunity a situation that offers the possibility of a better future, if the right steps are taken. Slide #7 Slide Title: Using Information to Solve Problems Problems Pose Threats and Opportunities [infographic about skills and roles in the planning, organizing, leading and controlling process] When using information to solve problems, there are three different types of roles. We ll start with decisional roles, this is information used for entrepreneurship, resource allocation, disturbance handling, negotiation. The next one is interpersonal roles and this is information used for ceremonies, motivation and networking and this is something I focus quite a bit on. And then information roles information sought, received, transferred among insiders and outsiders. And then we need to think about computer literacy, interpersonal skills and how information competency affects the planning, organizing, leading and controlling process within management. Slide #8 Slide Title: Using Information to Solve Problems Problem Solving Approaches Problem avoiders prefer not to make decisions and ignore problems Problem solvers react to problems as they occur Problem seekers proactive in anticipating threats and opportunities Problem avoiders prefer not to make decisions and ignore problems; they just think that the problem will go away. If you think about people that postpone work and then not turn it in. From a student standpoint, you think back in childhood, a lot of people just didn t turn it in. And then problem solvers react to problems as they occur. We think about two colors, a lot of times these are the greens and golds. Then the problem seekers who are proactive in anticipating threats and opportunities. These may be the orange type of personalities, they are always looking and thinking about possible issues that may come up, not that their pessimists, just that they re more proactive in their approaches. Slide #9 Slide Title: Using Information to Solve Problems Types of Decisions Programmed decisions o Applies a solution from past experience to a routine problem
Non-programmed decisions o Applies a specific solution crafted for a unique problem Programmed decisions apply solutions from past experiences to routine problems. And then nonprogrammed decisions are crafted for a unique problem. So programmed is do we make a decision based on outcomes and issues we ve had in the past, hopefully we learn from the past and non-programmed is very specific and basically tailored. Slide #10 Slide Title: Using Information to Solve Problems Problem Solving Approaches Systematic Thinking o Approaches problems in a rational and analytical fashion. Intuitive Thinking o Approaches problems in a flexible and spontaneous fashion [images comparing different thinking approaches] Systematic thinking approaches problems in a rational and analytical fashion. Again I know I keep going back to the True Color exercise because I really like that. Systematic will be a lot of the green and golds. And then intuitive thinking approaches problems in a flexible and spontaneous fashion. This again definitely is the orange, they re less likely to solve step by step, they use their imagination. It s important to know that these types of thinking are best in different situations. Think about a stable company and stable industry, maybe a systematic thinking works the best. But let s say you re Apple, they are always coming up with a new product, this is more of an intuitive approach because they want to imagine what the next big thing is and anticipate the market. Slide #11 Slide Title: Using Information to Solve Problems Problem Solving Approaches Managers use different cognitive styles [chart of the four different cognitive styles] Managers definitely use different cognitive styles. We ll start with sensation thinkers are impersonal, realistic, and prefer facts. Going back to the True Colors exercise, these are the type of people that are green if it s raining outside and I say Hey it s raining the oranges are going to say oh okay it s raining while the greens are not only going to look out of the window, they might not just look out the window, they re the type of people that will have to go outside and feel that. So until they have the facts for themselves, they re not going to move forward. Then there are intuitive thinkers, they are impersonal, abstract, and idealistic, they like unstructured problems. And then we have intuitive feelers, who are relationship oriented, abstract, flexible, this is going to be more of the blue personality that we learned. And then the sensation feelers who are relationship oriented, but analytical, realistic. These are people that might fall in that same approach, or they might be a mix between the blues and the gold in their approach to relationships. Slide #12 Slide Title: Using Information to Solve Problems Problem Solving Environments Managers make decisions with various amounts of information [chart of the three different environments]
Managers make decisions with various amounts of information. Okay and in a perfect world there s a certain environment, this offers complete information and possible actions and consequences. Then there s a risk environment, this lacks complete information, but there are some probabilities, you can use statistics, this is where people that like finance and operations management do the best in my opinion. And then you have the uncertain environment, where it lacks so much information it is difficult to assign probabilities to the likely outcomes of alternatives. I think of entrepreneurs, the odds are clearly stacked against them, but they think they going to be the most successful person ever and this is where they thrive, the true entrepreneurs. Slide #13 Slide Title: Using Information to Solve Problems Problem Solving Environments [infographic depicting the correlation between risk of failure, type of decision and the resulting environment] So we re looking at these three different environments, we see that this risk of failure down below starts on the left with low and high risk of failure on the right. And then also types of decisions with programmed on the left and non-programmed on the right. So in a certain environment where alternative actions are known, you re going to want to have more program decisions where the risk of failure is low, versus in a certain environment, where we don t even know the correlations between success and failure. You can see that in a certain environment, there is a high risk of failure, but we want to use a non-programmed decision because a programmed decision will not fit in that area at all. Slide #14 Slide Title: 4.2 Steps in The Decision Making Process Step 1 is to identify and define the problem. Step 2 is to generate and evaluate alternative courses of action. Step 3 is to decide on a preferred course of action Step 4 is to implement the decisions Step 5 is to evaluate results I mentioned earlier that there are five steps in the decision making process. The first is to identify and define the problem. Step 2 is to generate and evaluate alternative courses of action. Step 3 is to decide on a preferred course of action. Step 4 is to implement the decisions. Step 5 is to evaluate results. Many organizations have adopted this in one form or another, I know that I have worked for some larger companies and they have this. Entrepreneurship, they may not use this as much, but this is the type of thing, the five step decision making process works really well for entrepreneurship as well. Slide #15 Slide Title: 4.2 Steps in The Decision Making Process [infographic of the detailed decision making process] Here we could see the 5-step decision making processes, but what we are point out is that last week we talked about ethical behavior, but you want to do an ethical analysis along each line continually, because ethics and social behaviors doing the right thing is so important to business these days Slide #16
Slide Title: The Decision Making Process Step 1 Identify and Define the Problem Gather information and decide what should be accomplished Common mistakes include o Identifying the problem too broadly o Dealing with symptoms rather than problems o Choosing the wrong problem [Image of road sign that says Oops!!! ] Step 1 Identify and define the problem, gather information and decide what should be accomplished. Common mistakes include: identifying the problem too broadly, dealing with symptoms rather than problems and choosing the wrong problem. And this happens all of the time, groupthink is often a culprit here; Choosing the wrong problem make sure you get to the right cause. Slide #17 Slide Title: The Decision Making Process Step 2 Generate and Evaluate Alternatives Who are the stakeholders and how will the alternatives affect them? Criteria for evaluating alternatives o Cost benefit analysis o Timeliness o Acceptability o Ethical soundness [image of a clock] Step 2 is generated and evaluate alternatives; we need to ask Who are the stakeholders and how will the alternatives affect them? again the last section talked about stakeholders. Criteria for evaluating alternatives, we need to look at a cost benefit analysis, the timeliness, acceptability and ethnical soundness of the various alternatives. Slide #18 Slide Title: The Decision Making Process Step 3 Decide On A Preferred Course of Action Two different outcomes o Behavioral model leads to satisficing decisions o Classical model leads to optimizing decisions [image of personal creativity drivers] Step 3: this involves going forward or deciding on a preferred course of action. There are two different outcomes, one is behavior models that lead to satisficing decisions, and then there are classical models that lead to optimizing decisions. Slide #19 Slide Title: The Decision Making Process Step 4 Implement the Decision Take action on the selected alternative Lack of participation error occurs when parties necessary for supporting the decision were not included in the process Step 4 is taking action on the selected alternative. Lack of participation error occurs when parties necessary for supporting the decision were not included in the process. So think about that if the executives are going to make a decision for you but they ve never worked alongside you, but
they don t really know, they re looking at charts and they re looking at statistics, can they really get to the root cause? And to think about that as a manager we really need to consider all of the stakeholders that are incurred especially those that need to support the decision. Because let s say I come with an idea and I don't have the full support of my team, they re not going to implement it. Slide #20 Slide Title: The Decision Making Process Step 5 Evaluate Results Did the decision solve the problem? Results must be evaluated against objectives set at the beginning of the process. Step 5 Evaluate the Results, a lot of people stop at after four and they don t move forward to five, but we need to consider if the decision solved the problem and we need to consider that the results must be evaluated against the objectives set at the beginning of the process not what s now. Because is it good enough? If it s good enough now, but it didn t meet the primary objectives, maybe we didn t design this process right. Slide #21 Slide Title: The Decision Making Process Ethical Reasoning is Important Make the ethics double check. Ethical Reasoning [chart of ethical questions] The last section we talked a lot about ethics, We want to make sure the ethics are double checked. We want to look at utility does the decision satisfy all stakeholders? Rights does the decision respect the rights and duties of everyone? Justice is the decision consistent with the canons of justice? And caring is the decision consistent with my responsibilities to care? Care for whom? Care for the stakeholders. Slide #22 Slide Title: The Decision Making Process Ethical Reasoning is Important Spotlight questions o How would I feel if my family found out about this decision? o How would I feel if this decision were published in the local newspaper or posted on the internet? o What would the person I know who has the strongest character and best ethical judgment say about my decision? [image of spotlight] Again ask the Spotlight questions. Last week we talked about this; How I feel if my family knew about this, or if it were published in the New York Times, and then I had that person who has strongest character and the best ethical judgment, I mentioned religious leaders, I talked about that I have a specific mentor, Dr. Kenneth Butterfield here at WSU. Slide #23 Slide Title: 4.3 Current Issues in Decision Making Personal factors help drive creativity in decision making Group decision making has both advantages and disadvantages Judgmental heuristics and other biases and traps may cause decision-making errors Managers must be prepared for crisis decision making
There are current issues in decision making such as Personal factors help drive creativity in decision making, group decision making has both advantages and disadvantages. We talked a little bit about that you are currently working on times; you can clearly see the advantages and disadvantages. Judgment heuristics and other biases and traps may cause decision-making errors and managers must be prepared for crisis decision making. Slide #24 Slide Title: Issues in Decision Making Personal Factors Drive Creativity [image of factors of creativity] Let s look at three different personal factors that can drive creativity. The first is task expertise, this expertise can be gain through a lot of different ways, it could be by going through similar situations, it could be done by education or research. And then there s task motivation - this is do we want to get something done. Then there are creativity skills, these can be learned but a lot of these are more intuitive. Some of us are more creative than others, but these three are what really drive creativity in teams and firms. Slide #25 Slide Title: Issues in Decision Making Personal Factors Help Drive Creativity Creativity generating a novel idea or unique approach Personal creativity drivers o Task expertise is expanding an existing skill o Task motivation is the drive to work hard o Creativity skills include imagination, intuition, holistic processing, right brain characteristics Know that creativity is generating a novel idea or unique approach. Personal creativity drivers including task expertise again ant that s expanding an existing skill and it s based off of what has been done in the past. Task motivation is the drive to work hard and the buy-in and if you believe in that. And creativity skills include imagination, intuition, holistic processing, right brain characteristics. Slide #26 Slide Title: Issues in Decision Making Group Decision Making [chart comparing group decisions] Again decisions can be good and bad. If they re good, there s more information. It provides more alternatives, it increases our understanding, there is greater acceptance and there s a greater commitment. However, it can also be bad because of conformity with social pressures. Domination by a few members, and I mentioned a couple of weeks ago that working as a member of a team, some teams decide that no one speaks twice until everyone speaks once. Time delays are more times required to make decisions when many people are involved. And a crisis is an unexpected problem that can lead to disaster if not resolved quickly and appropriately. Slide #27 Slide Title: Issues in Decision Making Decision Making Errors Heuristics simplify decision making when time or information are scarce. Examples include a rule of thumb or trial and error.
[image of silhouette of a man looking confused at a direction post] Heuristics, I don t know if you have ever heard of heuristics, they simplify the decision making when timing or information is scarce. The best example is rule of thumb, or trial and error, I really like the rule of thumb. Things that you have learned in most corporations but we just don t have enough information to make a decision we just use heuristics because of rules of thumb. Slide #28 Slide Title: Issues in Decision Making - Decision Making Errors Availability Heuristic occurs when people use information readily available as a basis for assessing a current event or situation Representative Heuristic occurs when people assess the likelihood of something occurring based on its similarity to a stereotyped set of occurrences. Anchoring and Adjustment Heuristic involves making decisions based on adjustments to a previously existing value, or starting point. Decision making errors. Availability Heuristic occurs when people use information readily available but they should really use other information. Representative Heuristic occurs when people assess the likelihood of something occurring based on its similarity to a stereotyped set of occurrences. We talked about how stereotypes are bad, sometimes we use stereotypes because we don t have other information but this is when we should not be using stereotypes because they don t represent the sample even. Anchoring and Adjustment Heuristic involves making decisions based on adjustments to a previously existing value, or starting point. I want you to know what Heuristic is. If I was you I d read this slide or circle this for the exam: representative heuristics and availability heuristics. Especially, but going forward if you plan on taking any other management courses or not, please know what heuristics are because these are the types of things that will come up in your job. Slide #29 Slide Title: Issues in Decision Making - Decision Making Errors Framing Error solving a problem in the context perceived for example, positive or negative. Confirmation error only pay attention to information that confirms the decision that has been made Escalating commitment adding resources to a course of action even if it s not working. Some errors I d like to talk about. Framing error solving a problem in the context perceived for example positive or negative. Are we in a positive or negative context, it s all about the way it was framed. Confirmation error we only pay attention to the information that confirms the decision that has been made. We ignore the rest of the things; we ignore the things that tell us not to do something in favor to paying attention to the things that tell us we should. And escalating commitment the addition of resources to a course of action even if it s not working. I think about those of you have bought stocks, I used to buy penny stocks, I actually somehow made money. It was a hobby, but I remember that I would buy a stock believing that it was a good price, and then the stock would drop in price but instead of selling or leaving it alone, I would buy more because I would believe that my first decision was right and that buying that stock at 5 cents or 6 cents or a dollar and was the right decision that it would eventually go up, and when it would eventually drop buy half, I d buy some more. That s a simple example of escalating
commitment so please know escalating commitment; I believe that is a very important definition to know. Slide #30 Slide Title: Issues in Decision Making - Decision Making Errors How to avoid the escalation trap o Set advance limits on your involvement and commitment to a particular course of action; stick with these limits. o Make your own decisions; don t follow the lead of others, since they are also prone to escalation o Carefully determine just why you are continuing a course of action; if there are insufficient reasons to continue, don t. o Remind yourself of the costs of a course of action; consider saving these costs as a reason to discontinue [picture of firetrucks] Let s talk about how to avoid the escalating trap. One is to set advance limits on your involvement and commitment to a particular course of action; stick within these limits. I think those of you, who plan to be accountants, this is probably easier. Then make your own decisions; don t follow the lead of others, since they are also prone to escalation. And carefully determine just why you are continuing a course of action; if there are insufficient reasons to continue, don t. But, well my gut well your gut is not always right, while managers do need to use their gut and need to depend on heuristics, but they re not always right. And then remind yourself of the costs of a course of action; consider saving these costs as a reason to discontinue. So you think of sunk costs, well sunk costs are exactly that, they re sunk. Slide #31 Slide Title: Issues in Decision Making - Decision Making In Crisis Crisis unexpected situation that can lead to disaster if not handled quickly Crisis management programs train managers in decision making and establish plans to handle emergencies Decision Making In Crisis a crisis is an unexpected situation that can lead to disaster if not handled quickly and crisis management programs train managers in decision making and establish plans to handle emergencies. Slide #32 Slide Title: Issues in Decision Making - Decision Making In Crisis Figure out what is going on Remember that speed matters Remember that slow counts too Respect the danger of the unfamiliar Value the skeptic Be ready to fight fire with fire We need to first figure out what is going on and remember that speed matters and remember that slow counts too. What that means is that sometimes doing something is better than nothing but sometimes doing the wrong thing will actually add fuel to the fire. Respect the danger of the unfamiliar. Value the skeptic. And this can be difficult especially when that skeptic is the same
person that s a pessimist at all times, but skeptics have their role, they make us think, we need to stop and really think. And be ready to fight fire with fire.