CH 11 - Decision Making Flashcards
What is decision making the process of?
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.
Three key points about
decision making, it
involves:
Making Choices
It is a process.
Committing resources.
What is a well structured problem
• 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.
What is an ill-structured problem?
• 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.
What is the Rational Decision Making Process
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
Perfect rationality
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.
Bounded Rationality
Bounded rationality is a decision strategy that relies
on limited information
Framing
Presentation of information about a problem
How problems and decision alternatives are
framed can have a powerful impact on resulting
decisions.
Cognitive Biases
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.
Maximizer
Exhaustively seek the best outcome
Compare decisions with others
Expend more time and energy
Unhappier with outcomes
Satisfacer
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.
Solution implementation
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.
Solution Evaluation
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
Sunk Cost
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.
What are the reasons for escalation of commitments
- Dissonance reduction.
- Social norm for consistent behaviour.
- Motivation to not appear wasteful.
- The way the problem is framed.
- Personality, moods, and emotions.
What are ways to prevent Escalation
• 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.
How emotion and mood affect decision making
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).
Summary of cognitive biases in decision making
- 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)
Group decision making occurs often - especially when problems are ill structured
Why else might we use it?
Decision quality: • more vigilant; more ideas; evaluate ideas better. Decision acceptance and commitment Diffusion of responsibility
Groups should
perform better
than individuals
when:
• 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.
Disadvantages of group decision making
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
What is Groupthink
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.
Factors that can cause Groupthink
MINDGUARDS INVULNERABILITY SUPERIOR MORALITY CONFORMITY TO PRESSURE UNANIMITY SELF-CENSORSHIP STEREOTYPING RATIONALIZATION
Strategies to prevent groupthink
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.
Improving decision making in organizations
Training
discussion
leaders
Stimulating
and
managing
controversy
Traditional &
electronic
brainstorming
Nominal
group
technique
The Delphi
technique
Nominal Group Technique (NGT)
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.
The Delphi Technique
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.
