Principles of Management - Lecture 09

every one class beginning this might think hello lecture number eight is what I think the chapter is number four its decision making and decision making is about the process of how managers and in general people will usually make decisions these are factors which I covered last time let me give you a quick example of factors which I use to choose a country to work okay for example when I'm choosing your country to work question number one is well is the weather really nice okay so here Thailand weather very nice right next one is lifestyle healthy meaning nice clean air clean environment and healthy also means good quality healthy food okay and young also means opportunity for exercise okay that's all support y'all see me every day jogging campus okay here's another factor salary well and here where we come from different things another factor quality of work am i teaching good students or not-so-good students right our students good at it interesting so the quality of the university the quality of life quality of killing okay all of these are important things and we get to the next one which is way prettier you can also say waiting and waiting is about what is more important than what is less be more in my personal case is I'm getting a little bit older more important is health in the lifestyle and less important is salary is in money so for some of you when you get a job maybe the most important thing with the highest weight will be salary do you begin job with good money not now for others the most important will be oh you want to get a good high quality job with a good company where you can grow in salary not very important the first job okay so waiting is about deciding what is most important what is less important and what is not really important as I gave example last time brand name for a motorcycle for me very important okay maybe CC is in power like 110 125 a little bit more important okay so way things should be waiting not way make waiting is what you put in is very important a little bit and you basically give weight to each decision criterion okay example this is just an example of buying a car which they do for that particular buyer price is very important so he gives the price of big-wave away ten then for interior comfort it gives away the eight then for durability gives away of five so price is very important and evening is little important for that particular vibe now it's important to understand two things number one your grades will be different from yours will be very different from mine so the weights will be different from person to person but what's also important to understand is that the weights change for a particular person over time five years ago what I was looking for a job I was very focused on getting the money a lot of money okay so as I was earning a lot more money and have been able to save a lot now money is not the big focus for me okay so things change at same thing same thing okay same thing would happen for a young couple if a young guy is living one lifestyle when he gets married and his wife is expecting a baby she is priorities and his wife streamers will change the cell gate more important good environment more important healthy lifestyle for the baby so you have to understand that ways change from time to time time for the same person two of you quite to separate now so because you just keep talking over gather took good just keep separate one of you go right X you just just trouble okay all right and when you have the waiting thank you initial price the difference of for each car which in this particular case for each alternative for each alternative they give you what the price what is the interior your ability and everything and you provide what's gonna score so you finally got a tool what is the performance of the car what's the handling of a car what's the repair what's the durability and they give a different scores you see a relatively high score of 44 restored Volkswagen Golf okay and you basically get Mazda and BMW 335 you know you get the different scores and what you want to do for each score is then put up weight on that particular school so you're just going to get up the initial price Jeep Compass okay very expensive so bad score okay for focus cheap so a good well-to-do nutrious scooter bet so basically you put in the score with each one of them you multiply by the weight and again the total score or the weighted score and again they do the same thing okay to multiply minus four of ten twenty nine of the PI bars for 10 is 90 so each of these if you remember the score the way it is then so here the initial is ten thus for sm u multiplied by the weight of ten you get a total score of under what we're doing here is to occupy my eight-five by 8:45 by eight forty six by eight forty eight again 7 by 8 56 so you take it evaluation or the score this becomes the week and then what you do is you take this this this this next in this you have the total weighted school and that's a simple quantitative method so 20 and 80 is hundred one hundred and forty and thirty five and fifteen is one hundred and one hundred forty and fifty hundred and ninety and five hundred and ninety five okay you know how to use calculator and that's basically the idea and now we look at which number is 223 zero to 21 to 24 looks like the highest number so based on this 224 will be to your camera as the choice that's the market so that's the way you simply do that's the weighted method method of ways to determine with all the best choice so these are the alternatives this is the score for each alternative this is the weighted score for that particular criteria and then you get all criteria together and that's it it's very simple now for the exam I will not asking you to solve problems for the midterm alright implementing decisions to implement means to get it done to do the job that's what it means get it done and then the last step in the decision process so after you get it done the last step in the decision process is basically evaluation you'll look at what you did and decide if it's good or not good so you've had your exam where your quiz I will evaluate and based on the evaluation in your results maybe I will change my teaching a little bit but also maybe you will change your learning a little bit okay so you just don't do something and forget about it when you do something you want to see if it's good or not good okay the best example actually we're in constantly evaluate is when you cook food restaurant when you could put in the restaurant sometimes sometimes the cook will try to pull every few minutes to see does it taste good is it good or salt is a good and spicy is it good vinegar is it good on whatever okay a lot of times as they just keep cooking they'll just try to taste the food to see how it takes that happens a lot well that's if they're waiting you work and now we get to it is a big big big hockey club : mistakes with people make decisions when decisions they make a lot of mistakes let's try some of the mistakes they make this is especially true and specialize and this stuff actually in finance and a lot of these mistakes are made in finance so number one Iran this quiet overconfidence a lot of times most people make the biggest mistake is typically overconfidence they think you guys just separate okay yeah two separate big time okay the biggest mistake is overconfidence usually people think of themselves that they're way better than they are usually when you ask people about are you good driver they all think that they're way better drivers than the others when real-estate prices go up people usually think that they're way better investors and they can buy house to make them a lot more money sometimes they will try to wait in a business which other people open business they are gonna save time type of business for example everyone's opening restaurant they think all their that managers they can't run the business I can do the better job okay and if I can do a better job I open the restaurant but they turn out to be not much better they think they're better but they're not much then and that's typical overconfidence it's one of the most common mistakes in business where businessmen then oh I can do anything Duke I'm better at doing it and how it doesn't matter that they fail I'll be okay because I'm smarter right so that's one difficult mistake but another difficult mistake is immediate gratification in immediate gratification businessman and especially people and especially let's say students like you make the common mistake of the immediate gratification where they just want to be okay today and not taking part into the future example will be if you're not focused on immediate gratification you will be actually studying and getting there and after four years we didn't get it great education you will be able to have a better job better money better career better lifestyle and you are going to do way better in life just for sacrificing two or three years in other words sacrificing the immediate gratification to go party to go ahead fun to enjoy yourselves to spend time with your friends and all of those things two or three years of a sacrifice of college can make a big big big difference in our laws okay we got a whole bunch of these anchoring in fact is sometimes people think from a particular point of view they think only from the recent past okay example will be everybody seeing real estate prices going higher and higher and ire and they think incorrectly they assume that real-estate prices will keep going higher and higher but the two of you close soon enough we'll just have to get people out of the road because of me so people just look this is also known it is very similar to what is called recency bias even recency bias people just think that if they are doing okay in the last couple of months that they'll be okay in the future so they're just looking they made a little investment like real estate they see the real estate prices going for three more years up and then they think is just going keep going higher and higher and higher and they're going to be really rich by simply buying a house which is of course totally wrong it doesn't work like that in the real world okay sometimes people make the mistake of selective perception in a selective perception they usually look only at those things that may lie but don't look at things that they don't like the different way or it's like a different way they always look at the positive things and don't look at the negative things so when they analyze they look only a part of the picture they don't look at the other part of the vision for example sometimes people maybe wanna buy a very nice car in the Middle East I already have experienced with Jaguar Jaguar is a very nice car it's a great brand name it's terrific car very well made very high quality but when you're trying to sell it you can't people don't want to buy people don't know the car people don't understand the car okay so it turns out that people are willing to pay for Toyota Camry more than for a Jaguar even though the Jaguar quality is much much better it's a very very high-end luxury car okay but people don't want to buy so that's an example where sometimes people can make the mistake except oh I can buy a Jaguar it's a great car and I can always sell it later and they think they can sell it later but actually they can't be because they need not check they did not look they look at the luxury component but don't look at them they don't think that the component of resale they're what we call in English secondary market okay or use our mark in used car Jaguar doesn't sell vehicle yourselves or say this sells with Jaguar just doesn't sell another classical bias or mistake or they're so bias or listed here or these things confirmation confirmation is very similar when people make a mistake and then they are looking for that particular mistake if they see good news or confirmation they choose to look at if they don't see good news or ABC menus after the fact they just ignore it okay so an example will be you're taking six courses and when it takes six courses you look at quiz one and one of course is it oh I did a great job you look in the second exam you did a great job you look at the did a great job and you can good you're a great student you can operate the fact that you fail in course number four in course number five you fail in course number six you're fail again this is similar to select advice but after you make the decision okay you just don't look like those things that you don't like the only look at things that you actually like and you also have a whole bunch of other problems you will be effectively you will be effectively seeing a day.another comedies hindsight hindsight means all if I hadn't known this anything you in advance I will never make the mistake hindsight is if you know something happened but then you say well I didn't know about I had a hair like five years ago I had a really bad accident associated with hindsight I want you near by the 7-eleven and right next to 7-eleven little dogs just walked by and didn't do anything just like my leg and I said wow if I had known I would have done this or walk posing and it's very easy to say oh if I have known that the dog will bite me okay I did not suspect that it will do okay so sometimes it's very easy it's very easy to make the mistake of oh if I had known this would happen or now that I know that things would happen okay but before the decision or when you make the decision you did not know about okay so it's a very common mistake like buying the house the house went up for one or two years and then the house go down and down and down and down in this thing all if I knew that the house would fall down funny I would not buy okay and then they use some selective perception and this is a pocket but it's going to come back again so maybe it's not a bad investment okay when it's just going to keep going down and down so you will read for all of these different types of mistakes because believe me I make all of these mistakes quite often and you every one of you make all of these mistakes and pretty much anyone in the world even the best managers the best decision makers they make these mistakes quite commonly a lot of times a lot of many times today okay so you should be aware that's going to be very helpful in your personal life all right so explain the three approaches the main approaches that managers can use to make decisions so basically managers have three fundamental approaches to decision made okay and they talk about the decision so what are first of all let's discuss you know which are decisions that changers me and you so me playing on and for the planning managers should decide what are the long-term objectives think of the president of this university what is the long-term objective is the long-term objective to get more students is the long-term objective to add more majors to add more degrees to add more master's degrees to add more PhD degrees what is the overall objective is the objective to improve the quality of life on campus like owning Fitness like opening swimming pool okay or the comfort by any I know refrigerator in every room I mean you need to find out what is hope if you're the president have to find out what is the objective or the long-term goal of his business then for any manager for any business you need to decide what are the main strategies strategies is the approach how to get these objectives done that's next chapter and next chapter is planning soon you'll have to separate to there is yeah - so strategist guy just one guy right well after 10 or 15-minute time you're going to still have about 10 minutes left so every manager has got to decide how to accomplish the objectives how to open a brand new faculty here a brand new department or a brand new school how to do that is he going to need more professors where to bring the professors are they going to need more buildings are they going to need more dorm rooms so you need the strategy and then you need a specific plan and this is what should be your organization's short-term objectives so for every manager you need to know what their objectives short-term objectives you also should have you know how difficult you these goals be so should we give them big hard goals or easy goals in our example example over here should I give you up an easy quiz or a very hard place okay so we need to figure on organizing how many employees in the university's case how many new protesters you're going to need how you know how much centralization so if you have a brand-new faculty by all the other faculties during a highly centralized or any departments to be relatively independent well in the classical universities life in the United States and we have in Bulgaria very very very decentralized each department is totally independent design your own schedule they decided exist inside that they hire their own people administration cannot interfere with the work of different departments so some universities especially West universities departments and faculties are totally independent of administration here in Asia I see the office here in Asia departments are not independent but we pour you've got guys here have huge centralization so administration's tell professors what kind of exams to do when to do them how to do them what's the program you should have this course you cannot have that course if you want to change your program we have to prove it okay so ask the administration and big centralization again I'm not saying it's good I'm not saying it's bad okay but the centralization is a big risk and the risk is that if the centralization method is that it affects negatively every single department to the point where the whole university the whole institution to just go back okay if you have independent departments if one department is bad you shut down part the other departments are okay in one department in really good it's attracting more students in the department growth okay so in a decentralized system in a decentralized system those that are good can grow in those that are bad can shred and we can go on how you know should jobs be design what are the job positions and everything else where should your organization implement the different structure in other words but what point to over the new university branch or at what point to open a new faculty so all of these are questions associated with organization questions associated with leading will be you know how to ahead the handle employees were not motivated so you always have employees that they're not motivated what do you do it you just send them home and say look you're not working hard go back home you're hired okay if they are low in motivation do you raise this salary to increase the motivation or it just saying job is it look you're not motivated I'll sell lower your salary when you start working harder I'll increase back your sound so you have to work with motivation you know what is the most leadership style in a given situation so in a restaurant you can add one leadership style in a university we can have a different okay in a hotel it's still going to be different okay so different types of business businesses will have different leadership side and changes what changes the need what is a normal change to perfect worker productivity I can understand salaries income comes from better productivity of the same time profits come from better productivity how you increase the productivity of workers here in Asia I see everywhere the same thing productivity simply increase by increasing the hours of work you don't go to work eight hours you're going to work ten hours we call this squeezing more out of the work and then they say okay you're going to work 12 hours and then they said oh we want to work six hours a week okay and you're getting more and more and more out of the worker but that's what that causes a big problem is worker the satisfaction we're not having you increase the hours you try to get more and more the worker is not happy what is the work you're going to do find another job get out of here okay that's a very very very common response when you try to squeeze workers harder and harder in they're both very happy and again what is the right time to stimulate conflict if there's conflict or no conflict how the results on it and control you know what is the feedback and everything else I'm not going to go and read through the PowerPoint all right so we're discussing back the different models in the different ways that managers make decision and one of the main approaches is hold of rational mom in an irrational model yet rational decision making rational means you analyze you think about it you're very careful and you make the best decision and choices are consistent with maximizing fare so rational means you try to get the best value so if you're going to spend forty thousand five or on a motorcycle you want to get the best motorcycle for you with the best brand name that you like the best color that you like the best for biggest engine that you like so you're going to try to get the best value for your money in decision-making it's going to be to get the best value from the decision in my case is I would like to get the best value from my job where I mentioned value is not money and salary then also means quality of life lifestyle healthy okay this is part of the fair that I get from the job job is just not not just money okay it's also experience it's also learning the local language learning the local culture and a lot of other things are included in the value of the job not just money money's not that important to life okay so rationality means maximum vary but better doesn't mean money necessarily okay here's another a different type of approach which is called bounded rationality in a bounded rationality means that you don't always have the best information okay the key is sometimes what we call limited information or you're not maximizing the full value you know about aggression dishes decisions are rational within the limits and here's the key to process information the limit to process information in the limit the process information means we don't have complete information okay we don't know everything beforehand example I'm thinking of coming before to work to Thailand but the question is wouldn't Cambodian bit better place okay wouldn't I don't know Myanmar the better place would have Laos the better place well what about them right so but the point is I don't know I asked a person says oh I'll end this grant great go there you're gonna love it ok I asked another person says oh I'm into them I don't know ok so the part about bounded rationality is that you don't always know about decision exam you are in high school they have to choose University you can choose this one or can choose University in Bangkok or can choose some other University well the basic problem is that you don't know if you will like university you don't know what the life is going to be there you don't know if you're going to get good teachers or bad pictures okay so this is not about being stupid or smart and this is not about being lazy and of doing the research just in what you don't know exactly you can guess you can come on campus for a day or two you can ask a few students here and you can ask your students there but you can't really know okay so that's again bounded rationality bounded rationality is based on limited information one year later you know that you've been here one year maybe two years then you have a lot more information another one is called septa spicy in satisficing is about just accepting the solution which is good enough okay I do a lot of satisficing in my early days when they come here about food I'm just looking at hood I don't know it's the same thing I don't know if this meal is going to be good or if this meal is better okay I never eat this field I never eat that meal okay I don't know I cannot Jack I never eat I've never seen this room okay so what I do is okay this is good enough okay this is good enough okay looks good seems good okay I'll try this one okay that's basic satisfies set the slicing is you choose something which is just okay good enough I'm not gonna work when I was raped renting the motorcycle I wasn't making the best motorcycle I wasn't trying to do the back I just needed something and I said okay this motorcycle is good enough I'll take it for one month okay it gets the job done for me it's the supermarket it's going to get me to central right for a big seed or whatever I going wrong okay so that's the second time which we do would also do again satisficing when we have limited information limit you don't notice looters I don't know that you're this good okay and the same thing the guys saying you can take this back or you can take that back but I don't know which one is better okay I should know if I write one night for one week and then I write the other bag for one week okay then I will know but otherwise I just looks okay liquid let's give a quick ride good enough and today we finish with escalation of committee an increased commitment to a previous decision despite evidence that may have been a poor one this is very common in business I will provide an example which is very very common in University when I was working in a previous University the student and I two or three students work over there having okay they say this university really bad we don't like it now their work why don't you just leave this is well I already spending here and a half hour and half credit that doesn't look but you're going to change your life you're gonna have a much better universe big much better life much better friends much better professors okay you're going to do a little lot better but they say well but I already choose that University I don't want you to change I don't want to lose the crack okay and all the other things and then we do the same thing say look but it's okay nothing wrong with he says but I have to study one more year and I told them it's much better to study one more here on a better place in a better University then spend two more years here they totally unhappy okay very similar situation with people common is getting married and after two years you're not happy about the marriage but it just say anyway because you know it's already poor bad decision but you don't just get a divorce quickly okay and people very often will get a divorce after 10 years after 15 years after 20 years so they see by the second third fourth year that the marriage is not good but they still keep the marriage going similar with businesses you got a chain of hotels okay three four five hotels all hotels are working okay wonderful travel is not worth losing money okay you just shut it down but they don't want to do that thing so the point is they make a bad decision they make a big mistake and commonly they will not fix it they will not change it because they hope it's going to get better you know three years of bad marriage okay let's try one more maybe it's going to get better for three years the hotel is losing money okay hopefully next year who gets there and as a very very common type of mistake and the destination maybe I'll explain next time okay all right this is good enough for today enjoy was it the weekend not yet okay good I don't see it

Channel: Krassimir Petrov

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Length: 44min 31sec (2671 seconds)

Published: Wed Jun 19 2013