This OpenStax ancillary resource is © Rice University under a CC BY 4.0 International license; it may be reproduced or modified but
must be attributed to OpenStax, Rice University and any changes must be noted.
CHAPTER SIX
Perception and Managerial Decision Making
CHAPTER SUMMARY
This chapter discusses effective managerial decision making; including its characteristics,
types of systems, barriers, and use of groups.
The chapter explains that managers are constantly making decisions, and those
decisions often have significant impacts and implications for both the organization and
its stakeholders. Managerial decision-making is often characterized by complexity,
incomplete information, and time constraints; and there is rarely one right answer. The
brain processes information to make decisions using one of two systems: either the
logical, rational (reflective) system or the quick, reactive system. Programmed decisions
are those that are based on criteria that are well understood, while nonprogrammed
decisions are novel and lack clear guidelines for reaching a solution.
In addition, numerous barriers to effective decision-making are identified. Managers are
limited in their ability to collect comprehensive information, and they are limited in their
ability to cognitively process all the information that is available.
The chapter explains that managers tend to get better at decision-making with time and
experience. Heuristics and satisficing can also be useful techniques for making
programmed decisions quickly. For nonprogrammed decisions, a manager can improve
the quality of decision-making by utilizing the steps in the decision-making process,
involving others, and being creative in generating alternatives. They should also engage
in evidence-based decision-making: doing research and collecting data and information
on which to base the decision. Effective managers also carefully consider long-term
outcomes and ethical implications prior to making a decision.
Further, groups can contribute more knowledge and a diversity of perspectives than
individuals. Groups tend to generate more options, which can lead to better solutions.
However, groups sometimes fail to generate added value in the decision-making process
as a result of groupthink, conflict, or suppression of dissent.
Finally, managers can improve the quality of group decision-making in a number of
ways. The manager should ensure that group members are diverse. The manager may
also want to assign a devil’s advocate to discourage groupthink. Managers also should
not allow personality conflicts to derail group processes.
, Organizational Behavior
LEARNING OUTCOMES
1. What are the basic characteristics of managerial decision-making?
Managers are constantly making decisions, and those decisions often have
significant impacts and implications for both the organization and its
stakeholders. Managerial decision-making is often characterized by complexity,
incomplete information, and time constraints, and there is rarely one right
answer. Sometimes there are multiple good options (or multiple bad options),
and the manager must try to decide which will generate the most positive
outcomes (or the fewest negative outcomes). Managers must weigh the possible
consequences of each decision and recognize that there are often multiple
stakeholders with conflicting needs and preferences so that it often will be
impossible to satisfy everyone. Finally, managerial decision-making can
sometimes have ethical implications, and these should be contemplated before
reaching a final decision.
2. What are the two systems of decision-making in the brain?
The brain processes information to make decisions using one of two systems:
either the logical, rational (reflective) system or the quick, reactive system. The
reflective system is better for significant and important decisions; these generally
should not be rushed. However, the reactive system can be lifesaving when time
is of the essence, and it can be much more efficient when based on developed
experience and expertise.
3. What is the difference between programmed and nonprogrammed decisions?
Programmed decisions are those that are based on criteria that are well
understood, while nonprogrammed decisions are novel and lack clear guidelines
for reaching a solution. Managers can establish rules and guidelines for
programmed decisions based on known fact, which enables them to reach
decisions quickly. Nonprogrammed decisions require more time to resolve; the
decision maker may need to conduct research, collect additional information,
gather opinions and ideas from other people, and so on.
4. What barriers exist that make effective decision-making difficult?
There are numerous barriers to effective decision-making. Managers are limited
in their ability to collect comprehensive information, and they are limited in their
ability to cognitively process all the information that is available. Managers
cannot always know all the possible outcomes of all the possible options, and
they often face time constraints that limit their ability to collect all the
May 12, 2019 2
must be attributed to OpenStax, Rice University and any changes must be noted.
CHAPTER SIX
Perception and Managerial Decision Making
CHAPTER SUMMARY
This chapter discusses effective managerial decision making; including its characteristics,
types of systems, barriers, and use of groups.
The chapter explains that managers are constantly making decisions, and those
decisions often have significant impacts and implications for both the organization and
its stakeholders. Managerial decision-making is often characterized by complexity,
incomplete information, and time constraints; and there is rarely one right answer. The
brain processes information to make decisions using one of two systems: either the
logical, rational (reflective) system or the quick, reactive system. Programmed decisions
are those that are based on criteria that are well understood, while nonprogrammed
decisions are novel and lack clear guidelines for reaching a solution.
In addition, numerous barriers to effective decision-making are identified. Managers are
limited in their ability to collect comprehensive information, and they are limited in their
ability to cognitively process all the information that is available.
The chapter explains that managers tend to get better at decision-making with time and
experience. Heuristics and satisficing can also be useful techniques for making
programmed decisions quickly. For nonprogrammed decisions, a manager can improve
the quality of decision-making by utilizing the steps in the decision-making process,
involving others, and being creative in generating alternatives. They should also engage
in evidence-based decision-making: doing research and collecting data and information
on which to base the decision. Effective managers also carefully consider long-term
outcomes and ethical implications prior to making a decision.
Further, groups can contribute more knowledge and a diversity of perspectives than
individuals. Groups tend to generate more options, which can lead to better solutions.
However, groups sometimes fail to generate added value in the decision-making process
as a result of groupthink, conflict, or suppression of dissent.
Finally, managers can improve the quality of group decision-making in a number of
ways. The manager should ensure that group members are diverse. The manager may
also want to assign a devil’s advocate to discourage groupthink. Managers also should
not allow personality conflicts to derail group processes.
, Organizational Behavior
LEARNING OUTCOMES
1. What are the basic characteristics of managerial decision-making?
Managers are constantly making decisions, and those decisions often have
significant impacts and implications for both the organization and its
stakeholders. Managerial decision-making is often characterized by complexity,
incomplete information, and time constraints, and there is rarely one right
answer. Sometimes there are multiple good options (or multiple bad options),
and the manager must try to decide which will generate the most positive
outcomes (or the fewest negative outcomes). Managers must weigh the possible
consequences of each decision and recognize that there are often multiple
stakeholders with conflicting needs and preferences so that it often will be
impossible to satisfy everyone. Finally, managerial decision-making can
sometimes have ethical implications, and these should be contemplated before
reaching a final decision.
2. What are the two systems of decision-making in the brain?
The brain processes information to make decisions using one of two systems:
either the logical, rational (reflective) system or the quick, reactive system. The
reflective system is better for significant and important decisions; these generally
should not be rushed. However, the reactive system can be lifesaving when time
is of the essence, and it can be much more efficient when based on developed
experience and expertise.
3. What is the difference between programmed and nonprogrammed decisions?
Programmed decisions are those that are based on criteria that are well
understood, while nonprogrammed decisions are novel and lack clear guidelines
for reaching a solution. Managers can establish rules and guidelines for
programmed decisions based on known fact, which enables them to reach
decisions quickly. Nonprogrammed decisions require more time to resolve; the
decision maker may need to conduct research, collect additional information,
gather opinions and ideas from other people, and so on.
4. What barriers exist that make effective decision-making difficult?
There are numerous barriers to effective decision-making. Managers are limited
in their ability to collect comprehensive information, and they are limited in their
ability to cognitively process all the information that is available. Managers
cannot always know all the possible outcomes of all the possible options, and
they often face time constraints that limit their ability to collect all the
May 12, 2019 2
