978-1305502215 Chapter 6 Part 2

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Managerial Decision Making •

• Justifying past decisions. People don’t like to make mistakes, so they continue to support a

flawed decision in an effort to justify or correct the past.

• Seeing what you want to see. People frequently look for information that supports their

existing instinct or point of view and avoid information that contradicts it, affecting where

they look for information as well as how they interpret the information they find.

• Perpetuating the status quo. Managers may base decisions on what has worked in the past

and fail to explore new options, dig for additional information, or investigate new

technologies.

• Being influenced by emotions. Managers make better decision when—to the extent

possible—they take emotions out of the decision-making process.

• Overconfidence. Most people overestimate their ability to predict uncertain outcomes. Before

making a decision, managers have unrealistic expectations of their ability to understand the

risk and make the right choice.

VI. INNOVATIVE DECISION MAKING

A. Start with Brainstorming

1. One of the best known techniques for rapidly generating creative alternatives is

brainstorming. Brainstorming uses a face-to-face group to spontaneously suggest a

broad range of alternatives for decision making. The keys to effective brainstorming

are that people can build on one another’s ideas, all ideas are acceptable no matter

how crazy they seem, and criticism and evaluation are not allowed. The goal is to

generate as many ideas as possible.

2. Electronic brainstorming, called brainwriting, brings people together in an

interactive group over a computer network. Recent studies show that electronic

brainstorming generates about 40 percent more ideas than individual brainstorming

alone and 25 to 200 percent more than groups.

B. Use Hard Evidence

1. Using evidence can help take emotion out of the decision-making process, preventing

managers from relying on faulty assumptions or points of view.

2. Evidence-based decision making means a commitment to making more informed and

intelligent decisions based on the best available facts and evidence. Managers should

be alert to potential biases, past assumptions, or intuitions and seek and examine the

evidence with rigor, thus making a careful and thoughtful decision.

C. Engage in Rigorous Debate

An important key to better decision making under conditions of uncertainty is to

encourage a rigorous debate of the issue at hand. Good managers recognize that

Managerial Decision Making •

constructive conflict based on different points of view can focus a problem, clarify ideas,

and stimulate creative thinking. It can also create a broader understanding of issues and

alternatives, and improve broader decision quality. There are several ways to stimulate

rigorous debate.

a. One way is by ensuring diversity in terms of age and gender, functional area of

expertise, hierarchical level, and experience with the business.

b. Some groups assign a devil’s advocate, who has the role of challenging the

assumptions and assertions made by the group.

c. Another approach is to have group members develop as many alternatives as they

can as quickly as they can.

d. Another approach is technique called point-counterpoint, in which two

subgroups are assigned competing points of view. The two groups then develop

and exchange proposals and discuss the various options until they arrive at a

common set of understandings and recommendations.

D. Avoid Groupthink

Avoiding groupthink helps groups make better decisions. Groupthink refers to the

tendency of people in groups to suppress contrary opinions. When people slip into

groupthink, the desire for harmony outweighs concerns over decision quality. Group

members emphasize maintaining unity rather than realistically challenging problems and

alternatives. Some disagreement and conflict is much healthier than blind agreement.

E. Know When to Bail

In a fast-paced environment, a good manager encourages risk taking and learning from

mistakes, and also teaches people to know when to pull the plug on something that isn’t

working. Escalating commitment means that organizations often continue to invest

time and money in a solution despite strong evidence that it is not appropriate to do so.

Managers might block or distort negative information because they don’t want to be

responsible for a bad decision, or might not accept that their decision is wrong.

F. Do a Postmortem

To improve decision making, managers need to reflect and learn from every decision they

make.

1. A technique many companies have adopted from the U.S. Army to encourage

examination of the evidence and continuous learning is the after-action review, a

disciplined procedure whereby managers invest time to review the results of decisions

on a regular basis and learn from them. After implementing the decision, managers

meet to evaluate what worked, what didn’t, and how to do things better. Many

problems are solved by trial and error.

2. A similar technique was applied by managers at Lenovo called fu pan, which means

“replaying the chess board,” reviewing every move to improve the next one.

SUGGESTED ANSWERS TO END OF CHAPTER DISCUSSION

QUESTIONS

1. Aaron Alexis, the former Navy reservist who went on a shooting rampage in September 2013

and killed 12 people at the Washington Navy Yard in Washington D.C., had a history of

mental instability, but he was carrying a valid security clearance. How would you suggest

managers make decisions for issuing or revoking security clearances to prevent this kind of

catastrophe?

2. Managers at Gap Inc., formerly one of the top retail chains, are reported to have made a

series of decisions that hurt the company: They expanded so rapidly that the chain lost touch

with customers; they tried to copy the successful approach of rivals rather than charting

their own course; they cut quality to reduce costs; they shifted from one fashion approach to

another as each failed to appeal to customers, and so on. What techniques would you

recommend Gap managers use to improve the quality of their decisions?

a. Start with brainstorming

b. Use hard evidence

c. Engage in rigorous debate

d. Avoid groupthink

e. Know when to bail

f. Do a postmortem

3. Explain the difference between risk and ambiguity. How might decision making differ for a

risky versus an ambiguous situation?

Risk means that the decision maker has most of the necessary information. The objectives of

the decision are clear-cut, and alternatives can be identified. However, the future outcome of

4. Analyze three decisions you made over the past six months. Which of these were

programmed and which were nonprogrammed? Which model—the classical, administrative,

or political—best describes the approach you took to making each decision?

A programmed decision would refer to a situation that has occurred often enough so that a

student can use past experience and similar decision rules over and over again. Programmed

5. What opportunities and potential problems are posed by the formation of more than one

coalition within an organization, each one advocating a different direction or alternative?

What steps can you take as a manager to make sure that dueling coalitions result in

constructive discussion rather than dissension?

When more than one coalition forms within an organization, with each advocating a different

direction or alternative, there are significant opportunities for constructive dialogue and

6. Can you think of a bad decision from your own school or work experience, or from the recent

business or political news, that was made in an effort to correct or justify a past decision?

As a new manager, how might you resist the urge to choose a decision alternative based on

the idea that it might correct or validate a previous decision?

7. Experts advise that most catastrophes in organizations result from a series of small problems

or mistakes. As a new, entry-level manager, how might you apply this understanding to help

your organization avoid making major mistakes?

hand, including collecting information on how such decisions have been handled in the past.

One of the best ways to meet the challenge of inexperience is to find someone in the

organization who has substantial experience in the company and the industry who is willing

to serve as a mentor. A mentor can serve as a sounding board for the new manager, offering

suggestions for improvement of an idea or explaining why the idea should be dismissed

altogether. Mentors have substantial wisdom that they can share with new managers to help

them “learn the ropes,” including learning the ropes of decision making.

8. List some possible advantages and disadvantages to using computer technology for

managerial decision making.

9. Can intuition and evidence-based decision making coexist as valid approaches within an

organization? How might managers combine their intuition with a rational, data-driven,

evidence-based approach?

10. What do you think is your dominant decision style? Is your style compatible with group

techniques such as brainstorming and engaging in rigorous debate? Discuss.

Students’ responses will, of course, be very different. They should, however, demonstrate an

Managerial Decision Making •

may be more comfortable in highly technical jobs where large volumes of data can be

gathered and applied to the decision-making process.

People who tend toward a conceptual style also like to consider a broad amount of

information. However, they are more socially oriented than those with an analytical style and

like to talk to others about the problem and possible alternatives for solving it. Managers

using a conceptual style consider many broad alternatives, rely on information from both

people and systems, and like to solve problems creatively. These students may be more

comfortable in jobs that involve many nonprogrammed decisions that require strong

conceptual skills.

The behavioral style is often the style adopted by managers having a deep concern for others

as individuals. Managers using this style like to talk to people one-on-one, understand their

feelings about the problem, and consider the effect of a given decision upon them. People

with a behavioral style usually are concerned with the personal development of others and

may make decisions that help others achieve their goals. These students may be more

comfortable in flatter, more participative organizations where employees are heavily

involved in decision making and are empowered to generate innovative solutions.

APPLY YOUR SKILLS: SELF LEARNING

What’s Your Personal Decision Style?

Student responses will vary regarding their own decision-making style. For additional

information, one is encouraged to review decision-making styles in the chapter. Personal

decision style refers to differences among people with respect to how they perceive problems and

make decisions. A suggestion would be to discuss the four decision-making styles: directive,

analytical, conceptual, and behavioral.

The directive style is used by people who prefer simple, clear-cut solutions to problems.

Managers who use this style often make decisions quickly because they do not like to deal with a

lot of information and may consider only one or two alternatives. People who prefer the

directive style generally are efficient and rational and prefer to rely on existing rules or

procedures for making decisions.

People with an analytical style like to consider complex solutions based on as much data as they

can gather. These individuals carefully consider alternatives and often base their decisions on

objective, rational data from management control systems and other sources. They search for the

best possible decision based on the information available.

People who tend toward a conceptual style also like to consider a broad amount of information.

However, they are more socially oriented than those with an analytical style and like to talk to

others about the problem and possible alternatives for solving it. Managers using a conceptual

style consider many broad alternatives, rely on information from both people and systems, and

like to solve problems creatively.

Managerial Decision Making •

The behavioral style is often the style adopted by managers having a deep concern for others as

individuals. Managers using this style like to talk to people one-on-one, understand their

feelings about the problem, and consider the effect of a given decision on them. People with a

behavioral style usually are concerned with the personal development of others and may make

decisions that help others achieve their goals.

APPLY YOUR SKILLS: GROUP LEARNING

A New Approach to Making Decisions

Managers are typically effective at focusing on problems and diagnosing what is wrong and how

to fix it when they have to make a decision. A new approach to decision making known as

outcome-directed thinking focuses on future outcomes and possibilities rather than on the causes

of the problem.

This exercise asks students to think of problems they have in their lives at the present time and

write a brief summary of the problems, then answer four questions provided in the text. Finally,

students should share their answers to the questions in small groups.

APPLY YOUR SKILLS: ETHICAL DILEMMA

The No-Show Consultant

1. Give Carpenter a month’s notice and terminate him. He’s known as a good consultant, so he

probably won’t have any trouble finding a new job, and you’ll avoid any further problems

associated with his emotional difficulties and his possible alcohol problem.

2. Let it slide. Missing the New York appointment is Carpenter’s first big mistake. He says he

is getting things under control, and you believe that he should be given a chance to get

himself back on track.

3. Let Carpenter know that you care about what he’s going through, but insist that he take a

short paid leave and get counseling to deal with his emotional difficulties and evaluate the

seriousness of his problems with alcohol. If the alcohol abuse continues, require him to

attend a treatment program or find another job.

Managerial Decision Making •

This is probably the best course of action. Andrew needs support and help, but cannot

continue his present pattern of behavior.

APPLY YOUR SKILLS: CASE FOR CRITICAL ANALYSIS

The Office

1. What mistakes do you think John Mitchell made with the way he solved the problem of

limited office space? Explain.

It seems obvious that John Mitchell settled for a satisficing rather than a maximizing solution for

the problem. His approach to decision making is based on the administrative model, which is

2. What approach would you have used if you were Mitchell? Why?

The classical model of decision making would have been a better approach for Mitchell. This

model is considered to be normative, which means it defines how a decision maker should make

decisions. It is based on rational economic assumptions and manager beliefs about what ideal

3. What are Krista Acklen’s options for responding to Mitchell’s decision? What should she do

now? Why?

Following are the possible ways in which Krista Acklen can respond to Mitchell’s decision:

a. Start with brainstorming

ON THE JOB VIDEO CASE ANSWERS

Mi Ola Swimwear: Managerial Decision Making

1. What role does an advisory board play in this business owner’s approach to decision

making? If you were a business owner, would you want to develop an advisory board?

2. After listening to this entrepreneur’s perspective on decision making, how would you

categorize her decision-making style? Include at least two examples that support your

choice.

Fogerty uses a new trend in decision making, quasirationality, which combines intuitive and

Managerial Decision Making •

heavily on intuition. When she designs swimsuits, she selects the colors, fabrics, and sizes

based on her personal ideas and past experience.

Quasirationality is seen in Fogerty’s decision to manufacture her products in the United States.

She is participating in a trend to bring manufacturing home, the “Made in America” movement.

Although she says that at some point she may look into offshoring, she made the decision to

design, manufacture, and sell her swimwear in the United States. This decision is a combination

of rationality and intuition.

3. Customer feedback is an important part of this entrepreneur’s decision-making process.

Referring to the innovative decision-making techniques described at the end of the chapter,

how would you categorize “getting feedback”? Why is feedback valuable in decision

making?

Feedback is important because decision making is an ongoing process. Feedback provides

Fogerty with information that can precipitate a new decision cycle. Many problems are solved