Chapter 2 Management and Decision Making I

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Chapter 2 Management and Decision Making - I

• Lecture 2, Jan. 30, 2006

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Announcements

• Course project team
• Need to enroll in the course create your
  project teams ASAP
• 2 members for each group
• Send me the names and emails of your team members
  by Feb. 6 (next Monday), as well as the class
  presentation topic your group has chosen
• Go over carefully the final project report
  requirement handed out today

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Announcements

• Class presentation
• Select one of the lecture topics and present at
  the end of a class (due Feb. 6)
• Either one member or entire group can present
• Each presentation is expected to take 15 minutes
  5 minutes QA
• Submit your choice via the website ASAP.
• Course Project presentation May. 3

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Common Mistakes in ProjectsFor type-I projects

• Is it really a decision support paper or a
  database paper, or something else
  (Relevancy)?The technology should be explained,
  but more focus should be placed on HOW it can be
  used to support decision making in WHAT
  applications.
• Is this an interesting and important decision
  making problem?
• Combination of breadth and depth?Assuming you
  are giving a tutorial
• Is my content out-of-date?

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Common Mistakes in Project ProposalsFor type-II
projects

• Is it a decision-making problem?
• Is the DSS we are proposing really necessary (any
  significant benefits)?
• Do we have a clear understanding of the problem?
• What are the potential problems to implement a
  system like this?

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A sample Type II project

• A prototype DSS to support Car Loan decisions
  (using ME VBA)
• Pay attention to its major components
• Interface
• Model
• Data

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Any questions before we move on?
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A big picture of the course content
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Agenda

• Decision making
• Managerial decision making
• Classifying decisions
• Categories of decision makers
• Decision forces and effectiveness
• Why are decisions difficult

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Decision Making

• A decision is a choice about a course of action
  for the purpose of attaining a goal or goals
• A classic view of decision making

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Managerial Functions

• Management is a process by which organizational
  goals are achieved using resources. Managers are
  power centers in organizations
• Five functions of a manager
• Planning
• Organizing structuring of human resources
• Commanding
• Coordinating
• Controlling
• Decision making is a common thread through all
  managerial functions!

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Decisional Roles of Managers

• Four decisional roles
• Entrepreneur search for opportunities to steer
  the organization in a new direction
• Disturbance handler devises corrective action
  for unexpected disturbance
• Resource allocator allocate available resources,
  including money assets, people assets, and other
  facilities
• Negotiator represents the organization in
  bargaining with outsiders

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Managerial Decision Making

• All managerial activities revolve around decision
  making
• Decision makers at various levels
• Decision making is becoming more and more
  complicated
• ?
• ?

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Classifying Decisions

• Based on
• Managerial function planning, organizing,
• Functional area marketing decisions, personnel
  decisions, etc
• Negotiation negotiated and unilateral decisions
• Structureness structured, semi-structured, and
  unstructured decisions

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Simons Decision-making traits

• Decision making process (1957)
• (programmed) (nonprogrammed)

Semi-structured
Highly unstructured
Highly structured
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Structured vs. Unstructured Problems

• Structured problems
• Routine and repetitive
• Programmable
• Objectives are clearly defined (e.g. cost min. or
  profit max.)
• The procedures to get the best solution are known

• Unstructured problems
• Non-routine
• Human intuition is often the basis for decision
  making
• Objectives often conflicting
• No clear solution methods (high degree of
  uncertainty)

Semi-structured problems??
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How a Decision Is Made?
Stimulus
Decision Maker
Problem Definition
Formulate a problem
Alternative Selection
Partly shows why sometimes decision-making is
difficult
Implementation
Figure 2-1, Page 36
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Different Categories of Decision Makers

• Different types of decision makers - different
  types of DSS
• Individual decision makersworks alone and makes
  a final decision by his/her own.
• Multiple decision makersMultiple individuals
  interact with each other to reach a decision.
  Example Jury
• Formal or informal manner
• Each member may possess equal or different impact
  on decisions

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Decision Styles

• Decision style describes the manner in which a
  manager makes decisions.
• Contributing factors Context, Perception, and
  Values
• Categories of decision style
• Directive
• Analytical
• Conceptual
• Behavioral

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Decision Style Model
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Decision Forces

• A variety of potential forces and constraints
  that can act on a problem context, and thus on a
  decision maker, who must balance these forces.
• Major forces
• Personal and emotional forces
• Economic/environmental forces
• Organizational forces
• Contextual and emergent forces

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Forces Acting Upon A Decision Maker
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Decision Effectiveness

• What is a good decision?
• A good decision results in the attainment of the
  objective or objectives that give rise to the
  need for a decision within the boundaries and
  constraints imposed by the problems context.
• Effectiveness vs. efficiency
• Which is more important in the context of
  decision making?

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Why Are Decisions Difficult?

• Structural
• Psychological
• Physical
• Environmental

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Why Are Decisions Difficult?

• Structure

Structured
Semi-structured
Unstructured
intuitive, volatile context, multiple decision
strategies, decision criterion unclear,
routine, programmable, focused decision strategy,
decision criteria understood
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Why Are Decisions Difficult? (Contd)

• Cognitive limitations
• We do not know everything
• Information overload
• We have limited ability to process and store
  information and knowledge.The magic number
  seven plus or minus two (Miller, 1956)

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Why Are Decisions Difficult? (Contd)

• Uncertainty
• Total certainty indicates complete and accurate
  knowledge regarding the outcome of a pending
  decision.
• Genuine uncertainty suggests that the outcome of
  a pending decision cant be determined even
  within the confines of probability.
• In real-word, both total uncertainty and genuine
  are rare - with some degree of certainty -
  using probabilities.

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Why Are Decisions Difficult? (Contd)

• Alternatives and multiple objectives
• A decision making process aims to choose from a
  selected set of alternatives the one that will
  results in the greatest number of desirable
  outcomes with the least number of undesirable
  consequences.
• A decision can be more complicated when there are
  multiple goals.

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A case

• What decisions did McDonald's need to make when
  it became interested in starting business in
  Barcelona?
• Decisions are critical but difficult

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A case Uncertainties

• Uncertainties?