CH 7 Flashcards
Decision
A choice made from available alternatives
Decision making
Process of identifying and choosing among alternative courses of action
Rational model of decision making
AKA classical model
Explains how managers should make decisions
What does the rational model of decision making predict?
It predicts managers will make logical decisions that are the optimal means to further the organization’s best interests
What are the 4 stages in the rational decision making process?
1) Identify the problem or opportunity
2) Think up alternative solutions
3) Evaluate alternatives and select a solution
↳ Is it ethical?
Is it feasible?
Is it effective?
4) Implement and evaluate the solution chosen
A decision can take action on problems or opportunities, both of which are ______ between an actual and a desired state.
gaps
What’s wrong with the rational model?
The rational model is prescriptive, describing how managers ought to make decisions. It doesn’t describe how managers actually make decisions.
What are the 3 assumptions of the rational model?
1) Complete information, no uncertainty
2) Logical, unemotional analysis
3) Best decision for the organization
Nonrational models of decision making
They explain how managers make decisions; they assume that decision making is nearly always uncertain and risky, making it difficult for managers to make optimal decisions
The nonrational models are __________ rather than prescriptive: They describe how managers _________ make decisions rather than how they should. 2 nonrational models are (1) ____________ and (2) _____________.
descriptive, actually, satisficing, intuition
Satisficing model: managers seek alternatives until they find one that is satisfactory, not optimal
Intuition model: Making a choice without the use of conscious thought or logical inference
Bounded rationality
Suggests that decision makers’ ability to be rational is limited by numerous constraints, such as complexity, time, money, and other resources such as their cognitive capacity, values, skills, habits, personality, and unconscious reflexes.
What is evidence-based decision making?
It is the process of gathering and analyzing high-quality data to develop and implement a plan of action
Whereas _______ ________ gives organizations access to information, ______ and _________ generate insights to inform decisions.
big data, AI, analytics
Big data
Is an extremely large quantity of data that is too large for a typical computer to handle and requires the use of new technologies and statistical approaches to process it.
*It’s the warehouse where information is gathered
Data analytics
Process of examining data sets in order to draw conclusions about the information they contain
*Includes descriptive and predictive analytics
* improves organizations’ efficiency and decision-making accuracy via specialized systems and software
Descriptive analytics
Identify trends and relationships within big data
Predictive analytics
Combined historical data with statistical models and machine learning to specify the likelihood of future outcomes
What are the five characteristics of big data?
1) Volume: refers to the quantity of data and the storage capacity required to house it
2) Variety: refers to different sources of data generated by humans or machines
3) Velocity: the speed at which data accumulates
4) Veracity: refers to the degree to which data is of high quality and comes for a trustworthy source
5) Value: the extent to which analyzing data produces insights that contribute to an organization’s effectiveness
What are the four decision making styles?
1) directive
*low tolerance for ambiguity, oriented toward task and technical concerns
*efficient, logical, practical, systematic, action oriented, decisive, likes to focus on facts
2) analytical
*high tolerance for ambiguity, respond well to new or uncertain situations
*consider more info, careful decision makers, take longer to make decisions
3) conceptual
*high tolerance for ambiguity, focuses on people or social aspects of a work situation
*broad perspective, likes to consider many options and future possibilities, long term perspective, relies on intuition, risk takers
4) behavioral
*most people-oriented of the four styles
*receptive, show warmth, avoid conflict, ovrly concerned about others
What are the 10 decision making biases?
1) availability
* using only the information available
2) representativeness
* faulty generalizing from a small sample or a single event
3) confirmation
* seeking information to support your point of view
4) sunk cost
* money already spent seems to justify continuing
5) anchoring and adjustment
* being influenced by an initial figure
6) overconfidence
* fixating on the positives while dismissing the negatives
7) hindsight
* the I-knew-it-all-along effect
8)
framing
* shaping the way a problem is presented
9)
escalation of commitment
* feeling overly invested in a decision
10) categorical thinking
* sorting information into buckets
