Chapter 4 Decision Making
Text Organizer Answers
Business Management 12
Stewart
Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition
Copyright © 2011 Pearson Canada Inc.
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Making Decisions
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Rationality
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Managers make consistent, value-maximizing
choices with specified constraints
It assumes rational decision makers:
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Are fully objective, and logical
Will define the problem and have a
specific goal
Will select the alternative that
maximizes the organization’s interests
not their own
Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition
Copyright © 2011 Pearson Canada Inc.
4-3
Making Decisions (cont’d)

Bounded Rationality
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
Managers make decisions rationally, but are
limited by their ability to interpret, process, and
act on information
Assumes decision makers:
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Will not seek out or have knowledge of all
alternatives
Managers satisfice rather than maximize
That is, they will accept a solution that is “good
enough”
Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition
Copyright © 2011 Pearson Canada Inc.
4-4
Making Decisions (cont’d)

Intuitive Decision Making
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
Making decisions on the basis of experience,
feelings, and accumulated judgment
Complements rational analysis often allowing a
manager to act quickly with limited information
Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition
Copyright © 2011 Pearson Canada Inc.
4-5
Types of Problems and Decisions
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Structured Problems
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Have clear goals
Are familiar
Are easily defined
Programmed Decision

A repetitive decision that can be handled by a
routine approach
Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition
Copyright © 2011 Pearson Canada Inc.
4-6
Problems and Decisions (cont’d)

Unstructured Problems
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
Are new or unusual
Information is ambiguous or incomplete
Nonprogrammed Decisions

Are unique and nonrecurring and require
custom-made solutions
Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition
Copyright © 2011 Pearson Canada Inc.
4-7
Decision-Making Conditions
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Certainty
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Accurate decisions are possible because the
outcome of every alternative is known
Risk


Decision maker estimates the likelihood of
outcomes
Ability to weight outcomes is based on
personal experiences or secondary information
Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition
Copyright © 2011 Pearson Canada Inc.
4-8
Decision-Making Conditions (cont’d)

Uncertainty

Limited information prevents estimation of
outcome probabilities
Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition
Copyright © 2011 Pearson Canada Inc.
4-9
Decision-Making Styles
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Directive
 Use minimal information and consider few
alternatives
Analytic
 Make careful decisions in unique situations
Conceptual
 Maintain a broad outlook and consider many
alternatives in making long-term decisions
Behavioural
 Work well with and seek acceptance by others and
try to avoid conflict
Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition
Copyright © 2011 Pearson Canada Inc.
4-10
Group Decision Making
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Advantages

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More complete
information and
knowledge
More diverse
alternatives
Increases
acceptance of a
solution
Increases legitimacy
of decision
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Disadvantages

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
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Time consuming
Opportunity for
minority domination
Ambiguous
responsibility
Pressures to
conform
Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition
Copyright © 2011 Pearson Canada Inc.
4-11
Group Decision Making
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Groupthink
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
The withholding by group members of
different views to appear to be in
agreement
Quality decision making is jeopardized
Groupthink occurs when:
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
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Group members rationalize resistance to the assumptions
made
Members pressure those who doubt group views
Members with doubts avoid going against group
consensus
If someone does not speak, it is assumed they are in
agreement
Chapter 4, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition
Copyright © 2011 Pearson Canada Inc.
4-12