Learning Objectives

4-1. Discuss the relationship among objectives, problem solving, and decision making and their relationship among the management functions.

Managers are responsible for setting and achieving organizational objectives. When managers do not meet objectives, a problem results. When a problem exists, decisions must be made about what, if any, action must be taken. When managers perform the functions of planning, organizing, leading, and controlling, they make decisions and solve problems.

4-2. Describe when to use rational (maximizing) versus bounded rational (satisficing) decision making and group versus individual decision making.

The more complex and nonprogrammed the decision, the higher the degree of risk and uncertainty, and the more significant the decision outcome, the greater the need to spend time as a maximizer con-ducting research with the aid of the decision-making model to make a rational decision.

The more programmed the decision, the more certainty of the outcomes of the decision, and the less important the decision outcome, the less research and use of the decision-making model needed to make a bounded rational (satisficing) decision. The greater the need to maximize, the greater the need to use group decision making. With a group, it is good to have a mix of maximizers and satisficers to increase the speed and quality of the decision. Simple satisficing decisions can be made by an individual. However, this is a general guide; there may be exceptions to the rule.

4-3. Explain the difference between an objective and “must” and “want” criteria.

An objective is the result you want to achieve when making a decision. “Must” criteria are the requirements that an alternative must meet to be selected. “Want” criteria are desirable but are not necessary for the alternative to be selected. “Want” criteria should also be weighted by their level of importance to achieving the objective.

4-4. State the difference between creativity and innovation and identify five group techniques used to generate creative alternatives.

Creativity is a way of thinking that generates new ideas. Innovation is the implementation of new ideas for products and processes. Five techniques for generating creative alternatives include brainstorming, synectics, nominal grouping, consensus mapping, and the Delphi technique. Decision trees can also be used as a visual aid for generating alternatives.

4-5. Compare quantitative techniques including big data, cost-benefit analysis, and intuition for analyzing and selecting an alternative.

Quantitative techniques (break-even, capital budgeting, linear programming, queuing, and probability theories) including big data (the analysis of large amounts of quantified facts to aid in maximizing decision making) are objective management science approaches using math to select the alternative with the highest value.

Cost-benefit analysis compares the cost of implementing a decision to the benefits received. It is commonly used when some of the cost and/or benefits can’t be quantified. Cost-benefit tends to be used by a group that mixes evidence-based information/ math and subjective judgment.

Intuition is based on experience and subjective rational judgment. It is commonly used by individuals with recurring problems calling for a programmed decision under the condition of certainty.

4-6. Explain the importance of planning, implementing, and controlling decisions.

Decisions are of no value to the company unless there is a plan stating how the objective of solving the problem will be achieved, and a plan that is not implemented is also of no value. The implementation of the plan must also be controlled to measure and monitor the progress of achieving the objective. Based on control, the decision maker must also not give up too soon and lose the benefits or get caught in the escalation of commitment and throw good money after bad.