87.
What is intuition? Give an example to support your definition. Should managers use
intuition in decision making? Why or why not?
Intuition is the set of feelings, beliefs, and hunches that come readily to mind, require little
effort and information gathering, and result in on-the-spot decisions.
Sometimes managers have to make rapid decisions and do not have time to carefully
consider the issues involved. They must rely on their intuition to quickly respond to a
pressing concern.
For example, when fire chiefs, captains, and lieutenants manage firefighters battling
dangerous, out-of-control fires, they often need to rely on their expert intuition to make
on-the-spot decisions that will protect the lives of the firefighters and save the lives of
others, contain the fires, and preserve property decisions made in emergency situations
entailing high uncertainty, high risk, and rapidly changing conditions. In other cases
managers do have time to make reasoned judgments, but there are no established rules to
guide their decisions. Regardless of the circumstances, making nonprogrammed decisions
can result in effective or ineffective decision making.
AACSB: Reflective Thinking
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-01 Understand the nature of managerial decision making, differentiate between programmed and
nonprogrammed decisions, and explain why nonprogrammed decision making is a complex, uncertain process.
Topic: Non-Programmed Decisions
88.
Discuss the assumptions that underlie the classical model of decision-making.
The assumptions that underlie the classical model of decision making are that
• managers can generate a complete list of all alternatives and their consequences;
• they have access to all the information they need to make the optimum decision; and
• they can easily list their own preferences for each alternative and rank them from least
to most preferred to make the optimum decision.
AACSB: Analytical Thinking
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-01 Understand the nature of managerial decision making, differentiate between programmed and
nonprogrammed decisions, and explain why nonprogrammed decision making is a complex, uncertain process.
Topic: Classical Decision-Making Model
89.
March and Simon developed three important concepts in their administrative model of
decision making. Discuss these three concepts.
The three important concepts in this model are bounded rationality, incomplete
information, and satisficing decisions. March and Simon believed that managers do not
have the mental ability to absorb and evaluate all of the possible relevant information for a
complex decision.
• March and Simon coined the term “bounded rationality” to describe the situation in
which the number of alternatives a manager must identify is so great and the amount of
information so vast that it is difficult for the manager to even come close to evaluating it
all before making a decision.
• Information is incomplete because the full range of decision-making alternatives is
unknowable in most situations, and the consequences associated with known alternatives
are uncertain. Information is incomplete because of risk and uncertainty, ambiguity, and
time constraints.
• Satisficing is exploring a limited sample of all potential alternatives. When managers
satisfice, they search for and choose acceptable, or satisfactory, ways to respond to
problems and opportunities rather than trying to make the optimal decision.
90.
Researchers have identified a six-step model that can be used by managers who are faced
with an important decision. Discuss any two of these steps.
Using the work of March and Simon as a basis, researchers have developed a step–by–
step model of the decision-making process and the issues and problems that managers
confront at each step. The six steps are (1) recognize the need for a decision; (2) generate
alternatives; (3) assess alternatives; (4) choose among alternatives; (5) implement the
chosen alternative; (6) learn from feedback.
• Explore why any expectations for the decision were not met.
• Derive guidelines that will help in future decision making.
AACSB: Reflective Thinking
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 05-02 Describe the six steps managers should take to make the best decisions.
Topic: Classical Decision-Making Model
91.
In assessing alternatives, explain the four criteria to evaluate the pros and cons of
alternative courses of action.
Once managers have generated a set of alternatives, they must evaluate the advantages
and disadvantages of each one. The key to a good assessment of the alternatives is to
define the opportunity or threat exactly and then specify the criteria that should influence
the selection of alternatives for responding to the problem or opportunity. One reason for
bad decisions is that managers often fail to specify the criteria that are important in
reaching a decision. Successful managers use four criteria to evaluate the pros and cons
of alternative courses of action:
• Legality: Managers must ensure that a possible course of action will not violate any
domestic or international laws or government regulations.
92.
Describe why the stage of learning from feedback is considered very important for
managers in an organization. List the benefits of this step in the decision-making
process.
Learning from feedback is the final step in the decision-making process of an
organization. Effective managers always conduct a retrospective analysis to see what they
can learn from past successes or failures.
• Managers who do not evaluate the results of their decisions do not learn from
experience; instead they stagnate and are likely to make the same mistakes again and
again. To avoid this problem, managers must establish a formal procedure with which they
can learn from the results of past decisions.
• Managers who always strive to learn from past mistakes and successes are likely to
continuously improve the decisions they make.
• A significant amount of learning can take place when the outcomes of decisions are
evaluated, and this assessment can produce enormous benefits. Learning from feedback
is particularly important for entrepreneurs who start their own businesses.
AACSB: Analytical Thinking
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-02 Describe the six steps managers should take to make the best decisions.
Topic: Classical Decision-Making Model
93.
Identify the advantages and disadvantages of group decision making.
The advantages of group decision making include
• It is less likely to be biased and make judgment errors.
• It can draw on combined knowledge and skills of all group members.
• It can process more information.
• It can correct one another’s errors.
• It increases the probability of successful implementation.
The disadvantages of group decision making include
• It generally takes longer.
• In group decision making, gaining agreement may be difficult.
• It can be undermined by biases. A major source of group bias is groupthink.
AACSB: Analytical Thinking
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-03 Identify the advantages and disadvantages of group decision making, and describe techniques
that can improve it.
Topic: Groupthink
94.
Define groupthink. Explain a technique that counteracts groupthink.
Groupthink is a pattern of faulty and biased decision making that occurs in groups whose
members strive for agreement among themselves at the expense of accurately assessing
information relevant to a decision.
The existence of groupthink raises the question of how to improve the quality of group and
individual decision making so managers make decisions that are realistic and are based on
thorough evaluation of alternatives. One technique known to counteract groupthink is
devil’s advocacy. Devil’s advocacy is a critical analysis of a preferred alternative to
ascertain its strengths and weaknesses before it is implemented. The devil’s advocate
critiques and challenges the way the group evaluated alternatives and chose one over the
others. The purpose of devil’s advocacy is to identify all the reasons that might make the
preferred alternative unacceptable. In this way, decision makers can be made aware of the
possible perils of recommended courses of action. Devil’s advocacy can thus help counter
the effects of groupthink.
AACSB: Analytical Thinking
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-03 Identify the advantages and disadvantages of group decision making, and describe techniques
that can improve it.
Topic: Groupthink
95.
Managers can use a variety of techniques in group decision-making situations to
counteract situations in which the group is suffering from groupthink or cognitive biases.
Two such techniques have been shown to be especially useful in such situations. Discuss
these two techniques.
The two techniques that have been found to be most useful in groups suffering from
groupthink or cognitive biases are devil’s advocacy and diversity.
Devil’s advocacy is a critical analysis of a preferred alternative to ascertain its strengths
and weaknesses before it is implemented. Typically one member of the decision-making
group plays the role of devil’s advocate. The devil’s advocate critiques and challenges the
way the group evaluated alternatives and chose one over the others. The purpose of
devil’s advocacy is to identify all the reasons that might make the preferred alternative
unacceptable. In this way, decision makers can be made aware of the possible perils of
recommended courses of action.
Another way to improve group decision making is to promote diversity in decision-making
groups. Bringing together managers of both genders from various ethnic, national, and
functional backgrounds broadens the range of life experiences and opinions that group
members can draw on as they generate, assess, and choose among alternatives.
Moreover, diverse groups are sometimes less prone to groupthink because group
members already differ from each other and thus are less subject to pressures for
96.
Peter Senge has identified five principles that can be used by an organization to create “a
learning organization.” Discuss any three of these principles.
Peter Senge identified five principles for creating a learning organization: personal
mastery, complex mental models, team learning, building a shared vision, and systems
thinking.
Students can give any three of the following principles.
• For organizational learning to occur, top managers must allow every person in the
organization to develop a sense of personal mastery. Managers must empower employees
and allow them to experiment and create and explore what they want.
• As part of attaining personal mastery, organizations need to encourage employees to
develop and use complex mental models that are sophisticated ways of thinking that
challenge them to find new or better ways of performing a task to deepen their
understanding of what is involved in a particular activity.
• Managers must do everything they can to promote group creativity. Team learning
(learning that takes place in a group or team) is more important than individual learning in
97.
What can managers do to promote individual creativity?
Managers can promote individual creativity in the following ways:
• Give employees the opportunity to experiment and take risks.
• Not penalize employees for giving ideas.
• Give employees the freedom to ask questions and seek answers.
• Give constructive feedback and motivation to employees.
• Give recognition and rewards to employees.
AACSB: Analytical Thinking
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-04 Explain the role that organizational learning and creativity play in helping managers to improve
their decisions.
Topic: Learning Organization
98.
There are three important techniques that managers can use to promote creativity in
group decision-making situations. Discuss any two of these techniques.
To encourage creativity at the group level, organizations can use group problem-solving
techniques that promote creative ideas and innovative solutions. These techniques can
also prevent groupthink and help managers uncover biases. The two techniques discussed
here are brainstorming and nominal group technique.
alternatives have been read.
• The alternatives are then discussed, one by one, in the sequence in which they were
proposed. Group members can ask for clarifying information and critique each alternative
to identify its pros and cons.
• When all alternatives have been discussed, each group member ranks all the alternatives
from most preferred to least preferred, and the alternative that receives the highest
ranking is chosen.
AACSB: Analytical Thinking
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-04 Explain the role that organizational learning and creativity play in helping managers to improve
their decisions.
Topic: Learning Organization
99.
Jane and Ben, managers of KT Inc., are employed in different cities. They encounter
similar problems while developing a new product, but are unable to meet face–to-face for
any discussion. Explain the group decision-making techniques that can help them engage
in joint problem solving by generating creative ideas.
Videoconferencing is one way to bring distant managers together to brainstorm.
Another way is to use the Delphi technique, which is a written approach to creative
problem solving. The Delphi technique works like this:
• The group leader writes a statement of the problem and a series of questions to which
participating managers are to respond.
• The questionnaire is sent to the managers and departmental experts who are most
knowledgeable about the problem. They are asked to generate solutions and mail the
questionnaire back to the group leader.
• A team of top managers records and summarizes the responses. The results are then
sent back to the participants, with additional questions to be answered before a decision
can be made.
• The process is repeated until a consensus is reached and the most suitable course of
action is apparent.
AACSB: Analytical Thinking
Blooms: Apply
100.
Explain the different ways by which organizations can promote intrapreneurship.
The intensity of competition today, particularly from agile, small companies, has made it
increasingly important for large, established organizations to promote and encourage
intrapreneurship to raise their level of creativity and organizational learning. The higher
the level of intrapreneurship, the higher will be the level of learning and innovation.
Organizations can promote intrapreneurship in many ways.
• Product champions: One way to promote intrapreneurship is to encourage individuals to
assume the role of product champion, a manager who takes “ownership” of a project and
provides the leadership and vision that take a product from the idea stage to the final
customer.
• Skunkworks: A skunkworks is a group of intrapreneurs who are deliberately separated
from the normal operation of an organization. The idea is that if these people are isolated,
they will become so intensely involved in a project that development time will be relatively
brief and the quality of the final product will be enhanced.
• Rewards for creativity: To encourage managers to bear the uncertainty and risk