CH 11 - Decision Making

Question 1

What is decision making the process of?

Answer 1

Decision making is the
process of:

Developing a commitment to some course
of action.
Problem solving.
• Problem: When a gap is perceived
between existing state and desired
state.

Question 2

Three key points about
decision making, it
involves:

Answer 2

Making Choices
It is a process.
Committing resources.

Question 3

What is a well structured problem

Answer 3

• Existing state and desired
state are clear and how to
get from one state to another
is fairly obvious.
• Repetitive and familiar
problems, responses are
programmable
• Using rules, routines,
standard operating
procedures.

Question 4

What is an ill-structured problem?

Answer 4

• Existing and desired states are
unclear and how to get to the
desired state is unknown.
• Unique and unusual problems that
have not been encountered
before.
• Complex and involve a high
degree of uncertainty.
• They frequently arouse
controversy and conflict.

Question 5

What is the Rational Decision Making Process

Answer 5

Identify problem
Search for relevant information
Develop alternative solutions to the problem
Evaluate alternative solutions
Choose best solution 
Implement chosen solution
Monitor and evaluate chosen solution

Question 6

Perfect rationality

Answer 6

Perfect rationality is a decision strategy
that is completely informed, perfectly
logical, and oriented toward economic
gain.
Economic Person:
Can gather information without cost
and is completely informed.
Is perfectly logical.
Has only one criterion for decision
making: economic gain.

Question 7

Bounded Rationality

Answer 7

Bounded rationality is a decision strategy that relies

on limited information

Question 8

Framing

Answer 8

Presentation of information about a problem
How problems and decision alternatives are
framed can have a powerful impact on resulting
decisions.

Question 9

Cognitive Biases

Answer 9

Tendencies to acquire and process information in
a particular way that is prone to error.
They constitute assumptions and shortcuts that can
improve decision-making efficiency, but they
frequently lead to serious errors in judgment.

Question 10

Maximizer

Answer 10

Exhaustively seek the best outcome
Compare decisions with others
Expend more time and energy
Unhappier with outcomes

Question 11

Satisfacer

Answer 11

Accept good enough

doesn’t obsess over other options

can move on after deciding

happier with outcomes

Satisficing means that the decision maker
establishes an adequate level of acceptability
for a solution to a problem and then screens
solutions until he or she finds one that exceeds
this level.

Question 12

Solution implementation

Answer 12

Decision makers are often dependent
on others to implement their decisions,
and it might be difficult to anticipate
their ability or motivation to do so.

Implementation problems often occur
when those who must implement a
decision are not the ones who made
the decision.

Cross-functional teams can help
prevent these kinds of implementation
problems.

Question 13

Solution Evaluation

Answer 13

The perfectly rational decision maker should be able to
evaluate the effectiveness of a decision with calm,
objective detachment.

The bounded decision might encounter problems at this
stage of the process:
Ø Justification
Ø Hindsight

Question 14

Sunk Cost

Answer 14

The justification of faulty decisions is best
seen in the irrational treatment of sunk costs.

Sunk costs are permanent losses of
resources incurred as the result of a decision.

Since these resources have been lost (sunk)
due to a past decision, they should not enter
into future decisions.

Question 15

What are the reasons for escalation of commitments

Answer 15

• Dissonance reduction.
• Social norm for consistent behaviour.
• Motivation to not appear wasteful.
• The way the problem is framed.
• Personality, moods, and emotions.

Question 16

What are ways to prevent Escalation

Answer 16

• Reframing the problem. Shift the frame to saving
rather than spending.
• Set specific goals
• Place emphasis in evaluating on how they made
decisions no outcomes.
• Separate initial and subsequent decision making.

Question 17

How emotion and mood affect decision making

Answer 17

Strong emotions frequently figure in the decision making process.

Emotions can help decision making but strong emotions can be a hindrance.

Mood affects what and how people think when making decisions.

Mood has the greatest impact on uncertain, ambiguous decisions of the type that are especially crucial for organizations.

Research on mood and decision making reveals that:

People in a positive (negative) mood tend to remember positive (negative) information.

People in a positive (negative) mood tend to evaluate objects, people, and events more positively
(negatively).

Question 18

Summary of cognitive biases in decision making

Answer 18

• Decision makers tend to be overconfident about the decisions they make
• Decision makers tend to seek out information that confirms their own problem definitions and solutions. (confirmation bias)
• Decision makers fail to incorporate known existing data about the likelihood of events into their decisions
• DMs ignore sample sizes when evaluating samples of info
• DMs overestimate the odds of complex chains of events occurring
• DMs do not adjust estimates enough from some initial estimates that serves as an anchor as they acquire more info (Anchoring effect)
• DMs have difficulty ignoring sunk costs when making subsequent decisions
• DMs overestimate their ability to have predicted events after-the-fact, take responsibility for successful decision outcomes and deny responsibility for unsuccessful outcomes (Hindsight)

Question 19

Group decision making occurs often - especially when problems are ill structured

Why else might we use it?

Answer 19

Decision quality:
• more vigilant; more ideas; evaluate
ideas better.
Decision acceptance and commitment
Diffusion of responsibility

Question 20

Groups should
perform better
than individuals
when:

Answer 20

• The group members differ in
relevant skills and abilities,
as long as they do not differ
so much that conflict occurs.
• Some division of labour can
occur.
• Memory for facts is an
important issue.
• Individual judgments can be
combined by weighting them
to reflect the expertise of
the various members.

Question 21

Disadvantages of group decision making

Answer 21

Takes more time

More likely to have conflict

Maybe there is a member that dominates the team

Sometimes group think can be difficult to say no to groupthink

Question 22

What is Groupthink

Answer 22

The capacity for group pressure
to damage the mental
efficiency, reality testing, and
moral judgment of decision making
groups.

Unanimous acceptance of decisions is stressed over quality of decisions.

Question 23

Factors that can cause Groupthink

Answer 23

MINDGUARDS INVULNERABILITY SUPERIOR
MORALITY
CONFORMITY TO
PRESSURE
UNANIMITY
SELF-CENSORSHIP STEREOTYPING RATIONALIZATION

Question 24

Strategies to prevent groupthink

Answer 24

Leaders must avoid exerting undue pressure for a particular
decision outcome and concentrate on good decision processes.

Leaders should establish norms that encourage and even reward
responsible dissent.

Outside experts should be brought in from time to time to
challenge the group’s views.

Question 25

Improving decision making in organizations

Answer 25

Training
discussion
leaders

Stimulating
and
managing
controversy

Traditional &
electronic
brainstorming

Nominal
group
technique

The Delphi
technique

Question 26

Nominal Group Technique (NGT)

Answer 26

A structured group decision-making
technique in which ideas are generated
without group interaction and then
systematically evaluated by the group.

The NGT separates the generation of
ideas from the evaluation of ideas.

The main disadvantage is the time
and resources required to assemble the
group for face-to-face interaction.

Question 27

The Delphi Technique

Answer 27

A method of pooling a large number of expert judgments by using a series of
increasingly refined questionnaires.

It relies solely on a nominal group – participants do not engage in face-to-face
interaction.

Experts provide organizational decision makers with information but do not
participate in the actual decision making.

The main disadvantage is the rather lengthy time frame involved in the
questionnaire phases.