CHAP 3: MANAGERIAL DECISION MAKING
- Decision – making = process by which managers identify organizational problems + try
to resolve them
- Rational decision making process
- Only way to evaluate the decision effectiveness: conduct the action → evaluate the results
- Typical decisions managers make
- Rationality:
● Decision = consistent, value-maximizing, specified constraints
● Assumptions vs Reality
● Why the difference? Human is not machine. We not just scan information, but
also are affected along the way
- Bounded rationality:
● rationally, but are limited (bounded) by their ability to process in4
● assumptions:
▪ not seek out or have knowledge of all alternatives
▪ satisfice (= stop at the point which satisfy them instead of maximizing
value) 🡺 Escalation of commitment: ...choose the first alternative
encountered that satisfactorily solves the problem—rather than maximize
the outcome of their decision by considering all alternatives and choosing
the best.
- Use BOTH rationality & intuition (cảm tính)
● Intuition 🡪 not only feelings, but also experience, accumulated judgement
- Problems and Decisions:
● Structured problems
▪ Involve goals that clear.
▪ Are familiar (have occurred before).
▪ Are easily and completely defined—information about the problem is
available and complete.
● Programmed Decision
▪ A repetitive decision that can be handled by a routine approach.
● Unstructured problems
● Nonprogrammed decisions
- Level of organization:
● Top level of managers = make nonprogrammed decisions for unstructured
problems
● Lower level of managers = make programmed decisions for structured problems