DFJKLJDH Unit 4

Unit 4: Problem Solving and Decision Making
Objectives
1 Differentiate between programmed and non-programmed decisions.
2 Explain the steps involved in making a non-programmed decision.
3 Understand the major factors influencing decision making in organizations.
What is a problem ?
A discrepancy between ideal and actual conditions
What is a decision? A choice among alternatives
Non-programmed decisions
 A decision that is difficult because of its complexity and the fact that the person faces it
infrequently
 All strategic decisions are non-programmed decisions
 A well-planned and highly structured organization reduces the number of non-

programmed decisions
 E.g- outsourcing, merging, acquisitions
Programmed decisions
 A decision that is repetitive, or routine, and made according to a specific procedure
 First level managers or supervisors make more routine decisions. E.g- signing
payment vouchers
 Middle managers generally make both routine and non-routine decisions
 A well-managed organization encourages all managers to delegate as many non-

programmed decisions as possible
Steps in Problem Solving and Decision Making
1. Identify and diagnose the problem
 The first step in problem solving and decision making is to identify a gap between
desired and actual conditions
 Why our sales dropped over time?
 Why former customers stopped buying from us?
 Why can not we have a global presence?
2. Develop alternative solutions
 To explore all kinds of possibilities
3. Evaluate alternative solutions
 Examination of pros and cons of all the possibilities and considers the feasibility of each
 Evaluation parameters
 Cost
 Time
 Return
 Risk
 Resources availability
 Capabilities
4. Choose one alternative solution
 The process of weighing the alternatives must stop at some point
 Analysis paralysis
5. Implement the decision
 Converting a decision into action
6. Evaluate and control
 The final step in the decision making process is to investigate how effectively the chosen
alternative solved the problem
 Single loop and double loop learning
Bounded rationality and influences on decision making

Bounded rationality
 The observation that people’s limited mental abilities, combined with external influences
over which they have little or no control, prevent them from making entirely rational
decisions
 Superstitions
 Hong Kong people avoid 40-59
 Westerners avoid 13
 Satisficing decisions- a decision meets the minimum standards of satisfaction
 Heuristics- rule of thumb using decision making
 Smiling within first three minutes at an interview
 Intuition – experience based reasoning
Personality and cognitive intelligence
 Risk taking, cautiousness, and conservatism influences decisiveness
 Cautiousness will lead to low risk taking decisions
 Good decision makers, by definition, are decisive
 Perfectionism- people who seek perfect solution to a problem are usually indecisive
 Optimism and pessimism- optimistic people are more decisive
 Cognitive intelligence- imagination, adaptability, and practical intelligence
 In general, intelligent and well educated people are more likely to identify
problems and make sound decisions
Emotional intelligence
 The ability to connect with people and understand their emotions
 Key factors of emotional intelligence
 Self- awareness – to understand your own emotions

 Self- management – control one’s emotions
 Social- awareness – having empathy for others
 Relationship management – interpersonal skills of clear and convincing

communication
Quality and accessibility of information
 Accessing high quality and valid information for decision making
 Sources
 Organizational reports, Interviews, Observations, News and Case studies
 Avoid
 Anchoring and perceptual errors (selective, figure-ground, stereotyping,

and closure)
Political considerations
 Status quo
 Take revenge
 Political affiliations to stay in favor with,
 Senior managers
 Middle managers
 Operational level staff
Degree of certainty
 The more certain a decision maker is of the outcome of a decision, the more calmly and
confidently the person will make the decision
Crisis and conflict
 In a crisis many decision makers panic and they become less rational and more emotional
than they would be in a calm environment
 In such situation, some managers concentrate poorly, use poor judgment, and think
impulsively
Some managers consider crisis as an exciting challenge that energizes them towards their best
level of problem solving and decision making
Values of the decision maker
 What do the manager value?
 Employees
 Profits
 Prestige
 Any other
Procrastination
 Delaying taking an action without a valid reason
 Procrastination results in indecisiveness
Decision making style
 Managers use
 Intuition
 Procrastination
 Satisficing
 Decisive
 Flexible (many options and less information)
 Hierarchic
 Integrative (many options more information

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Unit 4: Problem Solving and Decision Making

1 Differentiate between programmed and non-programmed decisions.

2 Explain the steps involved in making a non-programmed decision.

3 Understand the major factors influencing decision making in organizations.

A discrepancy between ideal and actual conditions

What is a decision? A choice among alternatives

 All strategic decisions are non-programmed decisions

 A well-planned and highly structured organization reduces the number of non-

 E.g- outsourcing, merging, acquisitions

 A decision that is repetitive, or routine, and made according to a specific procedure

 Middle managers generally make both routine and non-routine decisions

 A well-managed organization encourages all managers to delegate as many non-

Steps in Problem Solving and Decision Making

1. Identify and diagnose the problem

 Why former customers stopped buying from us?

 Why can not we have a global presence?

2. Develop alternative solutions

 To explore all kinds of possibilities

3. Evaluate alternative solutions

4. Choose one alternative solution

 The process of weighing the alternatives must stop at some point

5. Implement the decision

 Converting a decision into action

6. Evaluate and control

 Single loop and double loop learning

Bounded rationality and influences on decision making

 Hong Kong people avoid 40-59

 Satisficing decisions- a decision meets the minimum standards of satisfaction

 Heuristics- rule of thumb using decision making

 Smiling within first three minutes at an interview

 Intuition – experience based reasoning

Personality and cognitive intelligence

 Risk taking, cautiousness, and conservatism influences decisiveness

 Cautiousness will lead to low risk taking decisions

 Good decision makers, by definition, are decisive

 Optimism and pessimism- optimistic people are more decisive

 Cognitive intelligence- imagination, adaptability, and practical intelligence

 The ability to connect with people and understand their emotions

 Key factors of emotional intelligence

 Self- awareness – to understand your own emotions

 Social- awareness – having empathy for others

 Relationship management – interpersonal skills of clear and convincing

Quality and accessibility of information

 Accessing high quality and valid information for decision making

 Organizational reports, Interviews, Observations, News and Case studies

 Anchoring and perceptual errors (selective, figure-ground, stereotyping,

 Political affiliations to stay in favor with,

 Operational level staff

Crisis and conflict

Values of the decision maker

 What do the manager value?

 Delaying taking an action without a valid reason

 Procrastination results in indecisiveness

Decision making style

 Flexible (many options and less information)

 Integrative (many options more information

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