Office Administration Chapter 6

advanced organizational management Chapter 1Critical Thinking and Decision-Making Processes1OverviewDecisions are made in an atmosphere in which there is uncertainty, risk, time pressure, imperfect information and a lack of knowledge as to responses.Decision making is a part of ALL the management functions: planning, organizing, leading, and controlling;Focus on this chapter: decisions made in the name of the organization by managers.

Page 12A.Organizational Decision MakingManagers primary function = decision makingthe process of identifying and solving problems creatively; making appropriate and rational decisions!

1.Theories of Managerial Decision MakingA. Classical theoryB. Behavioral (administrative) theory Page 23A.Organizational Decision Making (contd)A. Classical theory:* represents an ideal model, with maximizing outcomes as a primary goal;* maximizing = process of making decisions that is aimed at realizing the best possible outcome on one dimension seeking the best answer! Used with non-programmed decisions* considered the normative model defines how a decision maker should make decisionsB. Administrative theory:* describes how managers actually make decisions with uncertain outcomes where satisficing is necessary

Page 3

4A.Organizational Decision Making (contd)Satisficing:* manager adopts the solution that minimally meets the objectives, often found in the first acceptable option that arises; * alternatives are not studied much;* commonly used and appropriate with programmed and recurring decisions

Example: Purchasing software without reviewing whether the same needs exist this year as last year. Page 25A.Organizational Decision Making (contd)Optimizing:* involves the selection of the BEST alternative from a range of options that have been evaluated within existing time/price constraints;* involves the use of the classical decision-making model more than the other two types.

Example: Selecting a particular brand of computers to buy for use within the entire office from a range of six major options and within the time allotted.Page 26A.Organizational Decision Making (contd)Characteristics of Classical TheoryManagers are expected to:* gather information* examine it objectively* consider all alternative solutions* make an appropriate choice of alternatives leading to the best possible outcome* managers who are left-brain thinkers tend to arrive at logical and analytical decisions and are stronger advocates of the classical theoryPage 3

CHECK POINT B HERE! REVIEW IT!7A.Organizational Decision Making (contd)Identification of the problem clearly stated/definedPresence of certainty amount of risk is evident and easily determinedInformation about alternatives full set of information about each alternative available and expected outcomes are determinedMaximization of outcomes direct application of classical theory results in rational choice of alternatives in relation to the maximization of outcomesGoal attempt to make the ideal decisionPage 3

Pg. 343 FAX TRANSMISSION

DUN AND BRADSTREET COMPANY CREDIT REPORTS8A.Organizational Decision Making (contd)Characteristics of Behavioral (administrative) Theory based on work of Herbert A. Simon; how managers actually make decisions in business situationsModel incorporates two basic concepts: (1) bounded rationality and (2) satisficing* managers who are right-brain thinkers tend to rely more on intuitive and creative pursuits and more apt to follow a behavioral model

PAGE 3

PAGE 346 TAMU RULE 33.04.99.M2 RULES FOR RESPONSIBLE COMPUTING

CHECK POINT C!!!!!!!GO TO CHECK POINT C!!!!!9A.Organizational Decision Making (contd)Identification of the problem problem exists and is identified but difficulty in determining what it is; vaguenessPresence of uncertainty and intuition exists because there is only incomplete information available; sometimes manager must use intuition, based on personal experienceInformation about alternatives limited information available about alternative solutions and outcomesSatisficing decision making - managers select the alternative solution that satisfies minimal decision criteria and seems good enough

PAGE 410A.Organizational Decision Making (contd)Classical procedures associated with high performance in stable environment

Behavioral procedures associated with high performance in unsuitable environments where decisions made under more complex and difficult conditions within a short time spanPAGE 411A.Organizational Decision Making (contd)2. Two Types of Decisions to be MadeProgrammed: * decisions made routinely/recurring basis * most often do not require huge expenditures * less complex in nature (buying copy paper/stocking the supply cabinet)Nonprogrammed:* have no precedents/situations not dealt with previously* have no rules, procedures or policies for manager to followPage 4 STRESS EXAMPLE AT BOTTOM OF PAGE . . . RE ARTIFICIAL INTELLIGENCE!12A.Organizational Decision Making (contd)3. Personal v. Organizational Decisions follow proper protocol to make sure the two areas do not collide!4. Business Decisions * leaders are expected to act in a totally rational manner* moral responsibility of management making decisions that affect the work lives of others* emotions and intuition enter into the making of business decisions13A.Organizational Decision Making (contd)* need for rational behavior follow a well- established logical process* most decisions combine objectivity and subjectivity* use of decision-making aids- computers- statistics- decision treesPage 5 CHECK POINT A!!!!!!14B. Critical ThinkingDefinition: means using evidence and reason to evaluate claims, dilemmas, or choice options* rational decision making requires critical thinking* unique, unanticipated, not encountered before requires a more detailed process to define, analyze and solve nonprogrammed decisions

1.Scientific Method steps of critical thinking; method of research follows scientific rules that knowledge can be obtained in an unbiased mannerPAGE 6 REVIEW THE EXAMPLE OF BROKEN COPY MACHINE! 15B. Critical Thinking (contd)2. Logical Reasoning Using the Scientific Process a. Identifying/defining problem most important step!* reasons for failure to identify real causes: 1) haste; 2)work pressure; 3)discomfort with ambiguous, vague and ill-defined situations* results of failure to identify real cause b. Gathering information about the problem investigate fully the circumstancesPAGE 6 & 7 REVIEW EXAMPLES ON PAGE 7!!!!!16B. Critical Thinking (contd)c. Developing alternative solutions* need for clear objectives clear statement of the objective must be developed* need for creative solutions brainstorming = technique designed to help individuals become freer in exercising their creativity - brainwriting = individuals write down their ideas independently; group reviews and critiques each ideaPAGE 7 C; PAGE 8 EMPHASIZE DIFFERENCES BETWEEN BRAINSTORMING AND BRAINWRITING BULLETED ITEMS ON PAGE 8 UNDER BRAINSTORMING!!!!! VERY IMPORTANT AND ON EXAM, TOO!!!!17B. Critical Thinking (contd)* need for alternative scenarios an analytical method with the advantage being the ability of the manager to examine multiple possibilities rather than selecting one path to followd. Evaluating alternatives test of logic requires that alternatives be evaluated according to same set of standards* decision criteria stated in quantitative or qualitative terms1. statistical analysis the term statistics is used generally to mean DATA (characteristics) for a sample (subset) of a population; statistical analysis is a set of methods or techniques for collecting, organizing and interpreting the data (graphs/tables)

Page 8 & 9 REVIEW EXAMPLE ON PAGE 9; REFER TO EXAMPLE FIGURE 1-1 EXAMPLE OF FREQUENCY DISTRIBUTION18B. Critical Thinking (contd)The way data data are displayed can aid the reader to derive meanings from the data:* Graphs data organized and presented in terms of: 1) most common plot, or 2) total volume per time period* Tables data organized into arrays by chronology, size, location or some other characteristicPAGE 9 REVIEW FIGURE 1-1 AND PAGE 10 FIGURE 1-219B. Critical Thinking (contd) * Inferential statistics provide techniques for calculating the odds, or probabilities that certain events will happen* Payoff tables or matrices show results of a comparison of different alternatives; arranges information so that comparisons of outcomes can be examined simultaneously* Computers have made the preparation of payoff tables and matrices a much simpler process (Fig. 1-3)PAGE 10 AND 11 FIGURE 1-3 PAYOFF TABLE OR MATRIX20B. Critical Thinking (contd)2.Operations research includes a wide range of mathematical formulas and techniques for analyzing a complex decision problem* linear programming used to find the best answer to situations where many known elements may be put together in different combinations that yield different profits3.Qualitative factors are those which cannot be measured directly in quantitative termsPAGE 10 AND 1121B. Critical Thinking (contd)a. certainty all possible alternatives must be known, direct and predictable methods and all possible outcomes must be known* Question in the realm of certainty = What is the least expensive way to ship a package from point A to point B?* uncertainty we have little or no information about possible alternatives or outcomes* limited certainty decision maker has some knowledge about some alternatives but has little information about outcomesPAGE 11 LOOK AT EXAMPLE AT BOTTOM OF PAGE 1122B. Critical Thinking (contd)b. Risk where alternatives, the possible outcomes, and the probabilities of those outcomes occurring are known, the problem can be converted to one of gambling or risk4.Analytical tools for decision making* Decision trees powerful method of graphing complex decision problems, especially in which one is considering a sequence of decisions to be made across a period of time* VROOM MODEL most common decision-making tree developed by Vroom and YeltonPAGE 12 REFER TO EXAMPLE ON PG. 12 ABOUT RISK! REVIEW EXAMPLE, BOTTOM OF PAGE 12 DECISION TREE FIG. 1-423B. Critical Thinking (contd)* Decision making using groups T group, Delphi technique, nominal group technique, quality circles, brainstorming (all covered in Ch. 8)* Computerized decision making decision support system (DSS) is an interactive computer-based system that aids decision makers in solving problemse. Choosing an alternative final step* use judgment as it is needed in addition to quantitative data* consider possible negative consquences* personal values bias, attitude toward risk, ambition, fear of public opinion come into play in the act of choosing the alternativePAGE 1424B. Critical Thinking (contd)* use of groups or committees for implementation compromise, trading votes, filibustering are all involved in the process of making important decisions* implementing the decision (decision has been made)* monitoring the decision- feedback: either positive (decision was appropriate) or negative (poor decision)* internal and external environments (evaluate outcomes)PAGE 15 AND 16 -= ITEMS NO. 1 8!!!!!25B. Critical Thinking (contd)3.Logical Thinking Patternsa. Inductive reasoning defines the problem then moves to identify factors or variables inherent to the problem;b. Deductive reasoning thought processes move from a general premise toward specific conclusionsc. Comparison key is to use the same procedures for comparing all objects or attributes being investigatedd. Causation most difficult thought processPAGE 16 CHECK POINT B!!!!!! ON PAGE 17!!!!26C. Creative Thinking in Organizational Decision MakingCREATIVITY generation of new ideas;

INNOVATION is the translation of a new idea into a new product, service, method of production or even a new organization

Creativity and innovation need to be encouraged and fostered by individuals and organizations.C. Creative Thinking in Organizational Decision Making (contd)Individual creativity manager has the awesome task of identifying people within the organization who are creative and fostering that creativity*Highly creative people tend to be:- more original in thought and ideas;- willing to shift from one approach to another;- more flexible and less rigid with time, resources;- more independent in their pursuit of solutions- more apt to disobey orders that make no sense- more difficult to manage (question authority)PAGE 17!!!!28C. Creative Thinking in Organizational Decision Making (contd)Creative process in Organizationsa. Idea generation variety of sources: outside consultants, employees, new employees, etc.b. Idea development or problem solving supported or inhibitedc. Implementation of creative ideas high degree of integration is required among units of an organizationd. Monitoring of innovation enables the organization to examine the results to see if further research is neededPAGE 18 CHECKPOINT CCCCCCCC!!!! NEXT, FOR YOUR REVIEW29MOCK EXAM QUESTIONSQUESTION No. 1 CORRECT ANSWER IS B!30MOCK EXAM QUESTIONS (contd)CORRECT ANSWER IS D!31MOCK EXAM QUESTIONS (contd)CORRECT ANSWER IS D!32MOCK EXAM QUESTIONS (contd)33