1 Differentiate between programmed and nonprogrammed decisions, and explain why nonprogrammed decision making is a complex, uncertain process.

1. The Nature of Managerial Decision Making
   1. Programmed and nonprogrammed decision making
      1. Programmed decision making –routine decisions that have been made many times in the past.
      2. Nonprogrammed decision making – nonroutine decisions that are made in novel situations.
         1. Intuition – feelings and hunches that come to mind
         2. Reasoned judgment – a decision that results from careful information gathering and evaluation of alternative courses of action.
   2. The classical model – specifies how decisions should be made
   3. The administrative model – March and Simon explained why decision making is always a risky process.
      1. Bounded rationality – decisions are limited by people's ability to interpret, process, and act on a large amount of information.
      2. Incomplete information – the full range of decision making alternatives is not knowable.
      3. Risk and uncertainty – risk occurs when managers can assign probabilities to possible outcomes of decisions, while uncertainty does not allow assigning probabilities to possible outcomes.
      4. Ambiguous information – much of the meaning of information is unclear.
      5. Time constraints and information costs – managers do not have either enough time or money to evaluate all possible outcomes of decisions.
      6. Satisficing – this type decision searches for an acceptable decision instead of the optimum decision.

2 Describe the six steps that managers should take to make the best decisions.

2. Steps in the Decision-Making Process
   1. Recognize the need for a decision – do you need to make a decision here?
   2. Create alternatives – possible action to take.
   3. Evaluate alternatives – in terms of their advantages and disadvantages.
      1. Legality – is this action legal?
      2. Ethicalness – Is this action ethical?
      3. Economic feasibility – what does a cost-benefit analysis say?
      4. Practicality – are we able to do this action successfully?
   4. Choose among alternatives – decide which action to take.
   5. Implement the chosen alternative – carry out the steps needed to implement the decision.
   6. Learn from feedback – learn from past successes and past failures.

3 Explain how cognitive biases can affect decision making and lead managers to make poor decisions.

3. Cognitive Biases and Decision Making
   1. Prior hypothesis bias – making a decision based on past beliefs even when new evidence shows that those beliefs are incorrect.
   2. Representativeness bias – generalizing from a small sample.
   3. Illusion of control – overestimating one's ability to control events.
   4. Escalating commitment – refers to continuing to commit resources to a project even when receiving feedback that the project is failing.
   5. Be aware of your biases – managers need to be aware of their own biases and decision-making styles.

4 Identify the advantages and disadvantages of group decision making, and describe techniques that can improve it.

4. Group Decision making
   1. The perils of groupthink – groups in which members try to agree with each other instead of accurately assessing information.
   2. Devil's advocacy and dialectical inquiry
      1. Devil's advocacy – one member of the group challenges the group's thinking
      2. Dialectical inquiry – two groups select an alternative solution, and the other group critiques their recommendation.
   3. Diversity among decision makers – having different ethnic, racial, and functional backgrounds in a group can broaden the group's thinking

5 Explain the role that organizational learning and creativity play in helping managers to improve their decisions.

5. Organizational Learning and Creativity
   A learning organization maximizes the ability of workers to think and to act creatively.
   1. Creating a learning organization -- Senge's five principles:
      1. Top managers must allow personal mastery in all workers.
      2. Organizations must encourage complex mental models that challenge better ways of thinking and acting.
      3. Managers must promote group creativity.
      4. Managers must build a shared vision that frames problems.
      5. Managers must encourage systems thinking.
   2. Promoting individual creativity – managers must take risks and experiment and learn from their mistakes.
   3. Promoting group creativity
      1. Brainstorming – managers meet to generate a wide variety of alternative solutions to a problem.
      2. Nominal group technique – group members write down ideas and solutions, read them to the whole group, and discuss and then rank the alternatives.
      3. Delphi technique – Group members do not meet but respond in writing to questions from the group leader.
   4. Promoting creativity at the global level – the Delphi technique is useful here when managers live in different countries.