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Decision makingdecision makingMaking choices among alternative courses of action, including inaction. Individuals throughout organizations use the information they gather to make a wide range of decisions. Because many decisions involve an ethical component, one of the most important considerations in management is whether the decisions you are making as an employee or manager are ethical.
Despite the far-reaching nature of the decisions in the previous example, not all decisions have major consequences or even require a lot of thought. However, decisions that are unique and important require conscious thinking, information gathering, and careful consideration of alternatives. Decision making can also be classified into three categories based on the level at which they occur. In this chapter, we are going to discuss different decision-making models designed to understand and evaluate the effectiveness of nonprogrammed decisions.
The rational decision-making modelrational decision-making modelA decision making model which describes the series of steps that decision makers should consider if their goal is to maximize their outcome. Leta€™s imagine that your old, clunky car has broken down and you have enough money saved for a substantial down payment on a new car. Using the rational decision-making model to make major purchases can help avoid making poor choices. Before we can move too much further, you need to decide how important each factor is to your decision in step 3. Of course, the outcome of this decision will be related to the next decision made; that is where the evaluation in step 8 comes in.
While decision makers can get off track during any of these steps, research shows that limiting the search for alternatives in the fourth step can be the most challenging and lead to failure.
Despite all its benefits, you may have noticed that this decision-making model involves a number of unrealistic assumptions. In fact, the availability of too much information can lead to analysis paralysisanalysis paralysisA decision-making process where more and more time is spent on gathering information and thinking about it but no decisions actually get made., where more and more time is spent on gathering information and thinking about it, but no decisions actually get made. The bounded rationality modelbounded rationality modelA model that recognizes the limitations of decision-making processes. The intuitive decision-making modelintuitive decision-making modelArriving at decisions without conscious reasoning. In addition to the rational decision making, bounded rationality models, and intuitive decision making, creative decision making is a vital part of being an effective decision maker.
The five steps to creative decision making are similar to the previous decision-making models in some keys ways.
A NASA scientist describes his decision-making process leading to a creative outcome as follows: He had been trying to figure out a better way to de-ice planes to make the process faster and safer.
Researchers focus on three factors to evaluate the level of creativity in the decision-making process. Diversify your team to give them more inputs to build on and more opportunities to create functional conflict while avoiding personal conflict. Leaderless teams can allow teams freedom to create without trying to please anyone up front. Engage in brainstorming to generate ideasa€”remember to set a high goal for the number of ideas the group should come up with, encourage wild ideas, and take brainwriting breaks. Use the nominal group technique in person or electronically to avoid some common group process pitfalls.
Build a physical space conducive to creativity that is playful and humorousa€”this is a place where ideas can thrive. The four different decision-making modelsa€”rational, bounded rationality, intuitive, and creativea€”vary in terms of how experienced or motivated a decision maker is to make a choice. FlowBreeze is a flowchart add-in for Microsoft Excel that makes creating flowcharts simple and pain free. Connector: A small, labeled, circular flow chart shape used to indicate a jump in the process flow. The above definition is correct, but it falls short of describing the coolness of flow charts.
I know that sounds a little ridiculous, but in my years as a manufacturing engineer, flow charts and Pareto charts were my two favorite tools for characterizing and improving processes. Drilling down, some of the ISO 9000 work instructions for individual test types had low-level, detailed flow charts documenting how to conduct each test. Some flow chart tools (including Microsoft Excel) allow you to add hyperlinks to flow chart symbols. Unfortunately, the world of flowcharting hasn't come to a unanimous agreement on what to call flow charts.
Common alternative names include: flowchart, process flow chart, process map, process chart, process model, process flow diagram, or just flow diagram. Nicholas Hebb is the owner of BreezeTree Software, makers of FlowBreeze Flowchart Software, a text-to-flowchart maker, and Spreadspeed, an auditing and productivity toolset for Microsoft Excel®. Spreadspeed is a time saving Excel add-in for performing operations on workbooks, worksheets, ranges, tables, text, numbers, dates, data, and more.
Users of the online version of Intuit's popular QuickBooks small-business accounting software may find their workdays becoming a bit easier to manage, thanks to a new user interface and mobile application support. Intuit has completed a "complete relaunch and rebuild" of QuickBooks Online's look and feel, said Daniel Wernikoff, senior vice president and general manager of small business financial solutions. QuickBooks has about 4.5 million users around the world, with 500,000 using the online edition and the rest running the desktop version, Wernikoff said.
Intuit launched the online product about 10 years ago but only started getting serious traction for it recently. The uptick is likely being boosted by new features introduced last year that allowed the online version to be configured to support a wide variety of tax regulations and languages. The update announced Monday seems to bring QuickBooks beyond pure accounting and into the realm of CRM (customer relationship management). New mobile applications for iOS and Android devices allow users to pull up data while in the field, such as the complete financial history of dealings with a particular customer. Also on tap in the new release is better integration for the online product with third-party applications. Intuit has also tried to make it easier for less computer-savvy business owners to get started quickly with the application. When a new customer logs into QuickBooks Online for the first time, they are presented with a wizard-like interface that asks them questions about the industry they're in, how they prefer to be paid and other matters. As QuickBooks Online grows more popular, the user base may end up including more and more customers who once used the desktop version. PCWorld helps you navigate the PC ecosystem to find the products you want and the advice you need to get the job done.
For example, before you come to class, you make simple and habitual decisions such as what to wear, what to eat, and which route to take as you go to and from home and school.
These are called nonprogrammed decisionsnonprogrammed decisionsUnique, nonroutine, and important decisions that require conscious thinking, information gathering, and careful consideration of alternatives.. Petersburg, Russia, location, McDonalda€™s trains all restaurant managers (over 65,000 so far) at Hamburger University where they take the equivalent of two years of college courses and learn how to make decisions. We will cover four decision-making approaches starting with the rational decision-making model, moving to the bounded rationality decision-making model, the intuitive decision-making model, and ending with the creative decision-making model.

If each is equally important, then there is no need to weight them, but if you know that price and gas mileage are key factors, you might weight them heavily and keep the other criteria with medium importance. For example, if you purchase a car but have nothing but problems with it, you are unlikely to consider the same make and model in purchasing another car the next time! First, when making a decision you may want to make sure that you establish your decision criteria before you search for all alternatives.
It assumes that people understand what decision is to be made, that they know all their available choices, that they have no perceptual biases, and that they want to make optimal decisions. Our guess is that you rarely sit down and complete all eight steps in the rational decision-making model.
A senior executive at Hewlett-Packard admits that his company suffered from this spiral of analyzing things for too long to the point where data gathering led to a€?not making decisions, instead of us making decisions.a€?[508] Moreover, you may not always be interested in reaching an optimal decision.
According to this model, individuals knowingly limit their options to a manageable set and choose the best alternative without conducting an exhaustive search for alternatives. The model argues that in a given situation, experts making decisions scan the environment for cues to recognize patterns. All of the models include problem identificationproblem identificationThe step in which the need for problem solving becomes apparent., which is the step in which the need for problem solving becomes apparent. After recognizing the problem, he had immersed himself in the literature to understand all the options, and he worked on the problem for months trying to figure out a solution. Linus Pauling, the Nobel prize winner who popularized the idea that vitamin C could help build the immunity system, said, a€?The best way to have a good idea is to have a lot of ideas.a€? One popular way to generate ideas is to use brainstorming.
Choosing the right approach will make you more effective at work and improve your ability to carry out all the P-O-L-C functions. There are different types of decisions, ranging from automatic, programmed decisions to more intensive nonprogrammed decisions.
The Spreadspeed auditing features are a set of risk assessment and error reduction tools for ensuring the quality of your spreadsheets. It simplifies the task of creating flowcharts by converting your text into flowchart shapes, automatically applying styles, routing connector arrows, positioning symbols, and much more.Try a free 30-day trial today! While three or four years ago only about 5 percent of new customers were choosing the online version, Intuit expects online to account for more than half of new purchases by the end of the year, Wernikoff said. Transactions conducted through the mobile applications get synchronized back to the customer's QuickBooks Online account. The application's look and feel is automatically configured, based on those responses and on the way customers in similar industries have set up their systems.
Intuit's sunset policy, which essentially forces customers to repurchase the software every few years unless they don't want support or the use of add-on extensions, is a long-standing gripe among QuickBooks users.
While it can be argued that management is decision making, half of the decisions made by managers within organizations fail.[503] Therefore, increasing effectiveness in decision making is an important part of maximizing your effectiveness at work. For example, the decisions made by executives and consulting firms for Enron ultimately resulted in a $60 billion loss for investors, thousands of employees without jobs, and the loss of all employee retirement funds. For example, in 2005, McDonalda€™s became aware of a need to respond to growing customer concerns regarding foods high in fat and calories. In other words, if you want to make sure you make the best choice, going through the formal steps of the rational decision-making model may make sense.
The first step, therefore, has already been completeda€”we know that you want to buy a new car. This would prevent you from liking one option too much and setting your criteria accordingly. Nobel Prizea€“winning economist Herbert Simon observed that while the rational decision-making model may be a helpful tool for working through problems, it doesna€™t represent how decisions are frequently made within organizations. For example, this model proposed that we should search for all possible alternatives before making a decision, but this can be time consuming and individuals are often under time pressure to make decisions. For example, if you are looking to purchase a house, you may be willing and able to invest a great deal of time and energy to find your dream house, but if you are looking for an apartment to rent for the academic year, you may be willing to take the first one that meets your criteria of being clean, close to campus, and within your price range.
It was not until he was sitting outside of a McDonalda€™s restaurant with his grandchildren that it dawned on him. BrainstormingbrainstormingA process of generating ideas that follows a set of guidelines, which includes no criticism of ideas during the process, the idea that no suggestion is too crazy, and building on other ideas (piggybacking). Structured decision-making processes include rational decision making, bounded rationality, intuitive, and creative decision making.
Business Process Model Notation (BPMN) is a more technical type of diagram and should not be used synonymously with flow chart. This chapter will help you understand how to make decisions alone or in a group while avoiding common decision-making traps. But Sherron Watkins, a former Enron employee and now-famous whistleblower, uncovered the accounting problems and tried to enact change. These types of straightforward decisions are termed programmed decisions;programmed decisionsDecisions that occur frequently enough that we develop an automated response to them.
This is a nonprogrammed decision because for several decades, customers of fast-food restaurants were more concerned with the taste and price of the food, rather than the healthiness. Finally, operational decisions are decisions that employees make each day to run the organization. Then, in step 5, you need to use this information to evaluate each alternative against the criteria you have established. For example, leta€™s say you started browsing for cars before you decided your decision criteria. Moreover, even if we had access to all the information, it could be challenging to compare the pros and cons of each alternative and rank them according to our preferences. With the flattening of organizations and intense competition among organizations, individuals and organizations are driven to be creative in decisions ranging from cutting costs to creating new ways of doing business. ImmersionimmersionThe step where the decision maker thinks about the problem consciously and gathers information. The golden arches of the a€?Ma€? of the McDonalda€™s logo inspired his solution: he would design the de-icer as a series of Ma€™s![511] This represented the illumination stage. Each of these can be useful, depending on the circumstances and the problem that needs to be solved.
Lastly, Activity Diagrams, which are used in UML modeling, are basically just flow charts, but they are used in conjunction with other types of diagrams that depict software design and usage. Similarly, the decisions made by firms to trade in mortgage-backed securities is having negative consequences for the entire U.S. In response, McDonalda€™s decided to offer healthier alternatives, such as substituting apple slices in Happy Meals for French fries and discontinuing the use of trans fats. For example, remember the restaurant that routinely offers a free dessert when a customer complaint is received.
You may come across a car that you think really reflects your sense of style and make an emotional bond with the car.
Anyone who has recently purchased a new laptop computer or cell phone can attest to the challenge of sorting through the different strengths and limitations of each brand, model, and plans offered for support and arriving at the solution that best meets their needs. An important part of the bounded rationality approach is the tendency to satisficesatisficingAccepting the first alternative that meets minimum criteria., which refers to accepting the first alternative that meets your minimum criteria. Eighty-nine percent of managers surveyed admitted to using intuition to make decisions at least sometimes, and 59% said they used intuition often.[509] When we recognize that managers often need to make decisions under challenging circumstances with time pressures, constraints, a great deal of uncertainty, highly visible and high-stakes outcomes, and within changing conditions, it makes sense that they would not have the time to formally work through all the steps of the rational decision-making model. Please note that, while creativity is the first step in the innovation process, creativity and innovation are not the same thing.

After he tested and verified his creative solution, he was done with that problem except to reflect on the outcome and process.
If decision makers are able to generate several unique solutions to a problem, they are high on flexibility. Research shows that the quantity of ideas actually leads to better idea quality in the end, so setting high idea quotasidea quotasA set number of ideas a group must reach before they are done with brainstorming. The automated response we use to make these decisions is called the decision ruledecision rulesAutomated responses used to make programmed decisions.. Then, because of your love for this car, you may say to yourself that the fuel economy of the car and the innovative braking system are the most important criteria. For example, many college graduates do not conduct a national or international search for potential job openings; instead, they focus their search on a limited geographic area and tend to accept the first offer in their chosen area, even if it may not be the ideal job situation. Yet when CEOs, financial analysts, and healthcare workers are asked about the critical decisions they make, seldom do they attribute success to luck. Innovation begins with creative ideas, but it also involves realistic planning and follow-through. A key to success in creative decision making is having or acquiring expertise in the area being studied. Strategic management in turbulent times: The short and glorious history of accelerated decision making at Hewlett-Packard.
Each of these people made a decision, and each person, as well as others, is now living with the consequences of his or her decisions. For example, many restaurants face customer complaints as a routine part of doing business. The manager of the restaurant implemented the free dessert policy as a way to handle customer complaints, which is a tactical decision.
After purchasing it, you may realize that the car is too small for all of your friends to ride in the back seat when you and your brother are sitting in front, which was something you should have thought about! Satisficing is similar to rational decision making, but it differs in that rather than choosing the best choice and maximizing the potential outcome, the decision maker saves time and effort by accepting the first alternative that meets the minimum threshold.
To an outside observer, it may seem like they are making guesses as to the course of action to take, but it turns out that they are systematically making decisions using a different model than was earlier suspected. Then, incubationincubationThe step when the decision maker sets the problem aside and does not think about it for a while. If you are able to generate several distinct solutions to a problem, your decision-making process is high on flexibility. Another unique aspect of brainstorming is that the more people are included in brainstorming, the better the decision outcome will be because the variety of backgrounds and approaches give the group more to draw from. Because this is a recurring problem for restaurants, it may be regarded as a programmed decision. They had recently introduced a new product, ChargeUp with Lipitrene, an improved version of their popular sports drink powder, ChargeUp. And, the servers at the restaurant are making individual decisions each day evaluating whether each customer complaint received is legitimate to warrant a free dessert.
You only have a certain amount of money saved, and you dona€™t want to take on too much debt, so price range is an important factor as well.
Setting criteria before you search for alternatives may prevent you from making such mistakes.
Research on life-or-death decisions made by fire chiefs, pilots, and nurses finds that these experts do not choose among a list of well-thought-out alternatives.
A variation of brainstorming is wildstormingwildstormingA variation of brainstorming where the group focuses on ideas that are impossible and then imagines what would need to happen to make them possible.
To deal with this problem, the restaurant might have a policy stating that every time they receive a valid customer complaint, the customer should receive a free dessert, which represents a decision rule. But a phone call came from a state health department to inform them that several cases of gastrointestinal distress had been reported after people consumed the new product.
If you know you want to have room for at least five adults, get at least 20 miles per gallon, drive a car with a strong safety rating, not spend more than $22,000 on the purchase, and like how it looks, youa€™ve identified the decision criteria.
Another advantage of the rational model is that it urges decision makers to generate all alternatives instead of only a few. During incubation, the individual sets the problem aside and does not think about it for a while. Making strategic, tactical, and operational decisions is an integral part of the planning function in the P-O-L-C (planning-organizing-leading-controlling) model. All of the potential options for purchasing your car will be evaluated against these criteria.
By generating a large number of alternatives that cover a wide range of possibilities, you are likely to make a more effective decision in which you do not need to sacrifice one criterion for the sake of another. Two weeks later, it became clear that the gastrointestinal problems were unrelated to ChargeUp with Lipitrene.
The intuitive decision-making model argues that, in a given situation, experts making decisions scan the environment for cues to recognize patterns.[510] Once a pattern is recognized, they can play a potential course of action through to its outcome based on their prior experience. Then comes illuminationilluminationThe insight moment, when the solution to the problem becomes apparent.
Due to training, experience, and knowledge, these decision makers have an idea of how well a given solution may work. We do not exactly know how many ideas he had over the course of his career, but his ideas are fairly different from one another. If they run through the mental model and find that the solution will not work, they alter the solution and retest it before setting it into action. This is the a€?eurekaa€? moment similar to what happened to the ancient Greek inventor Archimedes, who found a solution to the problem he was working on while he was taking a bath.
After teaching math in Africa with the Peace Corps, Hastings was accepted at Stanford University, where he earned a mastera€™s degree in computer science.
If it still is not deemed a workable solution, it is discarded as an option and a new idea is tested until a workable solution is found. Finally, the verification and applicationverification and applicationThe stage when the decision maker consciously verifies the feasibility of the solution and implements the decision. Soon after starting work at a software company, he invented a successful debugging tool, which led to his founding the computer troubleshooting company Pure Software in 1991. Once a viable course of action is identified, the decision maker puts the solution into motion. After a merger and the subsequent sale of the resulting company in 1997, Hastings founded Netflix, which revolutionized the DVD rental business through online rentals with no late fees. Novices are not able to make effective decisions this way because they do not have enough prior experience to draw upon. An examination of leadership and employee creativity: The relevance of traits and relationships.

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