Chapter 11 Flashcards
Decision-making
process of developing a commitment to some course of actions
Well-structured problems
existing state and desired state are clear (how to get from one to the other is clear):
- > repetitive and familiar (can be programmed)
- > go directly from problem to solution
- > rules, routines, standard operating procedures
Ill-structured problem
existing state and desired are unclear and method is unknown:
- > unique and unusual problems not discovered before
- > high degree of uncertainty
- > arouse controversy and conflict
Perfect rationality
decision strategy completely informed, logical, toward economic gain
prototype for perfect rationality
economic person: one criterion for decision making and it is cost
bounded rationality
try to act rationally but limited to their capacity to acquire and process information, time constraints, political considerations
framing and cognitive biases are to operations of bounded rationality what
emotions and moods are to decision making
Framing
huge impact on how we interpret situations: the presentation of information
Cognitive bias
tendencies to acquire and process information in a particular way prone to error; involve assumptions & shortcuts
Problem identification and framing
bounded rationality can lead to the following difficulties in problem identification:
- > perceptual defence
- > defined in terms of functional specialty
- > defined in terms of solution
- > diagnosed in terms of symptoms
Information search
perfect rational decision maker has instant and free access to all information to clarify problem and find alternatives
bounded rationality decision makers say info cost can be slow and costly
too little info
cognitive biases because using info most readily available but not always good info –> can lead to confirmation bias where you see only the information that confirms your own opinion
Too much info
information overload: reception of more than necessary to make decisions
cognitive bias of value paid for advice over free even if = in value
perfect rational decision maker exhibits
maximization: the alternative with greatest expected value
bounded rationality decision maker
does not know all possible alternatives
satisficing
decision maker reaches adequate level of acceptability and then screens solutions to find one that will exceed it
who uses satisficing the most?
bounded rationality decision makers
Risky business
problem as choice between losses –> risky decisions
problems from alternative gains –> conservative decisions
“example of framing”
Justification
people are overconfident about the adequacy of their decisions
substantial dissonance can happen when a decision is faulty
the decision maker can devote time to justify a faulty decision
Hindsight
tendency to review the decision-making process to find what was done right or wrong –> take personal responsibility when positive outcome and deny when unsuccessful
escalation of commitment
tendency to invest additional resources in an already failing course of action (groups > individuals)
Reasons for escalation of commitment
dissonance reduction social norms for consistent behavior motivation to not appear wasteful the way the problem is framed personality, moods and emotions
Preventing escalation of commitment
- > continuous experimentation with reframing the problem (saving rather than spending)
- > Set specific goals for the project in advance that must be met if more resources are invested
- > place more emphasis in evaluating managers on how they make decisions
- > separate initial and subsequent decision making
emotions and moods and decision making
strongly emotions correct ethical errors
strong emotion = creative decision-making = intuition to solve problem
BUT can hinder because leads to self focused
Moods
affect what and how people think in making decisions
people in positive mood
remember positive information & evaluate object, people and events positively
people in good mood
overestimate the likelihood that good events will occur and underestimate the likelihood of bad ones
positive moods promote
creative, intuitive decision making
moderate optimism
creative decisions
moderate pessimism
process info carefully and effectively
Pros to using groups to make decisions
Decision quality (vigilant, more ideas, evaluate better)
Decision acceptance and commitment (to be approved by a group means it will be approved by more people)
Diffusion of responsibility: ability of group members to share the burden/load of negative (punishment for all)
Cons to using groups to make decisions
Time (takes more because process losses), Conflict (better decisions when psychologically safe), domination (one individual = not taking advantage of pros), groupthink
Group think
capacity for group pressure to damage mental efficiency, reality testing + unanimous is more important than quality
factors that contribute to group think
high group cohesiveness strong identification with the group concern for approval of the group isolation from the group promotion of particular decision by group leader
Group think symptoms
illusion of invulnerability: overconfident
illusion of unanimity: perception of unanimity for chosen decision
illusion of morality: group decisions = moral decisions
rationalization: justify somehow
stereotypes of outsiders: unfavourable to outside group
Pressure for conformity: pressure each other to fall in line and conform
self-censorship: avoid voicing opinions contrary to group’s
Mind guards: members to protect the group from information against decisions
strategies to prevent groupthink
encourage and reward responsible dissent
Outside experts to challenge the group’s view
groups handle risk
group discussions ->new ideas
group members -> better than others but similar
risky shift
riskier than average advocated by members
conservative shift
less risky than average by members
Rational decision making model
- Identify problem
- Search for relevant information
- Develop alternative solutions
- Evaluate alternative solutions
- Choose the best solutions
- Implement the chosen solution
- Monitor and evaluate the chosen solution
