When a manager made a decision and he is uncertain about the outcome is decision is likely to be?

Everyday a manager has to make hundreds of decisions in the organization. Managers do not function in a theoretical world but they function within the reality that many thongs are not known. There are three conditions that managers may face as they make decisions. They are (1) Certainty, (2) Risk, and (3) Uncertainty.

(1) Certainty

A state of certainty exists only when the managers knows the available alternatives as well as the conditions and consequences of those actions. There is little ambiguity and relatively low possibility of making a bad decision. It assumes that manager has all the necessary information about the situation. Hence, decisions under certainty means a perfectly accurate decision will be made time after time. Of course, decision making under certainty is rare.

(2) Risk

A state of risk exists when the manager is aware of all the alternatives, but is unaware of their consequences. The decision under risk usually involves clear and precise goals and good information, but future outcomes of the alternatives are just not known to a degree of certainty. A risk situation requires the use of probability estimates. The ability to estimate may be due to experience, incomplete but reliable information, or intelligence. Statistical analysis can be applied to the calculation or probabilities for success or failure.

(3) Uncertainty

In today's complex environment most significant decisions are made under a state of uncertainty where there is no awareness of all the alternatives and also the outcomes,even for the known alternatives. To make effective decisions, managers must require as much relevant information as possible. Such decisions require creativity and the willingness to take a chance in the face of such uncertainties. In such situations, managers do not even have enough information to calculate probabilities and degrees of risk. So, statistical analysis is of no use. Hence, managers need to make certain assumptions about the situation in order to provide a reasonable framework for decision making. Intuition, judgment, and experience always play major roles in the decision making process under conditions of uncertainty.

Hence, In conclusion, we can say that greater the amount of reliable information, the more likely the manager will make a good decision. Hence, manager should make sure that the right information is available at the right time.

Chapter 6 Decision Making: The Essence of the Manager’s Job

81. When lower-level managers deal with well-structured problems and they rely on procedures and rules to solve the problems, this refers to a relationship between types of problems and types of decisions known as ________________.
a. preprogramming
b. focused decision making
c. integration
d. separation
(c; moderate; p. 143)

82. Which of the following is likely to make the most programmed decisions?
a. the CEO of PepsiCo.
b. the vice president of General Motors Cadillac Division.
c. the head of the Minute Maid Division at Coca-Cola.
d. the manager of the local McDonald’s.
(d; easy; p. 142)

83. Which of the following is an accurate statement concerning the impact of programmed decisions on organizations?
a. They maximize the need for managers to exercise discretion.
b. They decrease the need for high-cost managerial talent.
c. They increase the amount of judgment needed by managers.
d. They decrease organizational efficiency.
(b; moderate; p. 142)

84. ______________ is a situation in which a manager can make accurate decisions because the outcome of every alternative is known.
a. Certainty
b. Risk
c. Uncertainty
d. Maximax
e. Maximin
(a; easy; p. 144)

85. If an individual knows the price of three similar cars at different dealerships, he or she is operating under what type of decision-making condition?
a. risk
b. uncertainty
c. certainty
d. factual
(c; easy; p. 144)

86. Nonprogrammed decisions are typically made under a condition of ________________.
a. certainty
b. low levels of risk
c. uncertainty
d. reliability
(c; moderate; p. 145)

87. Organizational efficiency is improved by the use of _________________.
a. programmed decisions
b. nonprogrammed decisions
c. less planning
d. lower expectations and lower demands by top manager
(a; moderate; p. 142)

88. A retail clothing store manager who estimates how much to order for the current spring season based on last spring’s outcomes is operating under what kind of decision-making condition?
a. seasonal
b. risk
c. uncertainty
d. certainty
(b; difficult; p. 142)

89. ______________ is a situation in which a decision maker has neither certainty nor reasonable probability estimates available.
a. Certainty
b. Risk
c. Uncertainty
d. Maximax
(c; easy; p. 145)

90. A person at a horse racetrack who bets all of his/her money on the odds-based long shot to “win” (rather than “place” or “show”) is making what kind of choice?
a. maximax
b. maximin
c. minimax
d. minimin
(a; moderate; p. 146)

91. Which of the following best describes “maximizing the minimum possible payoff”?
a. maximax
b. maximin
c. minimax
d. minimin
(b; moderate; p. 146)

92. An individual making a “maximin” type of choice has what type of psychological orientation concerning uncertain decision making?
a. optimist
b. realist
c. pessimist
d. satisficer
(c; moderate; p. 146)

93. Which of the following would best describe the psychological orientation of an individual making a “maximax” type of choice?
a. optimist
b. realist
c. pessimist
d. satisficer
(a; moderate; p. 146)

94. Optimistic managers could be expected to utilize their maximax orientation when they _______________.
a. maximize the maximum payoff
b. maximize the minimum payoff
c. minimize the maximum regret
d. minimize the minimum regret
(a; easy; p. 146)

95. According to the textbook, a manager who desires to minimize his or her maximim “regret” will opt for a ______________ choice.
a. maximax
b. maximin
c. minimax
d. minimin
(c; moderate; p. 146)

96. All of the following are mentioned in the textbook as decision-making styles except _________________>
a. directive
b. egotistical
c. analytic
d. conceptual
(b; moderate; p. 147)

THE DECISION-MAKING PROCESS

Decisions, Decisions (Scenario)
Sondra needed help. Her insurance company’s rapid growth was necessitating making some changes, but what changes? Should they add to the existing information system? Buy a new system? She was given the responsibility of analyzing the company’s present information system and decide what the company should do that would give them plenty of room. She was confused and needed help in making the correct decision.

97. According to the decision-making process, the first step Sondra should take would be to _____________.
a. analyze alternative solutions
b. identify decision criteria
c. evaluate her decision’s effectiveness
d. identify the problem
(d; moderate; p. 134)

98. According to the decision-making process, the second step Sondra should take would be to ____________.
a. analyze alternative solutions
b. identify decision criteria
c. evaluate her decision’s effectiveness
d. allocate weights to the criteria
(b; moderate; p. 136)

99. The very last step Sondra should take, according to the decision-making process, would be to __________.
a. analyze alternative solutions
b. select alternatives
c. implement the alternative
d. evaluate the decision’s effectiveness
(d; easy; p. 138)

100. When Sondra is conveying her decision to those affected and getting their commitment to it, she is performing which step in the decision-making process?
a. analyzing alternative solutions
b. selecting alternatives
c. implementing the alternative
d. identifying the problem
(c; moderate; p. 138)

101. Allocating weights to the criteria is the step in the decision-making process that occurs between identifying the decision criteria and ______________.
a. developing the alternatives
b. selecting alternatives
c. implementing the alternative
d. identifying the problem
(a; difficult; p. 138)

Colleen is a student, and her older brother has loaned her an old car. The car is in need of several repairs before she will feel comfortable driving it.
102. Colleen needs a vehicle, but she has to decide if the vehicle is worth repairing. She is facing a(n) _____________, a discrepancy between an existing and a desired state of affairs.
a. alternative
b. weighted problem set
c. problem
d. certainty avoidance situation
(c; moderate; p. 134)

103. In talking with an automotive repair person, Colleen needs to prioritize the repairs. Her first concern is safety of the vehicle. This step in the decision-making process is called __________________.
a. weighting the decision criteria
b. analysis of alternatives
c. identification of decision criteria
d. selection of an alternative
(c; moderate; p. 136)

104. Colleen decides to have all of the problems fixed on the car. She assumes that the repair person has found all the problems and that there will be no problem correcting the imperfections within a specified budget. This is an example of a __________ decision.
a. parochial
b. irrational
c. ethical
d. rational
(d; challenging; p. 139)

105. Colleen’s brother has a different view of the repairs. He assumes that the repair person is using the best information available, but there may be other unexpected repairs that might surface and that a higher budget might be more reasonable. He is using ______________.
a. rational decision making
b. risk avoidance
c. bounded rationality
d. Stage 4 decision making
(c; challenging; p. 140)

106. Colleen’s brother feels the car is worth repairing because he has owned several cars made by the same manufacturer as this car, and he has driven this car for several years. He is using _________ to decide the car has value despite of its need of repair.
a. intuitive decision making
b. selective coordination of thought processes
c. sunk costs
d. return on investment
(a; challenging; p. 141)

THE MANAGER AS A DECISION MAKER

The First Job (Scenario)
Upon graduation, you search for a job with the university’s job placement center. Although you have studied and prepared to work in an advertising agency, the first job that you are offered is a supervisor in a manufacturing company working the afternoon shift from 3:00 P.M. until 11:00 P.M.

107. Although the job in the manufacturing firm was good enough, you acted in a __________ manner by accepting a job.
a. self-righteous
b. boundedly rational
c. satisfactory
d. liberal
(b; moderate; p. 140)

108. If you had made a larger search using the Internet and other employment search processes, you might have been able to find more employment opportunities. This would have been a more _________ decision-making process.
a. nonprogrammable
b. uncertain
c. risky
d. perfectly rational
(d; moderate; p. 139)

109. Under bounded rationality, you would be expected to search for a job by ________________.
a. looking at all the opportunities that can be analyzed in the time available
b. looking at all the opportunities available
c. looking “outside the box” in your search
d. analyzing all the opportunities until you find the perfect job

110. If you use a shortened process of searching for a job, it is likely you ___________ rather than maximized in your decision process.
a. minimized
b. rationalized
c. satisficed
d. agreed
(c; challenging; p. 140)

111. During your job search, you depend on __________ decision making by making your decision on accumulated judgment and experience.
a. experiential
b. legal
c. intuitive
d. formidable

THE MANAGER AS DECISION MAKER

Is the Picture Clear? (Scenario)
Sharon was the regional manager of a large cable television company. She faced many problems and decisions daily, such as how to price each market, who to hire, what kind of technology she should purchase, and how she should handle increasing customer complaints. She needed some help sorting these issues out.
112. Unfortunately, Sharon also faces issues containing information that is ambiguous or incomplete, such as what kind of technology to purchase. These are known as ______________ problems.
a. poorly structured
b. variable
c. random
d. hit-and-miss
(a; moderate; p. 142)

113. When a customer calls and requests a refund for a partial month’s usage of cable, the fact that such situations are routine and most likely have a standard response would make the response a ______________ decision.
a. standard
b. routine
c. policy
d. programmed
(d; moderate; p. 142)

114. Sometimes Sharon follows a ______________, a series of interrelated sequential steps for responding to a structured problem.
a. rule
b. policy
c. procedure
d. suggestion

115. Sometimes Sharon instructs her local managers to follow ______________ when confronted with problem situations These establish parameters for the manager making the decision rather than specifically stating what should or should not be done.
a. rules
b. procedures
c. policies
d. orders
(c; moderate; p. 142)

Decision-Making Conditions (Scenario)
Sandy Jo is the manager for TrucksRUs, a medium-sized hauling service located in the Southeast. She is responsible for scheduling trucks, initiating new routes, and staffing both existing and new routes. She is currently struggling with existing information about the profitability of existing and future truck routes.
116. Joe, Sandy Jo’s best driver, tells her that he believes he can estimate that there is a 75 percent probability that they can get the business of Pork Brothers, Inc. if they initiate a truck route through rural North Carolina. Joe is operating under a condition of ______________.
a. certainty
b. risk
c. uncertainty
d. maximax

117. Sandy Jo can make accurate decisions if she is willing to pay $5,000 for research about the profitability of various truck routes. If she pays for the research, she believes that she is operating under a condition of ____________.
a. certainty
b. risk
c. uncertainty
d. maximax
(a; difficult; p. 144)

118. Sandy Jo knows that she is operating in an uncertain environment. She is basically an optimist, and we would, therefore, expect her to follow a ______________ strategy.
a. certainty
b. risk
c. uncertainty
d. maximax
(d; moderate; p. 146)

119. Sandy Jo knows that she is operating in an uncertain environment. She is basically a pessimist, and we would, therefore, expect her to follow a ______________ strategy.
a. certainty
b. risk
c. minimax
d. maximin
(d; moderate; p. 146)

120. Sandy Jo wishes to minimize her regret and will probably opt for a ______________ strategy.
a. certainty
b. risk
c. minimax
d. maximax
(c; moderate; p. 146)

Managing Your Career (Scenario)
Michelle has a new job and is learning to perform the tasks assigned to her. Different situations demand different decision-making processes.
121. Michelle finds a situation that instructs her in specific, interrelated, sequential steps to respond to a problem. This is referred to as a _____________.
a. rule
b. policy
c. broad guideline
d. procedure
(d; challenging.; p. 142)

122. Michelle finds a company directive that specifically restricts her from taking certain actions. This is a _____________.
a. rule
b. policy
c. broad guideline
d. procedure
(a; moderate; p. 142)

123. As she learns the general guidelines of the job, Michelle is given more decision-making authority. The guidelines establish parameters for decision making and are referred as a _____________.
a. rule
b. policy
c. broad guideline
d. procedure
(b; challenging; p. 142)

124. Michelle eventually finds a problem that has no cut-and-dry solution. The problem is unique and will never occur again. This problem is referred to as _____________.
a. flexible
b. programmed
c. adaptable
d. nonprogrammed
(d; moderate; p. 143)

Essay Questions
THE DECISION-MAKING PROCESS
125. In a short essay, list and discuss the eight steps in the decision-making process.
Answer
a. Step 1: Identifying a problem—the decision-making process begins with the existence of a problem or a discrepancy between an existing and a desired state of affairs. However, a discrepancy without pressure to take action becomes a problem that can be postponed.
b. Step 2: Identify decision criteria—once the manager has identified a problem that needs attention, the decision criteria important to resolving the problem must be identified. That is, managers must determine what’s relevant in making a decision.
c. Step 3: Allocating weights to the criteria—at this step, the decision maker must weigh the items in order to give them the correct priority in the decision. A simple approach is to give the most important criterion a weight of 10 and then assign weights to the rest against that standard.
d. Step 4: Developing alternatives—the fourth step requires the decision maker to list the viable alternatives that could resolve the problem. No attempt is made in this step to evaluate the alternative, only to list them.
e. Step 5: Analyzing alternatives—once the alternatives have been identified, the decision maker must critically analyze each one. From this comparison, the strengths and weaknesses of each alternative become evident.
f. Step 6: Selecting an alternative—the sixth step is the important act of choosing the best alternative from among those considered. All the pertinent criteria in the decision have now been determined and weighted, and the alternatives have been identified and analyzed.
g. Step 7: Implementing the alternative—implementation involves conveying the decision to those affected by it and getting their commitment to it. If the people who must carry out a decision participate in the process, they’re more likely to enthusiastically support the outcome than if they are just told what to do.
h. Step 8: Evaluating decision effectiveness—the last step in the decision-making process involves appraising the outcome of the decision to see if the problem has been resolved. Did the alternative chosen and implemented accomplish the desired result? If not, the manager may consider returning to a previous step or may even consider starting the whole decision process over.
(difficult; p. 134)

THE MANAGER AS DECISION MAKER
126. In a short essay, discuss the assumptions of rationality and the validity of those assumptions.
Answer
A decision maker who was perfectly rational would be fully objective and logical. He or she would carefully define a problem and would have a clear and specific goal. Moreover, making decisions using rationality would consistently lead toward selecting the alternative that maximizes the likelihood of achieving that goal. The assumptions of rationality apply to any decision. Rational managerial decision making assumes that decisions are made in the best economic interests of the organization That is, the decision maker is assumed to be maximizing the organization’s interests, not his or her own interests. Managerial decision making can follow rational assumptions if the following conditions are met: The manager is faced with a simple problem in which the goals are clear and the alternatives limited, the time pressures are minimal, the cost of seeking out and evaluating alternatives is low, the organizational culture supports innovation and risk taking, and outcomes are relatively concrete and measurable However, most decisions that managers face in the real world don’t meet all those tests.
(moderate; p. 139)

127. In a short essay, discuss bounded rationality and satisficing.
Answer
Despite the limits to perfect rationality, managers are expected to follow a rational process when making decisions. However, certain aspects of the decision-making process are not realistic as managers make decisions. Instead, managers tend to operate under assumptions of bounded rationality; that is, they behave rationally within the parameters of a simplified decision-making process that is limited by an individual’s ability to process information. Managers satisfice, rather than maximize, because they can’t possibly analyze all information on all alternatives. That is, they accept solutions that are “good enough.” They are being rational within the limits of their information-processing ability.
(easy; p. 140)

128. In a short essay, discuss the difference between well-structured and poorly-structured problems. Include specific examples of each type of problem to support your answer. Next, discuss the type of decisions that would be used to address each of these problems.
Answer
a. Well-structured problems—the goal of the decision maker is clear, the problem is familiar, and information about the problem is easily defined and complete. Examples of these types of problems might include a customer wanting to return a purchase to a retail store, a supplier being late with an important delivery, a news team responding to an unexpected and fast-breaking event, or a college’s handling of a student wanting to drop a class. Such situations are called well-structured problems because they are straightforward, familiar, and easily defined problems. In handling these problem situations, the manager uses a programmed decision. Decisions are programmed to the extent that they are repetitive and routine and to the extent that a definite approach has been worked out for handling them. Since the problem is well structured, the manager doesn’t have to go to the trouble and expense of going through an involved decision progress. Programmed decision making is relatively simple and tends to rely heavily on previous solutions.
b. Poorly-structured problems—these problems are new or unusual, and information for them is ambiguous or incomplete. For example, the selection of an architect to design a new corporate manufacturing facility in Bangkok is an example of a poorly-structured problem. When problems are poorly structured, managers must rely on nonprogrammed decision making in order to develop unique solutions. Nonprogrammed decisions are unique and nonrecurring. When a manager confronts a poorly-structured problem or one that is unique, there is no cut-and-dry solution. It requires a custom-made response through nonprogrammed decision making.
(difficult; p. 142)

129. In a short essay, discuss the differences between a procedure, a rule, and a policy. Include specific examples of each to support your answer.
Answer
a. A procedure is a series of interrelated sequential steps that a manager can use for responding to a structured problem. The only real difficulty is in identifying the problem. Once the problem is clear, so is the procedure. For instance, a purchasing manager receives a request from the sales department for 15 PalmPilots for use by the company’s customer service representatives. The purchasing manager knows that there is a definite procedure for handling this decision. The decision-making process in this case is merely executing a simple series of sequential steps.
b. A rule is an explicit statement that tells a manager what he or she can or cannot do. Managers frequently use rules when they confront a well-structured problem because they are simple to follow and ensure consistency. For example, rules about lateness and absenteeism permit supervisors to make disciplinary decisions rapidly and with a relatively high degree of fairness.
c. A policy provides guidelines to channel a manager’s thinking in a specific direction. In contrast to a rule, a policy establishes parameters for the decision maker rather than specifically stating what should or should not be done. Policies typically contain an ambiguous term that leaves interpretation up to the decision maker. For instance, each of the following is a policy statement: “The customer always comes first and should always be satisfied,” “We promote from within, whenever possible,” and “Employee wages shall be competitive within community standards.”
(moderate; p. 142)

See Also

When a manager made a decision and he is uncertain about the outcome is decision is likely to be Mcq?

How does a manager make a decision under condition of uncertainty?

What is uncertainty decision making?

What should a manager consider when deciding to make a decision?