Decision Making
Chapter 11 – Decision Making
What is Decision Making? * Decision making – the process of developing a commitment to some course of action * Can also be described as a process of problem solving * Problem – a perceived gap between an existing state and a desired state
Well-Structured Problems * Well-structured problems – a problem for which the existing state is clear, the desired state is clear, and how to get from one state to the other is fairly obvious * Decision making takes time and is prone to error, so organizations attempt to program the decision making for well-structured problems * Program – a standardized way of solving a problem * they short-circuit the decision-making process by enabling the decision maker to go directly from problem identification to solution
Ill-Structured Problems * Ill-structured problem – a problem for which the existing and desired states are unclear, and the method of getting to the desired state is unknown * They are generally unique, complex, involve a high-degree of uncertainty, and have not been encountered before * Cannot be solved with programmed decisions * Need to gather more information and be more self-consciously analytical in their approach
The Complete Decision Maker – A Rational Decision-Making Model
Perfect vs. Bounded Rationality * Perfect rationality – a decision strategy that is completely informed, perfectly logical, and oriented toward economic gain (prototype is the familiar economic person) * He or she: * Can gather information about problems and solutions without cost and is thus completely informed * Is perfectly logical – if solution A is preferred over solution B, and B is preferred over C, then A is necessarily preferable to see * Has only one criterion for decision making – economic gain * Bounded rationality – a decision strategy that relies on limited information and that reflects time constraints and political
What is Decision Making? * Decision making – the process of developing a commitment to some course of action * Can also be described as a process of problem solving * Problem – a perceived gap between an existing state and a desired state
Well-Structured Problems * Well-structured problems – a problem for which the existing state is clear, the desired state is clear, and how to get from one state to the other is fairly obvious * Decision making takes time and is prone to error, so organizations attempt to program the decision making for well-structured problems * Program – a standardized way of solving a problem * they short-circuit the decision-making process by enabling the decision maker to go directly from problem identification to solution
Ill-Structured Problems * Ill-structured problem – a problem for which the existing and desired states are unclear, and the method of getting to the desired state is unknown * They are generally unique, complex, involve a high-degree of uncertainty, and have not been encountered before * Cannot be solved with programmed decisions * Need to gather more information and be more self-consciously analytical in their approach
The Complete Decision Maker – A Rational Decision-Making Model
Perfect vs. Bounded Rationality * Perfect rationality – a decision strategy that is completely informed, perfectly logical, and oriented toward economic gain (prototype is the familiar economic person) * He or she: * Can gather information about problems and solutions without cost and is thus completely informed * Is perfectly logical – if solution A is preferred over solution B, and B is preferred over C, then A is necessarily preferable to see * Has only one criterion for decision making – economic gain * Bounded rationality – a decision strategy that relies on limited information and that reflects time constraints and political