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1. Introduction to Management 11e
John Schermerhorn
Chapter 7Chapter 7
TheThe
Decision-Making ProcessDecision-Making Process

2. Planning Ahead — Chapter 7 Study Questions
1. What is the role of information in the
management process?
2. How do managers use information to make
decisions?
3. What are the steps in the decision-making
process?
4. What are the current issues in managerial
decision making?
Management 11e Chapter 7 2

3. Study Question 1: What is the role of information in the
management process?
 Information, technology and management
 Managers must have
 Computer competency
 Ability to understand computers and use them to their
best advantage
 Information competency
 Ability to gather, analyze and use information for
decision making and problem solving
Management 11e Chapter 7 3

4. Study Question 1: What is the role of information in the
management process?
 What is useful information?
 Data
 Raw facts and observations
 Information
 Data made useful for
decision making
 Information drives
management functions
Management 11e Chapter 7 4

5. Study Question 1: What is the role of information in the
management process?
 Characteristics of useful information:
 Timely
 High quality
 Complete
 Relevant
 Understandable
Management 11e Chapter 7 5

6. Study Question 1: What is the role of information in the
management process?
 Information needs of organizations
 Information exchanges with the external
environment:
 Gather intelligence information
 Provide public information
 Information exchanges within the
organization:
 Facilitate decision making
 Facilitate problem solving
Management 11e Chapter 7 6

7. Study Question 1: What is the role of information in the
management process?
Management 11e Chapter 7 7

8. Figure 7.1 Internal and external information needs of an
organization
Management 11e Chapter 7 8

9. Study Question 1: What is the role of information in the
management process?
 Information systems
 Use IT to collect, organize and distribute data
for use in decision making
 Management information
systems
 Meet the information
needs of managers in
making daily decisions
Management 11e Chapter 7 9

10. Figure 7.2 Information technology is breaking barriers and
changing organizations
Management 11e Chapter 7 10

11. Study Question 2: How do managers use information to make
decisions?
 Managerial advantages of IT utilization:
 Planning advantages
 Better and more timely access to useful
information
 Involving more people in planning
 Organizing advantages
 More ongoing and informed communication
among all parts of the organization
 Improved coordination and integration
Management 11e Chapter 7 11

12. Study Question 2: How do managers use information to make
decisions?
 Managerial advantages of IT utilization
(cont.):
 Leading advantages
 Improved communication with staff and
stakeholders
 Keeping objectives clear
 Controlling advantages
 More immediate measures of performance results
 Allows real-time solutions to performance
problems
Management 11e Chapter 7 12

13. Figure 7.3 The manager as an information-processing nerve center
Management 11e Chapter 7 13

14. Study Question 2: How do managers use information to make
decisions?
 Problem solving
 The process of identifying a discrepancy between
actual and desired performance and taking action to
resolve it
Management 11e Chapter 7 14

15. Study Question 2: How do managers use information to make
decisions?
 Problem-solving approaches or styles:
Management 11e Chapter 7 15

16. Study Question 2: How do managers use information to make
decisions?
 Systematic versus intuitive thinking
Management 11e Chapter 7 16

17. Study Question 2: How do managers use information to make
decisions?
 Multidimensional thinking applies both
intuitive and systematic thinking
 Effective multidimensional thinking requires
skill at strategic opportunism
Management 11e Chapter 7 17

18. Study Question 2: How do managers use information to make
decisions?
Management 11e Chapter 7 18
Managers use
different
cognitive
styles

19. Study Question 2: How do managers use information to make
decisions?
 Types of problems
 Structured problems are ones that are
familiar, straightforward, and clear with
respect to information needs
 Programmed decisions apply solutions that
are readily available from
past experiences to solve
structured problems
Management 11e Chapter 7 19

20. Study Question 2: How do managers use information to make
decisions?
 Types of problems
 Unstructured problems are ones that are full
of ambiguities and information deficiencies
 Nonprogrammed decisions apply a specific
solution to meet the demands of a unique
problem
 Commonly faced by
higher-level management
Management 11e Chapter 7 20

21. Study Question 2: How do managers use information to make
decisions?
 Crisis decision making
 A crisis involves an unexpected problem that
can lead to disaster if not resolved quickly
and appropriately
Management 11e Chapter 7 21

22. Study Question 2: How do managers use information to make
decisions?
Management 11e Chapter 7 22

23. Study Question 2: How do managers use information to make
decisions?
Managers make decisions with various amounts of
information
Management 11e Chapter 7 23

24. Figure 7.4 Three environments for managerial decision making and
problem solving
Management 11e Chapter 7 24

25. Study Question 3: What are the steps in the decision-making
process?
Five-step decision-making process:
 Identify and define the problem
 Generate and evaluate alternative solutions
 Make decision
 Implement the decision
 Evaluate results
Management 11e Chapter 7 25

26. Study Question 3: What are the steps in the decision-making
process?
 Step 1 — Find and define the problem
 Focuses on information gathering,
information processing, and deliberation
 Decision objectives should be established
 Common mistakes in defining problems:
 Defining the problem too broadly or too narrowly
 Focusing on symptoms instead of causes
 Choosing the wrong problem
Management 11e Chapter 7 26

27. Study Question 3: What are the steps in the decision-making
process?
 Step 2 — generate and evaluate
alternative courses of action
 Potential solutions are formulated and more
information is gathered, data are analyzed ,
the advantages and disadvantages of
alternative solutions are identified
 Approaches for evaluating alternatives:
 Stakeholder analysis
 Cost-benefit analysis
Management 11e Chapter 7 27

28. Study Question 3: What are the steps in the decision-making
process?
 Step 2 — generate and evaluate possible
solutions (cont.)
 Criteria for evaluating alternatives:
 Benefits
 Costs
 Timeliness
 Acceptability
 Ethical soundness
Management 11e Chapter 7 28

29. Study Question 3: What are the steps in the decision-making
process?
 Step 2 — generate and
evaluate possible solutions
(cont.)
 Common mistakes:
 Selecting a particular solution
too quickly
 Choosing a convenient
alternative that may have
damaging side effects or may
not be as good as other
alternatives
Management 11e Chapter 7 29

30. Study Question 3: What are the steps in the decision-making
process?
 Step 3 — decide on a
preferred course of action
 Two different approaches
 Behavioral model leads to
satisficing decisions
 Classical model leads to
optimizing decisions
Management 11e Chapter 7 30

31. Figure 7.6 Differences in the classical and behavioral decision-
making models
Management 11e Chapter 7 31

32. Study Question 3: What are the steps in the decision-making
process?
 Step 4 — implement the decision solution
 Involves taking action to make sure the
solution decided upon becomes a reality
 Managers need to have willingness and
ability to implement action plans
 Lack-of-participation error
should be avoided
Management 11e Chapter 7 32

33. Study Question 3: What are the steps in the decision-making
process?
 Step 5 — evaluate results
 Involves comparing actual and desired
results
 Positive and negative consequences of
chosen course of action should be examined
 If actual results fall short
of desired results, the
manager returns to
earlier steps in the
decision-making process
Management 11e Chapter 7 33

34. Study Question 3: What are the steps in the decision-making
process?
Check ethical reasoning
 Ask these spotlight questions
Management 11e Chapter 7 34

35. Study Question 4: What are the current issues in managerial
decision making?
 Issues in decision making
 How do decision errors happen?
 Hueristics are strategies for simplifying
decision making
Management 11e Chapter 7 35

36. Study Question 4: What are the current issues in managerial
decision making?
Management 11e Chapter 7 36

37. Study Question 4: What are the current issues in managerial
decision making?
 Creative Decision making:
 Creativity is the generation of a novel idea or
unique approach that solves a problem or
crafts an opportunity
 creativity is more likely when decision makers are
highly task motivated
 Organizations should create an environment
that supports and encourages creativity
Management 11e Chapter 7 37

38. Study Question 4: What are the current issues in managerial
decision making?
 Personal creativity drivers
Management 11e Chapter 7 38

39. Study Question 4: What are the current issues in managerial
decision making?
 Situational creativity drivers
 Team creativity skills
 Management support for creative ideas
 Organizational culture
Management 11e Chapter 7 39

40. Study Question 4: What are the current issues in managerial
decision making?
 Situational creativity drivers
Management 11e Chapter 7 40

41. Chapter 7 Case
 Amazon: One E-Store to Rule Them All