Ch 4 Flashcards
Problem solving
involves identifying and taking action to resolve problems
Knowledge workers
add value to organizations through their intellectual capabilities
Technological competency
the ability to understand new technologies and to use them to their best advantage
Information copetency
ability to gather and use information to solve problems
Analytical competency
ability to evaluate and analyze information to make actual decisions and solve real problems
Performance threat
situation where something is wrong or likely to be wrong
Performance opportunity
situation that offers the possibility of a better future if the right steps are taken
Decision
choice among possible alternative course of action
Programmed decision
applies a solution from past experience to a routine problem; preexisting rules; structured problems, can use rules policies which were already created ex. Walmart products
Problem avoiders
ignore information that would otherwise signal the presence of a performance threat or opportunity; not active in gathering information and prefer not to make decisions or deal with problems
Problem solvers
make decisions and try to solve problems, but only when required; they reactive, gathering information and responding to problems when they occur, but not before
Problem seekers
always looking for problems to solve or opportunities to explore; proactive as information gatherers, and they are forward thinking; anticipate threats and opportunities, are eager to take action to gain the advantage in dealing with them
Nonprogrammed decision
applies a specific solution that has been crafted to address a unique problem; where error occurs; unstructured elements don’t know about; require thinking information and facts to make decisions ex. new product
Systematic thinking
approaches problems in a rational and analytical fashion
Intuitive thinking
approaches problems in a flexible and spontaneous fashion
Common mistakes when identifying problems
1) defining problem too broadly or too narrowly
2) dealing with symptoms, not real causes
3) focusing on wrong problem to begin with
Decision making process
1) identify and define the problem
2) generate and evaluate alternative solutions
3) decide on preferred courses of action
4) implement the decision
5) evaluate results
Cost-benefit analysis
involves comparing the costs and benefits of each potential course of action
Classical decision model
describes decision making with complete information
Optimizing decision
perfect solution can be reached after analyzing all possible alternatives
Behavioral decision model
describes decision making with limited information and bounded rationality
Satisfying decision
chooses the first satisfactory alternative that presents itself
Lack of participation error
failure to include the right people in the decion making process
Spotlight questions
highlight the risks of public disclosure of one’s actions
Creativity
the generation of a novel idea or unique approach that solves a problem or crafts an opportunity
Big-C Creativity
occurs when extraordinary things are done by exceptional people
Little-C creativity
occurs when average people come up with unique ways to deal with daily events and situations
Why group decisions can be good?
more information; more alternatives; increased understanding; greater committment
Why group decisions can be bad?
conformity with social pressures; domination by a few members; time delays
Availability heuristic
uses readily available information to assess a current situation
Representativeness heuristic
assess the likelihood of an occurrence using a stereotyped set of similar events
Anchoring and adjustment heuristic
adjusts a previously existing value or starting point to make a decision
Framing error
solving a problem in the context perceived
Confirmation error
when we attend only to information that confirms a decision already made
Escalating commitment
continuation of a course of action even though it is not working
Crisis
unexpected problem that can lead to disaster if not resolved quickly and appropriately
Classical Model
prescriptive/ theoretical; assumes that complete information is available; prescribes generating and analyzing all possible alternatives
Behavior Model
practical model; assumes that in real world incomplete information is available; describes generating and analyzing realistically possible alternatives that meet the acceptability threshold
Satisficing
satisfactory decision is reached after analyzing the acceptable alternatives
Systematic Decision Making Process
-identify and define the problem, develop decision criteria, generate and evaluate alternatives, select among alternatives, implement the chosen alternative, evaluate and revise
Factors affecting DM
Contextual and Personal
- organizational competencies
- decision situation
- decision type
- decision making process
- cognitive biases
Organizational Competencies
- technological
- informational
- analytical
Decision situation
- certainty
- risk
- uncertainty
Decision Type
- programmed decisions
- non-programmed decisions
Decision Making Process
- intuitive
- systematic
Intuitive DM
based on expertise, knowledge, information, and personal experiences accumulated over the years
subjective, requiring personal judgement or “gut feeling”
involves information analysis at the unconscious or subconscious level
Systematic DM
- based on facts, information, and knowledge, gathered specifically to solve the current problem
- more objective and systematic, requiring analytical and problem solving skills, creativity, and logic
- involves information analysis at the conscious level
Risk
have some information; probability; can calculate ex. Zara
Uncertainty
almost no information, not enough information to make calculation
Cognitive Biases
mess up decision making capabilities
-assumptions; sterotypes
Systematic DM process
- identify and define the problem (issues)
- develop decision criteria (decide what you want out of decision)
- generate and evaluate alternatives (possible solutions, info gathering–organizational competencies; creativity)
- Select Among Alternatives (chose best that satisfy STEEPLE)
- Implement the chosen alternative (take action)
- evaluate and revise
Evaluation
1) criteria
2) cost-benefit analysis
3) environmental aspects
STEEPLE
Social-culture Technology Economical Ethical Practical Legal Enviornmental
Cognitive Biases in DM
- representativeness bias
- escalation of commitment
- emotional tagging
- anchoring & adjustment bias
- framing bias
- status quo trap
- confirmation bias
- availability bias
- immediate gratification
Representativeness Bias
- when people tend to make judgments or decisions based n their previous experiences in seemingly similar situations, or make generalizations based on a limited sample
- our perceptions of similarities in two or more situations/people affect our decisions
Escalation Commitment
- when a manger keeps on justifying and investing more resources (money, time, effort) in a project because of investing a lot already, despite evidence that costs outweigh the expected benefit
- how much have we invested in a situation in the past affects our decision
Emotional tagging
- when people tend to make decisions based on their previous or current emotional experiences
- what we love/hate; like/dislike; fear/envy affect our decisions
ex. IBM
Anchoring and adjustment bias
- when people tend to make judgments or decisions based on an initial information or figure; the initial figure serves as the “anchor” and we tend to “adjust” our decisions around that
- what figures we start with affect our judgments and decisions
Framing bias
- when people tend to make judgments or decisions based on how the information/situation is presented to us or “framed”
- how we perceive the situation (gain vs loss) affects our decisions
Status Quo trap
- when people decided to stay with default options/choices offered, not making the effort to explore other alternatives
- our predisposition to perpetuate the “status quo” and avoid risk affects our decisions
Confirmation bias
-when decision makers actively seek out and assign more weight to information that confirms their hypothesis, and ignore evidence that is contrary to their hypothesis
Availability Bias
- when people tend to make judgments or decisions based on information that is easily available or recalled
- what’s in our short term memory affects our decisions
Immediate Gratification
- when people tend to make decisions based on short term gains and immediate solution to the situation
- what can help us now lets decide on that
How to minimize cognitive biases?
- be aware of the biases
- seek expert advice and or outside perspective
- set decision making criteria
- remove self interest
- constantly reevaluate decisions
- use six thinking hats
Effective decisions
- involves applying both intuition and logic judiciously
- managers must understand the rational DM process and cognitive process; so as to capitalize on the DM process and minimize personal biases
Logical Decision making
may be constrained by bounded rationality, incomplete information, use of heuristics, and cognitive biases in the real world
DM
complex, cognitive process applied in all areas of managment
