CHAPTER 3: INFORMATION AND

DECISION-MAKING

Business Leadership: Management Fundamentals

John R. Schermerhorn, Jr., Barry Wright, and Lorie Guest

John Wiley & Sons Canada, Ltd.

PLANNING
AHEAD
CHAPTER 3
LEARNING
GOALS

o Understand the role of

information in the management

process

o Understand how managers use

information to make decisions

o Use the steps in the decision-

making process

o Understand the current issues

in managerial decision-making

INFORMATION AND KNOWLEDGE

BASIC LINKAGES
Knowledge and knowledge workers provide a
decisive competitive factor in todays economy
Knowledge worker:
Someone whose value to the organization rests
with intellect, not physical capabilities
Intellectual capital:
Shared knowledge of a workforce that can be
used to create wealth

INFORMATION AND KNOWLEDGE BASIC

LINKAGES (CONT.)
Knowledge and intellectual capital are irreplaceable
organizational resources
The productivity of knowledge and knowledge
workers depends on:
Computer competency
Information competency

WHAT IS USEFUL INFORMATION?

Data
Raw facts and observations
Information
Data made useful for decision-making
Information drives management functions
Characteristics of useful information:
Timely
High quality
Complete
Relevant
Understandable
5

WHAT IS INFORMATION
TECHNOLOGY?
Information Technology
Helps to acquire, store, process and transmit
information

FIGURE 3.1 INTERNAL AND EXTERNAL

INFORMATION NEEDS OF AN ORGANIZATION

IMPLICATIONS OF IT WITHIN
ORGANIZATIONS
Facilitation of communication and information
sharing
Operating with fewer middle managers
Flattening of organizational structures
Faster decision making
Increased coordination and control

IMPLICATIONS OF IT FOR RELATIONSHIPS

WITH EXTERNAL ENVIRONMENT
Helps with customer relationship management
Helps organizations with supply chain management
Helps in monitoring outsourcing and other business

contracts

IMPLICATIONS OF IT FOR RELATIONSHIPS WITH

INTERNAL ENVIRONMENT
Quick decision-making at lower levels translate into

higher profit margins

Top level management well informed

10

CEO JOHN CHAMBERS

(HARVARD BUSINESS)

Teamwork and
Collaboration,
Harvard Business Publishing
Series
(external link)

11

INFORMATION NEEDS OF
ORGANIZATIONS
Information exchanges with the external
environment:
Gather intelligence information
Provide public information
Information exchanges within the organization:
Facilitate decision-making
Facilitate problem solving

12

BASIC INFORMATION SYSTEM CONCEPTS

Information system
Use of the latest IT to collect, organize, and
distribute data for use in decision-making
Management Information System (MIS)
Specifically designed to meet the information
needs of managers in daily decision-making

13

FIGURE 3.3 INFORMATION TECHNOLOGY IS

BREAKING BARRIERS AND CHANGING
ORGANIZATIONS.

Management 2e - Chapter 13

14

MANAGERIAL ADVANTAGES
OF IT UTILIZATION
Planning advantages:
Better and more timely access to useful
information
Involving more people in planning
Organizing advantages:
More ongoing and informed communication
among all parts of the organization
Improved co-ordination and integration

15

MANAGERIAL ADVANTAGES
OF IT UTILIZATION (CONT.)
Leading advantages:
Improved communication with staff and
stakeholders
Keeping objectives clear
Controlling advantages:
More immediate measures of performance
results
Allows real-time solutions to performance
problems

16

FIGURE 3.4 THE MANAGER AS AN

INFORMATION-PROCESSING NERVE CENTRE

Management 2e - Chapter 13

17

MANAGERS AS PROBLEM-SOLVERS
Problem solving:
The process of identifying a discrepancy between
actual and desired performance and taking
action to resolve it
A decision:
A choice among possible alternative course of
action
A performance deficiency:
Actual performance being less than desired
performance
A performance opportunity:
Actual performance being better than desired18

PROBLEM-SOLVING APPROACHES
OR STYLES
Problem avoiders: Inactive in information
gathering and solving problems
Problem solvers: Reactive in gathering
information and solving problems
Problem seekers: Proactive in anticipating
problems and opportunities and taking appropriate
action to gain an advantage

19

TYPES OF THINKING
Systematic Thinkers
Rational
step-by-step
analytical
breaks problems into
smaller components

Intuitive Thinkers
Rely on hunches and
feelings
Flexible and
spontaneous
See big picture

Multidimensional Thinkers
Multidimensional thinking applies both intuitive and
systematic thinking
Effective multidimensional thinking requires skill at
strategic opportunism
20

COGNITIVE STYLES
Sensation Thinkers emphasize the impersonal
rather than the personal and take a realistic
approach to problem solving.
Intuitive Thinkers are comfortable with
abstraction and tend to be idealistic. Have a
spontaneous fashion.
Intuitive Feelers prefer broad and global issues
and are comfortable with intangibles.
Sensation Feelers emphasize analysis and human
relations and tend to be realistic and prefer facts.

21

FIGURE 3.6 DIFFERENT COGNITIVE

STYLES IN DECISION-MAKING

PROGRAMMED DECISIONS
Apply solutions that are readily available from past
experiences to solve structured problems
Structured problems are ones that are familiar,
straightforward, and clear with respect to
information needs
Best applied to routine problems that can be
anticipated

NONPROGRAMMED DECISIONS
Develop novel solutions to meet the demands of
unique situation that present unstructured problems
Unstructured problems are ones that are full of
ambiguities and information deficiencies
Commonly faced by higher-level management

24

CRISIS DECISION-MAKING
A crisis involves an unexpected problem that can
lead to disaster if not resolved quickly and
appropriately
Rules for crisis management:
Figure out what is going on
Remember that speed matters
Remember that slow counts, too
Respect the danger of the unfamiliar
Value the skeptic
Be ready to fight fire with fire

DECISION ENVIRONMENTS
Certain environments:
Offer complete information about possible action
alternatives and their outcomes
Risk environments:
Lack complete information about action
alternatives and their consequences, but offer
some estimates of probabilities of outcomes for
possible action alternatives
Uncertain environments:
Information is so poor that probabilities cannot
be assigned to likely outcomes of known action
alternatives

FIGURE 3.7 THREE ENVIRONMENTS FOR

MANAGERIAL DECISION-MAKING AND
PROBLEM SOLVING

FIVE-STEP DECISION-MAKING PROCESS

Identify and define the problem

Generate and evaluate possible solutions
Make decision and conduct ethics double check
Implement the decision
Evaluate results

FIGURE 3.8 STEPS IN MANAGERIAL

DECISION- MAKING AND PROBLEM
SOLVING

DECISION-MAKING PROCESS
Step 1: Identify and define the problem
Focuses on information gathering, information
processing, and deliberation
Decision objectives should be established
Common mistakes in defining problems:
Defining the problem too broadly or too narrowly
Focusing on symptoms instead of causes
Choosing the wrong problem

DECISION-MAKING PROCESS
Step 2: Generate and evaluate possible
solutions
Potential solutions are formulated and more
information is gathered, data are analyzed , the
advantages and disadvantages of alternative
solutions are identified
Approaches for evaluating alternatives:
Stakeholder analysis
Cost-benefit analysis

DECISION-MAKING PROCESS
Step 2: Generate and evaluate possible solutions
(cont.)
Criteria for evaluating alternatives:
Benefits
Costs
Timeliness
Acceptability
Ethical soundness
Common mistakes:
Selecting a particular solution too quickly
Choosing a convenient alternative that may have
damaging side effects or may not be as good as
other alternatives

DECISION-MAKING PROCESS
Step 3: Decide on a preferred course of action
Classical decision model
Managers act rationally in a certain world
Managers face clearly defined problems and
have complete knowledge of all possible
alternatives and their consequences
Results in an optimizing decision

DECISION-MAKING PROCESS
Step 3: Decide on a preferred course of action
(cont.)
Behavioural decision model
Managers act in terms of what they perceive
about a given situation
Recognizes limits to human informationprocessing capabilities
Cognitive limitations
Bounded rationality
Results in a satisficing decision

FIGURE 3.9 DIFFERENCES IN THE CLASSICAL

AND BEHAVIOURAL MODELS OF MANAGERIAL
DECISION MAKING

DECISION-MAKING PROCESS
Step 4: Implement the decision solution
Involves taking action to make sure the solution
decided upon becomes a reality
Managers need to have willingness and ability to
implement action plans
Lack-of-participation error should be avoided

DECISION-MAKING PROCESS
Step 5: Evaluate results
Involves comparing actual and desired
results
Positive and negative consequences of
chosen course of action should be examined
If actual results fall short of desired results,
the manager returns to earlier steps in the
decision-making process

CREATIVITY IN DECISION-MAKING

Creativity:
The generation of a novel idea or unique
approach that solves a problem to take
advantage of an opportunity
More likely:
Task expertise something one is good at
or knows about
Task motivated people work
exceptionally hard to resolve a problem or
exploit and opportunity
Organizations should create an environment
that supports and encourages creativity

VIDEO: CNBC VIDEO ON LONNIE

JOHNSON AND THE SUPER SOAKER

Super Soaker inventor, Lon

nie Johnson

(external link)

Television wont be able to hold onto

any market it captures after the first
six months. People will soon get tired
of the staring into a box every night.
- DARRYL F. ZANUCK,
HEAD OF 2OTH CENTURY FOX, 1946

Thats an amazing invention, but

who would ever want to use one of
them.
- US PRESIDENT RUTHERFORD B. HAYES, AFTER
PARTICIPATING IN A TRIAL TELEPHONE CONVERSATION
BETWEEN WASHINGTON AND PHILADELPHIA, 1876

I think there is a world market for

about five computers.
THOMAS J. WATSON SR., CHAIRMAN
OF IBM, 1943

RIGHT BRAIN VS. LEFT BRAIN

Right Brain

Left Brain

Imagination
Intuition
Spontaneity
Emotion

Logic
Order
Method
Analysis

CHARACTERISTICS OF CREATIVE
PEOPLE
Work with high energy
Identify problems, plan,
make decisions
Hold ground in face of
criticism
Accept responsibility for
what happens
Be resourceful, even in
difficult situations
Use both systematic and
intuitive in problemsolving

Think outside the box

Synthesize and find
correct answers
Look at divers ways to
solve problems
Transfer learning from
one setting to others
Be objective, willing to
step back and
question assumptions

ALBERT EINSTEINS
NEEDLE IN THE HAYSTACK
Question: What is the difference between you and
the average person?
Response: If you asked the average person to find
a needle in the haystack, the person would stop
when he or she found a needle. I, on the other hand,
would tear through the entire haystack looking for all
the possible needles."

ACTIVITY

What is one-half of thirteen?

ACTIVITY (CONT.)

6.5
Six and one-half
Thir & teen = 4 (4 letters on each side)
13 = 1,3
XI II = 11, 2
XIII = 8, 8 (Halving horizontally gives us 8 on
the top
and 8 on the bottom)

CREATIVITY EXERCISE

ACTIVITY 1
The diagram represents twelve matchsticks positioned to
represent a square made up of four equal squares. Can you, by
moving only three of these sides, make three equal-sized
squares?

SOLUTION

ACTIVITY 2
Add one line to the following to make it into a 6.

IX

SOLUTION

SIX

GROUP DECISIONS
Advantages:
Greater amounts of
information, knowledge
and expertise are
available
Expand number of
alternatives
Avoids tunnel vision
Increase understanding
and acceptance of
outcomes
Increase commitments
of members to work
hard

Disadvantages:
Social pressures to
conform
Minority domination
may occur
Decision making takes
longer thus more costly

WHEN GROUP DECISION-MAKING WORKS

BEST
Individual lacks expertise or information
Problem is unclear and hard to define
Acceptance by others needed for effective
implementation
Time is sufficient for group involvement

ETHICAL DECISION MAKING

Any decision should meet ethics double check

mentioned in step 3 of the decision-making process
How would I feel if my family found out about
this decision?
How would I feel if this decision were published
in the local newspaper or on the Internet?
Think of a person you know or know of (in real
life or fiction) who has the strongest character
and best ethical judgement. Then ask yourself
what would that person do in your situation?
Any discomfort in answering these questions
indicates the decision has ethical shortcomings.

ETHICAL DECISION MAKING (CONT.)

Considering the ethics of a proposed decision may
result in better decisions and prevention of costly
litigation
Ethical decisions satisfy the following criteria:
Utility
Rights
Justice
Caring

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