McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, All Rights Reserved.
Chapter Seven
Individual & Group DecisionMaking
How Managers Make ThingsHappen
7 - 2
The Nature of Decision Making
•Decision
choice made from among availablealternatives
•Decision making
process of identifying and choosingalternative courses of action
7 - 3
Decision-Making Styles
Figure 7.1
7 - 4
Rational Decision Making
•Rational model of decision making
explains how managers should makedecisions
assumes managers will make logicaldecisions that will be optimum in furtheringthe organization’s interest
also called the classical model
7 - 5
Nonrational Decision Making
•Nonrational models of decisionmaking
assume that decision making is nearlyalways uncertain and risky, making itdifficult for managers to make optimaldecisions
7 - 6
Bounded Rationality
•Bounded Rationality
suggests that the ability of decisionmakers to be rational is limited bynumerous constraints
7 - 7
Satisficing and Incremental Models
•Satisficing Model
managers seek alternatives until they findone that is satisfactory, not optimal
•Incremental Model
managers take small, short-term steps toalleviate a problem
7 - 8
Intuition Model
•Intuition
making a choice without the use ofconscious thought or logical inference
•Sources of intuition are expertise andfeelings
7 - 9
Analytics
•Analytics
sophisticated forms of business dataanalysis
Portfolio analysis, time-series forecast
also called business analytics
7 - 10
Advantages of Group DecisionMaking
•Greater pool of knowledge
•Different perspectives
•Intellectual stimulation
•Better understanding of decisionrationale
•Deeper commitment to the decision
7 - 11
Disadvantages of Group DecisionMaking
•A few people dominate or intimidate
•Groupthink
•Satisficing
•Goal displacement
7 - 12
Groupthink
•Groupthink
occurs when group members strive toagree for the sake of unanimity and thusavoid accurately assessing the decisionsituation
7 - 13
Participative Management
•Participative Management
process of involving employees in settinggoals, making decisions, solving problems,and making changes in the organization
7 - 14
Group Problem-Solving Techniques
•Consensus
occurs when members are able to expresstheir opinions and reach agreement tosupport the final decision
•Brainstorming
technique used to help groups generatemultiple ideas and alternatives for solvingproblems
7 - 15
Common Decision-Making Biases
1.Availability bias
2.Confirmation bias
3.Representativeness bias
4.Sunk cost bias
5.Anchoring and adjustment bias
6.Escalation of commitment bias