1. Exam # 2
DECISION-MAKING
1. Is decision-making a function of management?
• No, it a part of all functions of management. Most closely associated with planning
2. Why do we make decisions as managers?
• To accomplish our goals efficiently
3. What’s the difference between programmed and non-programmed decisions?
• Programmed  a set of decisions that has been developed for routine repetitive problems
o Normally associated with a standing company policy
o Rule or standard operating procedure used in making the decision
• Non-Programmed  specific solution made for a problem that is novel (new), unique (different and hard to understand),
complex (if you have to think about it), or unstructured
o Top managers—more important as you go up the management pyramid, conceptual skills very important
4. Do managers make more programmed or non-programmed decisions, in general?
• Managers make more programmed decisions
• As you go up the management ladder, top-level makes more non-programmed decisions, these decisions become more
common
• More autonomy  more non-programed
5. What is decision-making under conditions of certainty?
• Managers know all available alternatives and outcomes associated with each. The outcomes of each alternative are
known with absolute certainty (100% probability)
6. What is decision-making under conditions of risk?
• Involves a risk of complete certainty regarding the outcomes of various alternatives, but an awareness of the probabilities
• Alternatives are known but outcomes are in doubt
• Most common condition
• Key element in decision making under conditions of risk is accurately determining the probabilities associated with each
alternative
7. What is decision-making under conditions of uncertainty?
• Don’t know the alternatives, the potential outcomes, or the probabilities of the outcome occurrences
• Hardest decision to make a good decision
8. Which decision-making condition is most common? Least common? Most difficult?
• Most common – Risk (probabilities 0-100%)
• Least common/Easiest – Certainty (100% probabilities)
• Most difficult – Uncertainty (no probabilities)
9. What is the key to making good decisions under risk?
• Accurately determining the probabilities associated with each alternative, always a risk (can still have an unfavorable
outcome)
10. How do programmed/non-programmed decisions and the different decision-making conditions relate?
• Certainty  Programmed
• Uncertainty  Non-programmed
• Risk  Both (Programmed & Non-programmed)
• Most non-programmed decisions are made in craft jobs
• Most programmed decisions are made in enlarged jobs; every programmed decision was at one point or another a non-
programmed decision
11. What does the traditional economic model assume about decision-makers? (2 assumptions)
• Decisions are made under conditions of certainty
o Managers are completely rational (total rational) and seek to maximize benefits
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2. • You always select the best alternative—maximizing
• Prescriptive model (of decision making) – what we should do but not actually what we do
12. Under what decision-making condition do decisions get made in the traditional economic model?
• Certainty
13. What does the behavioral model assume about decision-makers?
• Assumes bounded rationality, rather than complete…
• Satisficing (satisfying rather than maximizing) a mental short cut that is a heuristic (not irrational)
• Managerial decisions are bounded by the limited mental capacity and emotions of the manager, as well as environmental
forces she cannot control
• How decisions are actually made, go from one to another until you reach one that satisfies
• Can only lead to a maximizing situation if you are lucky
• Descriptive model—describes how we do it
14. What is bounded rationality? What three things bound one’s rationality?
• Limits to your rationality that keep you from knowing everything.
• Managers are unable to grasp the full complexity of managerial decisions due to
o Emotional state
o Uncertainty of future events (<100%)
o Limited mental capacity (7+/- 2)
15. What is satisficing? How does it differ from maximizing? Is it irrational?
• Satisficing – doesn’t consider all alternatives; managers don’t maximize their benefits. Select the 1st alternative that meets
a minimally acceptable standard, rather than going though and evaluating all the alternatives and selecting the best one
• Maximizing considers all alternatives..
• Satisficing is not traditional, but not irrational because it may be sensible due to the limits of human processing
• Satisficing is more efficient and less time consuming
16. What is a heuristic? What are the advantages of and disadvantages of heuristics?
• Heuristic is a labor saving device or a rule of thumb that managers use because of their limited information processing
capabilities (mental shortcut)
• Simplifies complex environments
• Advantages  saves time and effort (more effective), produces more good decisions than bad
• Disadvantages  implicitly guide our judgment, we use them without realizing, over rely on them, can lead towards errors
due to biases (good thing misapplied)
17. What is the availability heuristic? What factors cause you to overestimate the frequency of an event? Underestimate
the frequency of an event?
• Manager assesses the frequency of an event based on how easy it is to recall the event in memory
o If something is easily remembered it is frequent, if something is hard to remember it is infrequent
o If something is rare, but emotional you will remember it easier; rare, but recent more easily remembered..
• Overestimate  if the memory is recent, vivid, emotional, specific, or easily imagined
• Underestimate  if the event is distant, bland, unemotional
18. What is the representativeness heuristic? What’s the problem with this heuristic?
• Manager assesses the likelihood of an occurrence by matching it with a preexisting category or stereotypes
• Problem  lead to prejudice or discrimination on non-job related factors and missed opportunities and mistakes
19. Under what decision-making conditions do decisions get made in the behavioral (bounded) model?
• Mostly risk, but also uncertainty
20. What does the irrational/implicit favorite model of decision-making say about decision-making?
• Decision maker selects a favorite early on in the evaluation of alternatives. Once the favorite is chosen, all other
alternatives are evaluated against it
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3. o Can lead the decision maker to distort information
o Manager wants his/her decision making process to appear rational while in reality it’s far from it
o Decisions made under uncertainty
21. What types of decisions are made irrationally?
• Uncertainty, decisions with little information
• Non-programmed decisions
• (1st car, 1st wife, 1st job, etc..)
22. What is the basic purpose of a brainstorming session?
• Generate ideas on how to solve the problem, not to evaluate them
o 7-9 people are presented with a problem and are asked to identify as many potential solutions as possible
o Criticism is strictly prohibited, prevents creativity
23. What are the four rules in brainstorming?
• 1) Evaluation/criticism is prohibited
• 2) Freewheeling is welcome; the more off the wall idea, the better
o Based on the idea of free association of ideas—first thing that pops into your subconscious is more creative
• 3) Quantity not quality
• 4) Combination and improvement is sought (Synergy)
24. Can inhibitions be totally eliminated in brainstorming sessions?
• No, it is very difficult/impossible… non-verbal communication and power differences among members will always be there
• Disadvantages—costly and time consuming
25. What two creativity techniques does synectics use in helping the group to generate better ideas?
• Fantasy & Analogy  looks at the problem with a different perspective
• “Wet leaves” – analogy that helped Pringles potato chips
26. What is the superhero technique?
• Fantasy technique which is a way to stimulate creativity by getting rid of barriers. As a superhero there are no rules
therefore nothing can hold you back from solving the problem, makes you more creative and you start to fantasize
• Helps individuals overcome internal inhibitions resulting from traditional ways of perceiving and thinking.
27. In synectics, what is the job of the facilitator? Technical expert?
• Facilitator’s job is to structure the problem and help lead the discussion away from traditional ways of thinking, and
generate ideas (creativity; uses fantasy and analogy)
• Technical expert helps the group evaluate the feasibility of ideas
28. What’s the problem with synectics?
• Doesn’t separate the generation of ideas and the evaluation of them, time consuming, & costly
• As soon as a group member generates an idea, the technical expert evaluates the idea
• All ideas should be generated before any idea is evaluated!!
29. What research is NGT based on?
• The Nominal Group Theory is based on research that discovered more and better ideas are discovered by several
persons working separately than by the same persons working in an interactive group
• NGT is a group “in name only”
30. How is NGT different from brainstorming and synectics?
• NGT is a structured process and doesn’t rely on free association of ideas (done individually)
• Purposely restricts verbal interaction
31. What in NGT does one try to eliminate to improve the decision-making process?
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4. • NGT tries to eliminate the negative aspects (inhibiting effects) of the group process
32. What are the steps in NGT?
1. 7-9 members of varying backgrounds and training are brought together as a group and are familiarized with a problem
2. Members work silently and alone generating solutions to the problem, prepares a list of ideas in response
3. Members share their ideas in a round-robin manner, until all ideas are out
4. Structured Interaction—members discuss and evaluate each idea
5. Members vote privately on each idea (ranked in order of best to worst) briefly discussing the vote’s outcome, and a final
secret ballot is conducted
• Steps 2 & 5 are INDIVIDUAL STEPS! No talking during these steps.
• Trying to eliminate the negative prospects of the group process
33. What are the defining characteristics of the Delphi technique?
• Same as NGT, BUT no face-to-face, and members remain anonymous.
• A structured approach to creating problem solving using a group of experts
• No face-to-face interaction between members
• Experts are not brought together to discuss their ideas
• Experts remain anonymous to one another (members never meet—difference from NGT)
• Questionnaires are used to obtain:
o Alternatives generated by the experts
o The evaluation of the alternatives by the experts
o The final vote on the alternatives
34. What is the reasoning behind the Delphi technique?
• Keep experts initial judgment ideas from being influenced by social pressure or other psychological aspects of group
behavior
35. What are some problems that can be encountered when using the Delphi technique?
• Design of the questionnaire can limit the results obtained
• Extremely time consuming
• Member interest and motivation may decrease if too much time passes between steps
36. What is the stepladder technique?
• It is a technique used during teleconferences when the group cannot be face to face
37. What is the stepladder technique designed to prevent? Promote?
• It is designed to promote the decision-making and interaction of group decision making by compensating for the obstacles
of non-visual communication.
38. What are operations research techniques? What are they designed to do? What kind of data do they usually require?
Are they an aid or substitute for managerial decision-making? What do managers need to think critically about when
they use these techniques? Are they applicable to all decisions that managers make?
• Operations research helps to evaluate alternatives by making the evaluation more systematic. They require quantitative
data (numerical), which is not applicable for all decisions. It is meant as an aid, not a substitute. They are greatest use
when making decisions under risk.
o More detailed answer is provided on page 19 in the course pack, but I think this is all you will probably need to
know.
• Finer points
• Alternative  Outcomes = Expected values
• Designed to help in evaluating RISK
• Most applicable for certainty or risk
• Least applicable to decisions made under uncertainty (top managers)
• Only as good as the data they’re based on
39. What is meant by the term “confirmatory bias” in decision-making?
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5. • Protect our ego
• We look for information that confirms we made a good decision; we ignore information that disconfirms our decision
• Stereotypes of groups persist because of this bias
40. What is the gambler’s fallacy?
• After a series of unfortunate events the next event must be better (or chance corrects itself)
o Ex) If I hire 4 bad employees surely the fifth one will be good
41. In making decisions, do people pay more attention to descriptive, qualitative information or statistical, quantitative
information?
• Descriptive, qualitative—actually contains less information
• When people make judgments they often ignore statistical/relevant data (logical base-rate reasoning) and make their
judgments using qualitative and descriptive data (i.e. vivid case data or personal experience data)
42. In making decisions, people often violate the law of large numbers. What does that mean? Why does it occur?
• As sample size increases  accuracy and reliability increase.
• People often try to substitute their own limited number of experiences for established guidance.
• The example Kerry uses is how he used to think his own opinions were better than his parents, but he realizes his parents
have had more life experiences or a larger sample size
43. How does the framing of a decision affect decision-making? Positive framing? Negative framing?
• Positive framing (in terms of a gain) when we gain, we take less risk; RISK-AVERSE
• Negative framing (in terms of a loss) when we are afraid we are going to lose, we take more risk to try and recoup the
loss (a bird in the hand is worth two in the bush)—high pressure sales tactic; RISK-SEEKING
• Research has shown that positively framed negotiators were more frequent and had more successful contract than
negatively framed.
(ASSIGNED OUTSIDE READING QUESTIONS #s 44-54)
44. What is group decision making a function of?
• Group Decision Making = Individual Efforts/Contributions + Assembly Effects – Process Losses
45. What is an assembly effect? Process loss?
• Assembly effect–positive effects from a group; positive consequences of bringing a group together such as synergy, more
information, diverse viewpoints, checking points
• Process loss–negative effects from a group; negative consequences of bringing a group together such as interpersonal
conflict, domination by a few, more time and expense, indecisiveness
46. What is the optimal size for a decision making group?
• 5 or 7 (odd number to break a tie) allows for better group dynamics and more participation
• Upper limit is 12; once they hit 12 group starts breaking up into clicks
47. What are the advantages of group decision making?
• More information available to help solve the problem; greater pooled resources
• = Assembly Effects
• Superior evaluation because of wide range of viewpoints
• Individuals get better understanding of the decision made, which makes it easier for them to communicate decision to
subordinates
• Fulfills the need for personal growth
• Individuals learn new skills
• Sets up “fairness image”; perceived as being more fair than decisions made by sole individuals
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6. • Participation in decision making reduces stress
48. What are the disadvantages of group decision making?
• = Process Losses
• Time consuming; costlier
• Indecisiveness
• Domination by a few members
• Leveling effect may occur
• Free riders are a problem in groups
• With corporate power and personal pride at stake, disagreement over important matters occurs
• Escalation of demands—people may want to participate in things that are inappropriate for them to participate in
• Social motives can prevail over hard-headed task orientation
49. What is the leveling effect?
• Group decision-making causes compromising which lowers the quality of the decision, but at the same time increases the
acceptant of the decision
• The leveling effect is BOTH assembly effect AND process loss
50. When does a manager (under what conditions) use individual decision making rather than group decision making?
• When time is limited, or short
• When decision maker has all relevant knowledge and expertise to solve problem
• When subordinate acceptance of decision is not an issue
• When subordinates of a group do not get along well
• When subordinates don’t share the organizations goals
51. Rank the following in terms of decision making accuracy: group, average individual in the group, and best member in
the group?
1. Best member
2. Group
3. Average member
• Group decisions will tend to be more accurate; better than the average individual in the group; seldom better than the
performance of the best individual
• Group has better implementing, many hands make for light work
52. Which is more efficient: group or individual decision making? (consider both short term and long term efficiency)
• Depends upon the perspective
• Group—long run (slow in the beginning, quick in the end)
• Individual—short run (quick in beginning, slow in the end)
53. Where do you have greater creativity: five individuals generating ideas alone or those same five individuals
generating ideas as a group?
• 5 individuals generating ideas/working ALONE has the most creativity
54. Which leads to greater acceptance of the decision and better implementation of the decision: individual or group
decision making?
• GROUP DECISION MAKING is better if degree of acceptance by al those involved is the criterion
JOB DESIGN
55. What function of management is concerned with job design and organizational design?
• Organizing function, it consists of dividing work and coordinating group and individual activity for purpose of goal
attainment
56. What are the three aspects of job design?
• Content—major duties, responsibilities
• Work methods/procedures—how you will have to do in performing those tasks
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7. • Relation to other jobs—how does your job related you other’s jobs; who do you have to work with to get things done
(vertical and horizontal coordination)
57. What is skill variety?
• Extent to which your job allows you to do a wide variety of tasks, thereby requiring a wide variety of skills (perform many
tasks, SV high)
• Management positions have high skill variety because they have to have human, conceptual, and technical skills.
• High SV jobs require more education, more training, and more experience; they provide more challenge, allow for more
creativity and give more prestige than low skill variety jobs.
• Craftsman—HIGH
• Specialized/routine—LOW
58. What is task identity?
• Extent to which your job allows you to complete a whole piece of work from beginning to end and can clearly identify your
efforts
• Take pride and ownership in your work
• Craftsman—HIGH
• Specialized—LOW
59. What is task significance?
• Extent to which the job and its performance exert a considerable impact on the lives of others
• All jobs have impact even garbage men (think about how a city smells in the middle of a sanitation strike in July) but some
jobs have more impact, like a surgeon.
• With high task significance, there is a feeling of accomplishment
• TS affects the effort you give when doing your job
• Greatest TS—Top management
• Least TS—First line
• Specialized jobs—LOW
60. What is autonomy?
• Extent to which your job allows you to make important decisions about that job
• Self governance; self ruled
• The more autonomy given, more becoming your own boss/self-managed
• Greatest autonomy—Top managers
• Least—1st line (has more laborers)
• Increases in strength as you go up the management period
• Craftsman, top—HIGH
• Specialized, 1st line—LOW
61. What is feedback?
• Extent to which your job gives you information on how you are performing on the job
• 360 degree feedback  feedback that comes from supervisors, co-workers, subordinates, customers, and self; feedback
from every angle
• Self feedback is seen as the most important!
62. What is job breadth and job depth?
• Job Breadth—number of tasks that a jobholder performs, horizontal (narrow to wide)
o Jobs with relatively few tasks (low job breadth/range)—specialized
o Many tasks (high job breadth/range)
o HORIZONTAL Loading—skill variety
• Job Depth—amount of discretion a jobholder has over his/her job activities and outcomes (shallow to deep)
o Enlarged jobs (wide and shallow)
o Specialized jobs (narrow and shallow)
o Enriched (wide and deep)
o VERTICAL Loading—autonomy
63. What task characteristics is job breadth similar to?
• Skill variety, task identity, & task significance
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8. 64. What task characteristic is job depth similar to?
• Autonomy & feedback
65. What job design is least prevalent today? Most prevalent today?
• Least prevalent—craft jobs (high quality, low quantity)
• Most prevalent—specialized jobs (high quantity, low quality)
66. What is specialized job and how does it load on the five task characteristics?
• Result of the Industrial Revolution and the division labor—activity to smaller and smaller tasks
o Narrow breadth & shallow depth
o Efficient
o Less skill variety
o Low task identity
o Low task significance
o Little autonomy
o High degree of feedback
67. What are the advantages of specialized jobs?
• Greater efficiency
o Higher productivity (quantity)
o Lower wages due to low skill level
o Lower training costs, job simple to learn
68. What are the disadvantages of specialized jobs?
• Only occur when the wrong person is in that job
• Low motivation
• Low job satisfaction
• Low quality performance
• High absenteeism
• High turnover (quitting)
• Sabotage & strikes—can’t find a way to make people listen to you
• Alcohol & drug abuse—work life spills into home life
69. What is the purpose of job enlargement?
• Break job monotony by adding more tasks, this increases breadth but not depth
• To provide more challenge, arousal so performance will improve
• Wide breadth but shallow depth
• Task identity and skill variety increases
70. What two task characteristic does job enlargement increase?
• Skill variety & task identity
71. The motivational benefits of job enlargement are short-lived or long-lived?
• Short-lived, once you learn other tasks, you become bored again
72. What is job rotation?
• Special case of job enlargement
• Rotating employees through a series of specialized jobs in a planned sequence. This method is a short-lived attempt to
break boredom
• Short-lived, increasing breadth but not depth
73. What is job enrichment? How is it different from job enlargement?
• Job enrichment is a move back to craft jobs from the assembly line like specialized jobs. Enrichment tries to make work
more meaningful, interesting, challenging, adds greater control and freedom
• Increases breadth AND increases depth—(DIFFERENT FROM JOB ENLARGEMENT)
74. What are the advantages of job enrichment?
• High in motivation and satisfaction
• High quality job performance
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9. • Low in absenteeism and turnover
75. What are the different aspects of the job characteristics model?
(look at the figure on page 29 in the course pack)
• Job characteristics
• Critical psychological states
• Personal/work outcomes
76. What are the three moderators that influence the effectiveness of job enrichment? How do they influence it?
• Knowledge and skill of employee (Ability)—people with low skills or knowledge do not get any thing out of job
enrichment
• Growth-need-strength of employee (Motivation)—people with high growth need strength are expressive (better match
for enriched job), low growth need strength are instrumental
• “Context” satisfaction of employee (Satisfaction)—people who are upset about other context things (pay, company
policies, etc.) they are less responsive to job enrichment
a. Performance = ability “can do” X motivation “will do” X role clarity “know what to do”
77. What are the five steps in redesigning a job so it will be enriched? What happens at each step and what task
characteristics are increased?
• Forming Natural Work Units  put employees together in teams (increase in task identity & significance)
• Combining Tasks  job enlargement, giving them multiple things to do (increase in skill variety & task identity)
• Establishing Client Relationships  put them in contact with the people who use their product or service (increases
skill variety, task significance, autonomy, & feedback)
• Vertical Loading  most important step! give the employee direction as to when and how it’s done; increasing freedom
and depth (mostly increases autonomy)
• Open Feedback Channels  info on how well performing (360 degrees)
78. What step in the redesign process is job enrichment?
• Combining Tasks
79. What step in the redesign process is most important?
• Vertical Loading
80. What are the disadvantages of job enrichment?
• High training and salary costs
• Places greater demands on workers
• Union resistance to anything that changes work roles
• Not all workers have the ability
• Supervisors can lose their jobs
81. How does strategy influence job design?
• Prospector Strategy  enriched or craft jobs
o Develop new and different products, be creative, innovative to exploit new opportunities
• Defender Strategy  specialized job design and maybe enlarged
o Lower costs and be maximally efficient to hold on to current market share
82. What employee factors should be taken into consideration when designing jobs?
• Ability (can they do it) & motivation (will they do it)
83. What type of motivation is best suited to specialized jobs? Enriched jobs?
• Specialized Jobs  Instrumental- work is a paycheck; work because you have to work
• Enriched Jobs (craft jobs)  Expressive- work is personally satisfying; grow and develop through your work (Ex:
artists/painters)
84. What is instrumental motivation? Expressive motivation?
• See answer to question #82
85. What is the Yerkes-Dodson law? (arousal and performance are related in what manner?)
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10. • Some people are hyper-sensitive which means they need little stimulation to get to their activation level. Or stated
differently, a moderate level of arousal leads to high performance
• Curvilinear relationship—challenge and performance
• Looks like an inverted U
86. When someone is hyper-sensitive to their environment, what type of job design should they be given? Why?
• A hyper sensitive person reacts very strongly to their environment, so they need a basic specialized job.
87. When someone is hypo-sensitive to their environment, what type of job design should they be given? Why?
• A hypo sensitive person needs a lot of stimulation to get excited, so they need an enriched job which will give them
stimulation and challenge
88. How does technology affect job redesign efforts?
• The more technology used in a job the harder it is to redesign it, it would be much easier to redesign craft work, than an
assembly line job.
• Easiest to redesign--Sally craft shop
• Hardest—Exxon Plastics
89. How do unions feel about any attempt from management to redesign jobs?
• Unions are very resistant because they are afraid it will bring greater efficiency and the need to employ less people.
90. How do economic factors affect redesigning of jobs?
• Job redesign is very expensive because all jobs are interconnected. Changing one job, you now have to change them all
• In bad times there is very little change in job design
ORGANIZATIONAL DESIGN
91. What is the relationship between specialization and coordination according to the specialization-coordination
dilemma?
• The more you try to divide up work between individuals and groups, the harder it is to coordinate between those individuals
and group
• Specialization advantages: efficiency and expertise
• Coordination advantages: deals with environmental threats and opportunities
• Coordination is easier to achieve within departments, harder to achieve between departments
• If you focus on efficiency it will be harder to change for the environmental threats and opportunities
92. Where is it more difficult to coordinate within departments or between departments?
• It is more difficult to coordinate between departments, because they have different goals.
93. What is the primitive/agency organizational design? What are its advantages/disadvantages?
• (Kerry sent the class an e-mail with pictures of these different models or page 43 in the course pack)
• The primitive/agency model has one boss and everyone reporting to him/her. This model is good because it is very flexible
and employees will do exactly what boss tells them to do, but it is not practical for larger firms because it breaks down with
complexity, because one boss just can’t manage that many employees.
• This was the predominate during the 1st part of the industrial revolution; most small businesses are primitive/agency design
• Quite flexible but breaks down under conditions of complexity because of the limited information-processing capacity of the
boss
94. What is the functional organizational design? How are activities grouped?
• A functionally designed organization groups its activities according to specialty or function
• One CEO and then VP’s for different functions, Human Resources, Marketing, Production etc.
• Divided the labor up and creates specialists; focus is SPECIALIZATION
• Predominant during the 1920s-1940s
95. What are the advantages of a functional design?
• Allows for people to specialize in their expertise, has greater efficiency.
• KISS (Keep It Simple Stupid) so we can make the CEO’s job and coordination easier
96. What are the disadvantages of a functional design?
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11. • Problems with coordination are only done from the top so it’s slower, and people in the different departments don’t identify
with the overall mission of the company.
• Customers and customer satisfaction goes down
97. When does one use the functional design?
• Small to medium size organization, stable environment, one or a few products, efficiency and quality are your goals, &
defender strategy
• If we keep it simple, our coordination problems will start to lessen
98. What is the product design? How are activities grouped?
• Specialists are grouped together to perform all the activities necessary to produce an individual good or service. Each
major product line is a separate and semi-autonomous division of the company
• Specialists are brought together to work on ONE product; increases coordination; expertise and efficiency decreases
• Coordination in product design is coordinated by VPs; multiple people doing the same thing, things will get done quicker
• Predominant during the 1950s & most Fortune 500 companies are structured this way toady
• Ex) 3-M has many different product lines, it makes band-aids, post-it notes, and computer disks
99. What are the advantages of a product design?
• Well coordinated, each product is a profit centers, managers are held accountable, Each product has its own unique needs
and it allows the company to be more responsive. The division also makes it easy to identify what products make money
(profit centers) and which ones loose money, this is handy if you want to spin-off a division or close up an un-profitable
one.
• Able to make changes quickly and respond to environment and make customers happy
100.What are the disadvantages of a product design?
• SPECIALIZATION
• It is hard to coordinate between the different units. It also loses efficiency because there is a lot of duplication, (you have
research and development, HR for each group. 5 HR departments, 5 accounting departments)
• Less expertise being developed
101.When does one use the product design?
• Large in size, dynamic environment, multiple product lines, goals are external effectiveness and customer satisfaction, &
prospector strategy (develop new and different products)
• Coordination is rewarded—MAKE IT COMPLEX
102.What is a profit center and what are its benefits?
• Profit center is set up in product/matrix designs; to see which products are doing well and which ones are lagging
• You can see each department separately, which establishes accountability, gives more feedback on each product, and
allows you to use info to make decisions.
• Every department shows its own expenses and revenues. You can see who is doing better and decide on which to
keep/adjust.
• When you hold people accountable they work harder to make sure the product is successful
103.What is a matrix design? How are activities grouped?
• It is often used with aerospace industry where for each project there is a group of technical experts in different fields. So a
Jet engine propulsion engineer might be working on several different projects, each one with a project manager
responsible for coordinating that project, and he or she would also have a functional manager manages all of the
propulsion engineers on any project. Uses coordination and violates specialization and coordination conflict.
• ONLY DO THIS DESIGN BECAUSE YOU HAVE TO DO IT
• High tech products with short product lives
• Need specialized and technical experts that can work quickly
• Need specialization and coordination at the same time
• Functional and product designs combined; both are equally emphasized
104.What are the advantages of a matrix design?
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12. • Extremely flexible and responsive, minimizes duplication, high product innovation, establishes responsibility, specialization
and coordination achieved at same time
105.What are the disadvantages of a matrix design?
• Violates unity of command (multiple bosses), stress and strain on employees, employee loyalty difficult to obtain, top
management loses command of control, power struggles exist between managers
106.When does one use the matrix design?
• Same condition as product design, difference is low tech vs. high tech
• Large in size, dynamic environment, multiple and high tech (temporary) products, goals are creativity and innovation
balanced against completion of deadlines, prospector strategy
• Same conditions as product design except HIGH TECH
107.What is the job of a project manager in the matrix design?
• Coordinate between the different technical experts to get the job done on time and on budget
• Try to bribe for the best personal that the functional manager is assigning to the jobs
• Horizontal authority—violates unity of command
108.What is the job of a functional manager in the matrix design?
• Make decisions specialized to their function; keep people up-to-date and experts in their areas (HAS POWER)
• Decide which personal goes to the different project teams
• Vertical authority—violates unity of command
109.Which type of manager has no formal authority in the matrix design?
• The project manager has no formal authority; they must use their people skills to get project done on time and within
budget. Entrepreneur inside of organization; violates parity (status) of authority to responsibility principle; leader stays for
2-3 years and then become CEO or VP; very difficult job!!
110.In which organizational design type, is it most difficult to replace the CEO from within the organization? Why is this
the case?
• It is most difficult in the functional design because no one else has experience coordinating, often times in functional
design, the company has to get a CEO from outside the company; CEO is only generally trained manager
• CEO from product or matrix can be replaced from within.
111.Which organizational design accommodates growth readily?
• The product design and matrix both accommodate growth well.
112.What is scalar chain or chain of command? What functions does it serve? What structural mechanism does one use
to bypass the strict chain of command in organization?
• The chain of command is where one individual reports to, or is subordinate to another. The chain of command:
o 1) defines levels of authority
o 2) routes information up and down the chain of command. The gangplank is used to bypass the chain of
command if you have to make reactions to environment (most likely to bypass the chain of command in the
MATRIX design).
• 1st line to middle to top = Chain of Command; distorts accuracy of communication
• Chain of command is really clear in the FUNCTIONAL DESIGN, unclear in the MATRIX DESIGN
113.What is unity of command? Why does one try not to violate this principal of organizing?
• The idea that subordinates should report to only one boss otherwise they will have conflicting orders; reporting to 2 or more
bosses stresses out employee; this is violated in every organization because your manager’s manager often gives you
instructions
114.Where is unity of command violated? In what organizational design type is unity of command violated to the greatest
extent?
• It is violated in almost all organizations (EVERYWHERE) but to the greatest extent in the matrix design
• Matrix violates it the most
115.What is delegation of authority? Why do managers delegate authority?
12

13. • It is passing authority from one level to another, it is used to extend a managers reach.
• Power of important tasks and decisions because managers can’t do everything themselves. This makes lower jobs more
important (empowers the workers)
116.What cannot be delegated when a manager delegates authority?
• Accountability cannot be delegated, the manager is still responsible
117.What violates the parity of authority and responsibility in the matrix? (TEST QUESTION)
• Project manager
118.Why do managers resist delegating authority?
• Looks lazy if they delegate tasks
• Afraid to lose control
• Easier to do yourself
• Lacks trained subordinates; feel like others can’t do it better than they can
• Afraid of costly mistakes
119.What do the terms “centralized” and “decentralized” mean as they pertain to delegation of authority?
• Centralized Delegation of Authority—authority is concentrated at top levels of management; authority is kept at the top and
not delegated
• Decentralized Delegation of Authority—authority is delegated to lower levels; giving more power to lower level managers;
never have a totally decentralized organization
• *1st and functional are most CENTRALIZED; 3rd and matrix are most DECENTRALIZED. Product is in between…the VP
does on the 2nd level
120.What are the signs that one’s organization is becoming decentralized?
• Decisions made by lower management
• Important decisions at lower management
• Flexibility in lower management levels in interpreting policies
• Autonomy in lower management decision making
• (Increased breadth and increase depth, you are enriching and empowering the lower management)
• When we decentralize we enrich the lower level managers job—making more non-programmed decisions
121.What are the benefits of decentralized organizations?
• Job enrichment
• Greater job motivation
• Skills improve
• More responsive
• Allows top managers more time to strategically plan
122.When does an organization need to decentralize?
• An organization needs to decentralize when it becomes dynamic or larger in size.
• Product and matrix more decentralized
123.What does span of control mean?
• How many people report directly to a manager; 1 person reporting gives you a narrow span of control
• Deciding on which is the “best” span of control depends on a number of things in the business
124.What is the relationship between span of control and organizational height?
• As span of control is widened, organizational height decreases, decrease management levels
• Narrow span of control, organizational height increases, increase management levels
125.What is the paradox of managerial control as it relates to span of control?
• Narrow spans of control allow managers tighter control over their subordinates, however, this loosens overall control from
top to bottom because there are now more management levels. Makes the overall control less—may cause problems
13

14. • Wide span of control allows managers to have loose control over subordinates, but more control from top to bottom
because there are fewer management levels.
126. What are the advantages of the disadvantages of wide spans of control?
• The advantage is that it can lead to substantial payroll savings and improve communications, but at the same time it can
decrease managerial control from top to bottom.; corporate downsizing
127.What is the optimal span of control?
• There is none; We used to believe 5+ or -2 from 3-7 but there’s not one. The number of people you should manage
depends on individual situation; take everything into account
128.What are the factors that narrow span of control? Widen span of control?
• Narrow—
o Low need for power
o Untrained/Inexperienced supervisors
o Separation among employees
o More problems to solve
o R&D Lab
o Dynamic environment
• Wide—
o Skilled and knowledgeable employees
o Well trained supervisors, have a lot of experience
o Higher need for power
o Similar employees
o Assembly line; similar work
o Stable environment
Topics Kerry Emphasized in Class
 Decision making is not one of the 5 functions of management but a part of all of them especially planning
 Negative framing leads to buyers remorse, customers regret their decision and are not likely to be a repeat decision
 The most common decision making scenario is under conditions of risk
 You can identify the difference between the different decision scenarios by looking at the probabilities, 100% certainty, XX
% risk, unknown% uncertainty
 Insurance companies make mostly programmed decisions, they have actuaries develop statistics that guide them to
making the right decision
 Programmed decisions are associated with Certainty and risk, non-programmed with decisions made under uncertainty
 Satisficing is a rational method but it usually doesn’t maximize the outcome
 Irrational Model-Implicit-“Kerry’s First Love Model” Kerry told a long story about his first car, and how early on in the
decision making process he ignored all the alternatives and just made his decision
 downsizing enriches jobs and creates more autonomy
 hypo-sensitive (need lots of stimulation) tend to be hyper-active
 The more technical factors of production, the harder it is to redesign jobs
 Matrix design is sometimes called “the meat grinder model” because it is very stressful having multiple bosses and there is
high burnout rate and turnover
 In an identification problem, you can pick out the functional design by looking for “KISS” (keep it simple stupid) and a
stable operating environment
 The matrix design bypasses the chain of command communication
 As the span of control stretches wider, it gets shorter, and as it gets narrower, it gets taller
FROM The Book
1. What is the geographic structure? p. 209 (257)
An organizational structure in which each region of a country or area of the world is served by a self contained division.
(Divisions broken down by geographic location.) Ex. Macy’s, Neiman Marcus
2. What is the global geographic structure? p. 210 (258)
Managers located different divisions in each of the world regions where the organization operates.
3. When does one use the global geographic structure? p. 210 (258)
Mostly used with multidomestic strategy because customer needs vary with country or region.
4. What is the global product structure? p. 210 (258)
14

15. Opposite of geographic structure; each product division not country or regional managers, take responsibility for deciding
where to make products and how to market to foreign countries.
5. When does one use the global product structure? p. 210 (258)
Mostly used with global strategy where customers abroad will buy the same kind of products with little variation.
6. What is the market (customer) structure and why is it used? p. 212 (260)
Divisions grouped based on particular kinds of customers they serve.
7. What is the product team structure? p. 214 (262)
Employees are permanently assigned to a cross-functional team and report only to the product team manager or to one of
his or her direct subordinates.
8. What are the two ways that the product team structure is different from the matrix structure? p. 214 (262)
1. It does away with dual reporting relationships and two-boss managers
2. Functional employees are permanently assigned to a cross-functional team that is empowered to bring a new or
redesigned product to the market.
9. What is a cross-functional team? p. 214 (262)
A group of managers brought together from different departments to perform organizational tasks.
10. What is a hybrid structure? p. 214-5 (262-3)
The structure of a larger organization that has many divisions & simultaneously uses many different organizational
structures.
11. What are the disadvantages of decentralization? p. 220 (268)
- If divisions, functions, or teams are given too much decision making authority they may begin to pursue their own
goals at the expense of organizational goals.
- Lack of communication among functions or divisions may prevent possible synergies between them from ever
materializing and organizational performance suffers.
REVIEW QUESTIONS FROM CLASS
Which are true concerning heuristics?
• efficient, simplify, produce, when lead to errors = biases {misapplied}
Which of the following are true concerning heuristics?
1. They make us more efficient
2. They simplify complex environments
3. They produce more good than bad decisions
4. When they lead to errors, they are called biases
5. All of the above are true.
All of the following could cause one to overestimate the frequency of an event except
15

16. • An event that is hard to imagine
In the gambler’s fallacy, the person believes after a number of unfortunate e vents that the likelihood of good fortune is
• Nearly a sure thing
Decision framed negatively, the decision maker…
• Is likely to take more risk [positively = less risk, they will have more sales]
If a company is interested in repeat sales, then their salespeople should be ____
• Positively framed
Overestimate frequency of an event? [easily recalled = not always true]
• emotional, vivid, recent, specific --- makes easier to remember so cause you to
overestimate
Gambler’s fallacy, series unfortunate, next event?
• nearly a sure thing
Is decision-making a function of management?
• no, it’s a part of all function & its most closely associated w/ planning
Programmed decisions are associated w/ which of the following decision-making conditions?
• certainty & risk [non-programmed decisions = risk & uncertainty]
The behavioral model assumes that decisions are made under what conditions?
• “bounded rationality” - you don’t know everything
risk & uncertainty
What type of decision making is most likely to occur under conditions of the irrational man model?
• uncertainty, little information
A manager has a rule when hiring new salespeople: “if they have a weak handshake then they won’t make a good
salesperson.” This is an example of
• A programmed decision
An entertainment studio manager has to decide what films to invest in, given that about every 1 or 2 films out of ten will be
a hit and make money. The decision made under
• Risk
Which factors would bound one’s rationality?
• limited mental capacity, emotional state, unforeseeability of future events
Traditional economic model assumes that manager’s make decisions under…{a prescriptive model}
• certainty
Behavioral model assumes managers made decisions under…
• risk & uncertainty
Which doesn’t evaluate alternatives generated?
• brainstorming
All of the following are true concerning satisficing except:
1. Satisficing saves time and effort
2. Satisficing entails selecting the first alternative that’s just good enough
3. Satisficing can never lead to a maximizing solution
4. Satisficing is quite rational given our limits as human beings
With the irrational/implicit favorite model, this type of decision-making is most likely to occur under conditions of
• Uncertainty
Which deemphasizes the group process to the greatest extent?
• Delphi Technique {brainstorming & synectics rely most!}
16

17. Rules of brainstorming?
• quantity, not quality is sought
NGT 5 Steps:
• members vote privately! {tries to deemphasize group somewhat}
Which uses analogy & fantasy to improve creativity?
• synectics [fantasy = super-hero technique]
Operations Research techniques are least applicable to decisions made under…
• uncertainty & top managers {most applicable = risk & 1st-line managers}
Assembly line worker job:
• low SV, low TI, relatively low TS, not much autonomy, fairly high performance
o feedback [self]
o low in all, except feedback
o narrow breadth & shallow depth
Craftsman:
high SV, TI, TS, lot autonomy, & feedback
-- wide breadth & deep depth
{As sill variety increase, task identity increased…correlated}
When we downsize we give people more to do w/ less supervision giving them more autonomy…
we’re enriching their job
can enrich too much
Job make products from beginning to end & take pride in her work, this job would be high on…
task identity
Which is most similar to job depth?
autonomy [job breadth = skill variety]
The compromise that takes place in group decision-making lowering the quality of the decision but increasing the
acceptance of the decision is known as ___.
1. An assembly effect
2. The leveling effect
3. Individual contributions
4. Process loss
5. All of the above except 3
The optimal size for a decision-making group is?
• 5 or 7 members
Which of the following would favor individual decision-making?
• Subordinates don’t share the goals of the organization
An employee is given a job that allows her to make a product from beginning to end and to take pride in her work. From
the facts presented, which of the following task characteristic would be increased the most by such action?
• Task identity
When an employee is given discretion over her job to decide what’s to be done, how it’s to be done, and when it’s to be
done, this employee’s job is high on
• Autonomy
Which of the following job characteristics is most similar to the concept of job breadth?
• Skill variety
In specialized jobs (assembly lines),
• Workers perform simple and repetitive tasks
• Efficiency is high but quality may suffer
• Performance feedback high, all other characteristics are low
Which of the following is not a disadvantage typically associated with specialized jobs?
• Low quantity performance
17

18. More technology determines, harder to redesign…
• Exxon Plastics = most difficult
• GM Shreveport
• Sally’s Craft Shop = easiest to redesign
More you specialize…
• Harder to coordinate
Job enlargement..
• Job enrichment always leads to job enlargement
• It’s motivational benefits are long-lasting
• It increases skill variety and task identity
• Job rotation is a special case of enlargement.
Theoretical advantages of job enrichment are..
• High motivation
• High satisfaction
• Low absenteeism
• Low turnover
When individuals are placed in teams and made responsible for completing an entire piece of work or process, this is
known as ___
• Form natural work units
Which step of the job enrichment process is most important?
• Vertical loading
Which step is the job enrichment process is the same as job enlargement
• Combing tasks
What most prevalent 1st part in IR?
• Primitive/agency decision
Not advantage w/ functional designs?
• Coordination is easier to achieve due to increased focus on specialists
When will use a functional design?
• The environment is stable
Matrix design is a combo of…
• Functional & product
Which design type was the most prevalent during the 1st part of the industrial revolution?
• Primitive/Agency design
Which of the following is not an advantage associated with functional designs
• Coordination is easier to achieve due to increased focus on specialties
Which of the following is a disadvantage associated with product designs?
• Less technical expertise is developed
• It’s less efficient because of duplication of specialists
• A change in product like can be disastrous
• Coordination between products can be difficult
A matrix design is a combination of?
• Functional and product designs
One would use a functional design when ____.
• The organization is small in size
• The environment is stable
• The organization has one product
• The organization’s strategy is a defender strategy
EXTRA CREDIT
18

19.  High school diploma 8 out of 10 good employees, 2 out of 10 no diploma bad employees
 7 + / - 2—how much information we can keep in our minds
 Social Loafing—less ideas developed in a group because people put less effort {tug-o-war}
 Employee Empowerment—increasing autonomy in their jobs
 ‘Auto’—self
 360 Feedback—from supervisor, peer, subordinates, customers, to self
 PERFORMANCE = ability (“can do”) * motivation (“will do) * role clarity (“knows what to do”)
 We use to believe that the optimal span of control was 3-7 employees.
 Satisficing can lead to a maximizing situation, but must get lucky & you wouldn’t know if it occurred.
 Yerkes- Dodson law- inverted relationship (inverted U- curvilinear) between arousal (challenge) and performance
o PEAK PERFORMANCE- “the zone”- high performance and medium challenge (stress)
 Instrumental motivation to work—see the job as a means to an end (work because you have to) best suits to specialized
 Expressive—see the job as an end (creative expression) craft or enriched job
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