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SMI SHAS4542 n4_Decision Making _ Organizing 0922.pdf

  1. 1. Prof. Ir. Dr. Sevia Mahdaliza Idrus SHAS 4542 Sem1 Session 2022/23 - Chap 4 Decision Making & Organizing
  2. 2. References: Morse & Babcock Chap4 & 5 Robbins & Coulter Chap2 & 11
  3. 3. Part A
  4. 4. Decision Making for Engineers Decision-making is commonly thought of as the cognitive process one undergoes before choosing a particular course of action. Engineers are trained to approach problems from a relatively more pragmatic and logical perspective. Engineers value efficiency, utility, and minimizing cost over aesthetics and flair. Understanding how the engineering mind internalizes information and reacts accordingly can provide insight on how the human mind makes decisions and how one can make better decisions. Be A Better Decision Maker A key to success in engineering management and in your career is knowing how to be an effective decision maker.
  5. 5. Decision Theory Decision-making is one of the most fundamental yet complex psychological processes performed regularly by human beings. – no exact MODEL & THEORY 2 different ways to understand how decisions are made. 1. Rational perspective - decisions are made to maximize utility. 2. Naturalistic perspective - decisions are made with less practicality but more influence from personal beliefs and prior experiences. Decision a choice among two or more alternatives
  6. 6. All decisions can be sorted into one of four categories (Yates & Tschihart, 2006): 1. Choices: selection of a subset from a larger set of alternatives 2. Acceptances/rejections: the binary decision 3. Evaluations: assigning worth to an option 4. Constructions: attempting to create an ideal solution given available resources Decisions are made under three types of circumstances (Roth, 2007): 1. Risk: the information is unavailable, but probabilistic models can be used because the distributions of random variables are known. 2. Uncertainty: the probability distributions are unavailable, but other obstacles are known (such as radiation affecting transmission from an antenna) 3. Ambiguity: functional form is unknown, and trial-and-error testing may be needed even to determine inputs and outputs Decision Theory
  7. 7. Normative Models Rational Choice Models Cost-benefit Analysis Risk Assessment Models Created to shed light how an individual commits to A decision The individual identifies a set of options, determines the criteria (usually quantitative) for evaluating the options, weighs each option, and selects the option with the highest score Decision Model Assume that individuals are perfectly rational and seek to optimize resources Used by corporations and governments, this type of decision- making is used when weighing business decisions and new policies. Attempts to quantify values associated with each decision Using probability to analyze games of chance. Evaluating expected values while considering the consequences of both false positives and false negatives An ill patient may have the weigh the risk and benefits of the two following treatments: Treatment A has a projected 20% chance of death and 80% chance of 35 years of normal life after the treatment. Treatment B has a 100% chance of survival with a certainty of 18 years of normal life.
  8. 8. 2. Generate all possible solutions. 3. Predict the outcome of each solution 1. define clearly the objectives of solving a specific problem 4. Determine the best solution by balancing the pros and cons along with cost and benefit Typical engineering decision making process Decision-Making Process (DMP)
  9. 9. Decision-Making Process (DMP) 8 steps in the decision-making process. This process is as relevant to personal decisions as it is to corporate decisions.
  10. 10. DMP2: Identify the Decision Criteria ▪ Decision criteria are factors that are important to resolving the problem. ▪ Example: Sarah decides that memory and storage capabilities, display quality, battery life, warranty, and carrying weight are the relevant criteria in her decision. DMP Step 1 : Identify a Problem ▪ Problem: an obstacle that makes it difficult to achieve a desired goal or purpose. ▪ Every decision starts with a problem, a discrepancy between an existing and a desired condition. ▪ Example: Sarah is a sales manager whose reps need new laptops. Decision-Making Process (DMP)
  11. 11. DMP3: Allocate Weights to the Criteria • If the relevant criteria aren’t equally important, the decision maker must weight the items in order to give them the correct priority in the decision. • Example: The weighted criteria for Sarah’s computer purchase are shown below. Criterion Weight Memory and storage 10 Battery life 8 Carrying weight 6 Warranty 4 Display quality 3 Important Decision Criteria Decision-Making Process (DMP)
  12. 12. DMP4: Develop Alternatives • List viable alternatives that could solve the problem. • Example: Sarah identifies eight laptops as possible choices Decision-Making Process (DMP) Laptop Memory and Storage Battery Life Carrying Weight Warranty Display Quality Acer Aspire E 10 3 10 8 5 Apple MacBook Pro 8 5 7 10 10 Dell XPS 13 8 7 7 8 7 Lenovo ThinkPad 7 8 7 8 7 Lenovo Yoga 8 3 6 10 8 Microsoft Surface Book 10 7 8 6 7 Razer Blade Stealth 4 10 4 8 10 Possible Alternatives
  13. 13. DMP5: Analyze Alternatives - Identify the alternatives to analyze them using the criteria established DMP2. DMP6: Select an Alternative - Choose the alternative that generates the highest total in DMP5. Laptop Memory and Storage Battery Life Carrying Weight Warranty Display Quality Total Acer Aspire E 100 24 60 32 15 231 Apple MacBook Pro 80 40 42 40 30 232 Dell XPS 13 80 56 42 32 21 231 Lenovo ThinkPad 70 64 42 32 21 229 Lenovo Yoga 80 24 36 40 24 204 Microsoft Surface Book 100 56 48 24 21 249 Razer Blade Stealth 40 80 24 32 30 206 Decision-Making Process (DMP)
  14. 14. DMP8: Evaluate Decision Effectiveness ▪ Evaluate the result or outcome of the decision to see if the problem was resolved. ▪ If it wasn’t resolved, what went wrong? DMP Step 1 : Implement the Alternative ▪ Put the chosen alternative into action. ▪ Convey the decision to those affected and get their commitment to it. Decision-Making Process (DMP)
  15. 15. Decisions Managers - options
  16. 16. Rationality in Making Decisions • Assumptions of rationality: • Rational decision maker is logical and objective • Problem faced is clear and unambiguous • Decision maker would have clear, specific goal and be aware of all alternatives and consequences • The alternative that maximizes achieving this goal will be selected • Decisions are made in the best interest of the organization Rational Decision Making: choices that are logical and consistent and maximize value
  17. 17. Intuition in Making Decision Intuitive Decision: making decisions on the basis of experience, feelings, and accumulated judgment
  18. 18. Types of Decisions Structured problems • straightforward, familiar, and easily defined problems Programmed decisions • repetitive decisions that can be handled by a routine approach • Procedure: a series of sequential steps used to respond to a well- structured problem • Rule: an explicit statement that tells managers what can or cannot be done • Policy: a guideline for making decisions Unstructured Problems and Nonprogrammed Decisions • Unstructured problems: problems that are new or unusual and for which information is ambiguous or incomplete • Nonprogrammed decisions: unique and nonrecurring and involve custom-made solutions
  19. 19. Programmed vs. Nonprogrammed Decisions Types of Decisions Characteristic Programmed Decisions Nonprogrammed Decisions Type of problem Structured Unstructured Managerial level Lower levels Upper levels Frequency Repetitive, routine New, unusual Information Readily available Ambiguous or incomplete Goals Clear, specific Vague Time frame for solution Short Relatively long Solution relies on… Procedures, rules, policies Judgment and creativity
  20. 20. 2 4 different individual decision-making styles based on 2 dimensions: 1. An individual’s way of thinking 2. An individual’s tolerance for ambiguity Directive style: low tolerance for ambiguity and seek rationality Analytic style: seek rationality but have a higher tolerance for ambiguity Behavioral style: intuitive decision makers with a low tolerance for ambiguity Conceptual style: intuitive decision makers with a high tolerance for ambiguity Decision-Making Styles
  21. 21. Decision-Style Model Decision-style model from A. J. Rowe and J. D. Boulgarides, Managerial Decision Making (Upper Saddler River, NJ: Prentice Hall, 1992), p. 29.
  22. 22. Common Decision-Making Biases Identifies 12 common decision errors of managers and biases they may have.
  23. 23. Cutting-Edge Decision Making Two technology driven cutting-edge aides to decision making are : 1. Big Data • The vast amount of quantifiable data that can be analyzed by highly sophisticated data processing. • Big data has opened the door to widespread use of artificial intelligence (AI) • Can be a powerful tool in decision making, but collecting and analyzing data for data’s sake is wasted effort 2. Artificial Intelligence (AI) • uses computing power to solve complex problems • AI systems have the ability to learn and have facilitated the use of new tools such as: • Machine learning • Deep learning • Analytics
  24. 24. 1. Machine Learning: A method of data analysis that automates analytical model building. 2. Deep Learning: A subset of machine learning that use algorithms to create a hierarchical level of artificial neural networks that simulate the function of the human brain. 3. Analytics: The use of mathematics, statistics, predictive modeling, and machine learning to find meaningful patterns in a data set. Cutting-Edge Decision Making
  25. 25. Part B: Organizing
  26. 26. Elements of Organizational Design • Organizing: management function that involves arranging and structuring work to accomplish the organization’s goals • Organizational structure: the formal arrangement of jobs within an organization • Organizational chart: the visual representation of an organization’s structure • Organizational design: creating or changing an organization’s structure
  27. 27. Purposes of Organizing 1. Divides work to be done into specific jobs and departments. 2. Assigns tasks and responsibilities associated with individual jobs. 3. Coordinates diverse organizational tasks. 4. Clusters jobs into units. 5. Establishes relationships among individuals, groups, and departments. Establishes formal lines of authority. 6. Allocates and deploys organizational resources.
  28. 28. Work Specialization Work specialization: dividing work activities into separate job tasks the economies and diseconomies of work specialization
  29. 29. Departmentalization Departmentalization: the basis by which jobs are grouped together
  30. 30. Departmentalization Departmentalization: the basis by which jobs are grouped together
  31. 31. Today’s View on Departmentalization • Two trends are: • Cross-functional teams: a work team composed of individuals from various functional specialties. This has become more popular as tasks become more complex. • Customer departmentalization: emphasizes monitoring and responding to customers’ needs
  32. 32. Chain of Command & Authority • Chain of command: the line of authority extending from upper organizational levels to the lowest levels, which clarifies who reports to whom • Authority: the line of authority extending from upper organizational levels to the lowest levels, which clarifies who reports to whom • Line authority: authority that entitles a manager to direct the work of an employee • Staff authority: positions with some authority that have been created to support, assist, and advise those holding line authority
  33. 33. Responsibility & Span of Control • Responsibility: the obligation or expectation to perform any assigned duties • Unity of command: the management principle that each person should report to only one manager • Span of control: the number of employees a manager can efficiently and effectively manage if one organization has a span of four and the other a span of eight, the organization with the wider span will have two fewer levels and approximately 800 fewer
  34. 34. Centralization and Decentralization • Centralization: the degree to which decision making is concentrated at upper levels of the organization • Decentralization: the degree to which lower-level employees provide input or actually make decisions More Centralization More Decentralization Environment is stable. Environment is complex, uncertain. Lower-level managers are not as capable or experienced at making decisions as upper-level managers. Lower-level managers are capable and experienced at making decisions. Lower-level managers do not want a say in decisions. Lower-level managers want a voice in decisions. Decisions are relatively minor. Decisions are significant. Organization is facing a crisis or the risk of company failure. Corporate culture is open to allowing managers a say in what happens. Company is large. Company is geographically dispersed. Effective implementation of company strategies depends on managers retaining say over what happens. Effective implementation of company strategies depends on managers having involvement and flexibility to make decisions.
  35. 35. Employee Empowerment • Employee empowerment: giving employees more authority (power) to make decisions. • Formalization: how standardized an organization’s jobs are and the extent to which employee behavior is guided by rules and procedures.
  36. 36. Mechanistic and Organic Structures • Mechanistic organization: an organizational design that’s rigid and tightly controlled • Organic organization: an organizational design that’s highly adaptive and flexible
  37. 37. Mechanistic vs Organic Organizations
  38. 38. Strategy and Structure • An organization’s structure should facilitate goal achievement. • Goals are an important part of the organization’s strategies, it’s only logical that strategy and structure are closely linked. • There’s considerable evidence that an organization’s size affects its structure, but once an organization grows past a certain size, size has less influence on structure
  39. 39. Technology and Structure • Unit production: the production of items in units or small batches • Mass production: the production of items in large batches • Process production: the production of items in continuous processes blank Unit Production Mass Production Process Production Structural characteristics: Low vertical differentiation Moderate vertical differentiation High vertical differentiation blank Low horizontal differentiation High horizontal differentiation Low horizontal differentiation blank Low formalization High formalization Low formalization Most effective structure: Organic Mechanistic Organic Woodward’s Findings on Technology and Structure
  40. 40. Traditional Organizational Design Options • Simple structure: an organizational design with little departmentalization, wide spans of control, centralized authority, and little formalization • Functional structure: an organizational design that groups together similar or related occupational specialties • Divisional structure: an organizational structure made up of separate, semiautonomous units or divisions
  41. 41. Matrix and Project Structures • Matrix structure: an organizational structure that assigns specialists from different functional departments to work on one or more projects • Project structure: an organizational structure in which employees continuously work on projects
  42. 42. The Virtual Organization • Virtual organization: an organization that consists of a small core of full-time employees and outside specialists temporarily hired as needed to work on projects • Sometimes called “Network” or “Modular” organization • Telecommuting: a work arrangement in which employees work at home and are linked to the workplace by computer
  43. 43. Compressed Workweeks, Flextime & Job Sharing • Compressed workweek: a workweek where employees work longer hours per day but fewer days per week • Flextime (or flexible work hours): a scheduling system in which employees are required to work a specific number of hours a week but are free to vary those hours within certain limits • Job sharing: the practice of having two or more people split a full-time job • Contingent workers: temporary, freelance, or contract workers whose employment is contingent on demand for their services
  44. 44. 45 sevia@utm.my